Mobile Financial Services in Bangladesh are increasingly being used as a conduit for illegal financial activities, including money laundering, bribery, online gambling, betting, and even financing terrorism and cryptocurrency transactions, according to a study by Transparency International Bangladesh.
In a press conference held at its Dhanmondi office on Tuesday, TIB unveiled the findings of a research report titled Governance Challenges in the Mobile Financial Services Sector and the Way Forward.
The study reveals that the lack of a requirement to include MFS transaction records in income tax returns has made MFS platforms a convenient channel for bribery among corrupt public officials.
According to the report, weak governance and regulatory loopholes have allowed the MFS sector to become dominated by a few players, stifling competition and compromising customer interests.
Excessive service charges have imposed additional financial burdens on users, and despite promises of financial inclusion, women and marginalised communities remain underserved.
The research also uncovered alarming trends of fraud and scams. Between November 2022 and October 2023, 52.6 per cent of personal MFS account holders who suffered losses were victims of scams involving false promises, 42.1 per cent were tricked via phone calls or SMS, and 12.3 per cent lost money due to account hacking.
Individual losses ranged from Tk300 to Tk83,000, while agents and merchants reported losses up to tk376,000 and Tk45,000, respectively.
TIB expressed concern over the use of MFS accounts — particularly bKash, Nagad, Rocket, and Upay — for transactions related to online gambling and betting.
These activities intensify during major cricket events like the IPL, BPL, and World Cup, yet MFS providers have failed to take effective action against such misuse it said.
The Criminal Investigation Department of Bangladesh Police reported that approximately Tk75,000 crore (USD 7.8 billion) was laundered abroad through MFS channels in 2022 alone.
The report also highlighted serious allegations of misappropriation of government welfare funds.
Around Tk2,356 crore was allegedly siphoned off by anonymous shareholders of Nagad Limited through unauthorised creation of e-money during disbursement of social protection allowances and education stipends.
Additionally, bKash reportedly violated the Foreign Exchange Regulation Act (amended 2015) by disbursing $410,000 to Argentina’s national football team under the guise of a donation, without formal approval from Bangladesh Bank.
TIB executive director Iftakharuzzaman called for the urgent need for sector-specific legislation, enhanced oversight, and stricter compliance measures to curb corruption and ensure accountability in the booming MFS sector.
TIB made 13 recommendations, including for enact a dedicated MFS law that ensures competition, financial inclusion, transparency, and accountability.
Amend the 2019 Anti-Money Laundering Regulations to allow BFIU intelligence reports as court evidence, implement AI-driven systems for monitoring suspicious transactions and resolving customer complaints.
TIB also recommended for establishing a universal code of conduct for agents and distributors, disclose all MFS-related contracts publicly and evaluate or annul those against public interest, reduce service charges and improve interoperability across all financial institutions.
It also suggested for preventing misuse of MFS branding in online gambling promotions through strict oversight, and creating and maintaining a centralised database of suspicious transactions and blacklisted customers.
