Economic Reporter :
Bangladesh Bank (BB) has taken a strategic move to stop illegal money creation in the country’s financial landscape through digital channel that poses risks of money laundering to terrorist financing.
As part of its move, the central bank has asked all scheduled banks to restrain from giving services to the unauthorised institutions that provides services as payment service provider (PSP) or payment service operator (PSO).
The central banks fears that as such operators can create illegal e-money to distort financial market stability and increase risk of money laundering, according to BB a circular issued last week.
The central bank officials say illegal money creation and risks of money laundering through digital financial service channel came in the regulatory observations after abnormal e-money transaction growth with some digital financial service operators whose e-money operations remains out of central bank’s supervision.
“A PSP or PSO deals with e-money purchasing from banks. If such operator deals e-money beyond the central bank’s regulation and supervision, it can create money illegally. Such money creation may destiblise the whole financial system, push up inflation and trigger money laundering to finance terrorist activities,” the BB official said.
Electronic money is one of the most important breakthroughs of technological progress. Such money has a significant impact on the demand for banknotes issued by the central bank and can be handled by institutions other than the central bank. To mitigate risks, Bangladesh Bank follows bank-led model for DFS business and has allowed 18 banks to run such business.
Economists say e-money without central bank’s supervision can raise a range of effects on monetary policy by influencing its tools and objectives, open the door to many crimes such as tax evasion, money laundering and counterfeiting, in the absence of a unified legal system between countries to regulate money circulation. So, it is necessary to establish controls for the issuance of e-money.
In Bangladesh, Nagad digital financial service operated by The Third Wave Technologies Limited (TWTL), a private non-bank company issues e-money which is outside the central bank’s supervision. Some e-commerce operators are also allegedly involved in e-money transactions without central bank’s permission.
“We don’t know how much e-money is created and where money goes through unauthorized digital channels. So, we have asked all scheduled banks, mobile financial service (MFS) providers, PSP and PSO not to deal with any unauthorised service operators in payment landscape to avert unwanted situation”, the official said.
The Economist, a London based newspaper brought the issue of Nagad recently focusing unusual revenue growth of Nagad, the digital financial service operator of Bangladesh Postal Department within a span of time.
