According to the BEA estimate, Bangladesh has around BDT 5 trillion to 7 trillion black money.
The finance minister has proposed a provision that will allow investors to legalize black money through investment in economic zones (EZs) and high-tech parks, with no question on the sources of the funds so long as the investors pay a 10% tax on the invested amount. A debate is now on about the budget proposal allowing ‘undisclosed income’ for investment in industry and real estate to become ‘disclosed’. It is an official facility to ‘whiten black money’. The budget for FY20, placed in the national parliament on Thursday last, basically opens a five-year scheme to convert black money into white. According to the proposal, people having an undisclosed income will be able to invest the money in special economic zones (SEZs) and high-tech parks by paying a flat rate of 10 per cent tax without any question being asked. Anyone can seize the opportunity until June 30, 2024. Moreover, they will also be allowed to invest such income on purchasing land, flats and apartments. For this, they have to pay a tax ranging from Tk 500 to Tk 15000 per square metre. The provision to invest in real estate for whitening black money was already there, however, the latest budget has widened the scope by adding land and reducing the tax rates. Money whitening facility from Bangladesh are available with some of the unknown people, but the government of Bangladesh are strick to prevent.
Five ways in which black money is created, White!
METHOD 1: MULTI-LEVEL MARKETING SCHEME
A recent trend is to use international debit or credit cards issued by offshore banks. This enables easy usage.
STEP 1: A group of individuals float a multi-level marketing scheme or investment scheme promising extraordinary returns to investors.
STEP 2: Investors deposit cash or cheques in bank accounts floated by the firm. The firm, in turn, issues them post-dated cheques.
STEP 3: The firm transfers the money to personal
- Lifestyle beyond known sources of income
- Ownership of assets abroad, but not declared in tax returns
- Large inter-account transfers with no economic rationale
- Cash transactions with unknown persons
- Withdrawal of large foreign remittance in cash
METHOD 2: DISGUISED OWNERSHIP
Increasingly, criminals want to own legitimate business. It could be to earn a return or to convert black money into white. A typical example of how this is done:
STEP 1: Criminal X generates Rs 10 crore in cash from illegal activities in India, and wants to ‘launder’ it abroad. He uses the ‘hawala’ route to transfer the money: he gives the Rs 10 crore cash to a local hawala operator. The operator, for a fee, arranges to deposit the sum in an offshore bank account belonging to a company floated by X.
STEP 2: The offshore company buys shares in a domestic company promoted by X, that too at steep valuations
STEP 3: The domestic company pays a high salary and dividends to X. Black becomes white, and X can show the money as income.
- International corporate structure with no visible benefits
- Shares of domestic companies sold at higher valuations
- Tax returns don’t support capital contribution by investors
- Large cash holdings
METHOD 3: MIXED SALES
Mixing illicit money sources with legit ones is a popular method because it’s hard to detect, especially if there is a large cash component in the legal business.
STEP 1: Illegal money is mixed with actual sales, by depositing in the company’s bank account. The cash deposit will be justified as legitimate business income, say, cash receipts in the restaurant.
STEP 2: The company projects the fabricated sales as total income and files an income tax return. However, it avoids paying tax on the total income by showing losses in other business lines or by showing fictitious deductions.
STEP 3: Black has become white, and promoters can use it
- The large increase in cash turnover and sales
- No commercial reasons for money inflows
- Promoter has poor knowledge of business
- Transactions don’t have supporting documents and don’t fit the company’s profile
- Costs incurred but no corresponding increase in turnover
METHOD 4: ‘SMURFING’
This type of transaction is usually done to evade notice by authorities monitoring transactions above a certain threshold.
STEP 1: X deposits illegal proceeds into any bank accounts. The amount transferred is below the threshold level for reporting suspicious transactions. If Rs 10 lakh is the threshold level, deposits will be for Rs 9 lakh. This is called ‘smurfing’.
STEP 2: The money is transferred from these multiple accounts to an offshore bank account to take the trail away from the source.
STEP 3: A loan agreement is signed between the holder of the offshore bank account and X.
- Cash received from countries with a high level of corruption
- Concealed transportation of cash
- An occasional high cash transaction
- Deposit is made in accounts of ‘straw men’ or nominees
METHOD 5: TRADE MISPRICING
Traditionally, goods exported and imported were either priced lower or higher to enable money laundering. Or, goods exported were different from the description. Below is a description of an actual case investigated by FIU, which got a suspicious report that a cab rental firm received Rs 100 crore as an advance payment for export obligations that did not relate to its line of business. The company had also issued cheques of small value (less than Rs 10,000) to various people.
During the investigation, it was found the chairman of the firm had several international bank cards. Fake invoices to show diamond purchases of Rs 188 crore were also recovered during the searches. No purchases were made. The company received Rs 300 crore from buyers in three overseas locations: Singapore, Dubai and Hong Kong. Interestingly, receivers of export shipments were different from people who sent advance payments.
With current technology, the Organisation for Economic Cooperation and Development (OECD) says it’s easy to modify invoices or produce fictitious invoices. And corporations are easy to set up to show that they have received goods.
- Discrepancies between customs filings and invoices
- A country is not known for the import and export of goods
- The large difference between declared and market value
- Payments made by an offshore company
- Commission paid to third parties with no supporting documentation
Best Tricks to Convert Black Money into White Legal Money is “Mixed Sales”.
Its means “money mixed” with a high volume of business transactions. Before starting you should make a deal with the business owner. Because for money cleaning its a bad idea to open a business, the best idea is to choose one and make a deal with a sort of commission. Some business is one kind of machine to clean black money. Money whitening facility from Bangladesh is available with some types of business. Its depends on plan and deal as well, but the question is: Is it legal?
Answer: Obviously No…
for our Tips, you may email us: [email protected] or research your own from the internet & choose an expert lawyer, but make sure he/she is not greedy or dishonest.