The government has taken steps to identify and freeze assets belonging to loan defaulters located abroad in an effort to recover large non-performing loans in the banking sector.
Concerned banks have initiated legal processes to track down, freeze, and repatriate money laundered overseas or assets created abroad by loan defaulters.
Initially, 42 institutions with defaulted loans exceeding Tk 200 crore have been brought under this initiative. Eight international legal and professional service firms are working to locate and recover these foreign assets.
Bangladesh Bank Spokesperson Arif Hussain Khan disclosed the information on Sunday (August 9).
He said some funds from defaulted loans exceeding Tk 200 crore may have been laundered abroad. Furthermore, the owners or relevant individuals of some borrowing institutions cannot be found within the country. Consequently, in consultation with banks, steps have been taken to identify and recover their overseas assets to realize the unpaid loans.
The central bank spokesperson noted that assistance from internationally recognized legal and professional firms is being utilized to repatriate laundered funds. Necessary measures will be enforced according to the laws of the countries where money or assets may have been laundered. If any asset is recovered, a portion of the recovered amount will be paid to the respective firm as remuneration under the contract.
According to relevant sources, priority was given in the first phase to 11 individuals and entities on the priority list of the government-formed joint investigation team. The Anti-Corruption Commission (ACC), the Criminal Investigation Department (CID) of Police, the Customs Intelligence and Investigation Directorate (CIID), and the Central Intelligence Cell (CIC) of the National Board of Revenue are investigating allegations of money laundering against these individuals and entities.
Simultaneously, cooperation from foreign legal and professional firms is being sought to recover defaulted bank loans from these individuals and institutions.
International entities involved in these (1st phase) activities include Grant Thornton, RI Consortium, Baker McKenzie & PwC, DLA Piper & Kroll, EY & Dentons, Rahman Ravelli & Interpath, White & Case, and Deloitte.
Second Phase targets 42 Major Defaulters
In the second phase, 42 institutions with defaulted loans exceeding Tk 200 crore were identified based on an analysis of data from the Credit Information Bureau (CIB) of Bangladesh Bank. Eight foreign legal and professional firms have been tasked with locating the overseas assets of these institutions.
The assigned firms include Grant Thornton, RI Consortium, Baker McKenzie & PwC, DLA Piper & Kroll, EY & Dentons, Rahman Ravelli & Interpath, BCG & HHR, and Ananimus Associates.
Banking sector insiders said cases are pending in the Money Loan Courts (Artha Rin Adalat) against many borrowers who have defaulted on large loans for a long period.
However, recovering loans using assets located inside the country is often not possible. Additionally, there is information that some loan funds were laundered abroad or that the borrowers reside overseas.
For this reason, along with domestic assets, initiatives are being taken to identify, freeze, or seize overseas assets through legal processes.
Initially, 12 countries where laundered money or assets are likely to exist have been brought under investigation. The countries are the United States, the United Kingdom, the United Arab Emirates, Canada, Singapore, Belgium, New Zealand, Hong Kong, China, Malaysia, Thailand, and Australia.
Based on information provided by the respective banks, foreign firms are verifying the location, nature, and estimated value of assets held abroad under the names of these individuals and entities. If assets are located, necessary legal actions are being taken to suspend, freeze, or seize them in accordance with the laws of the respective countries.
If assets can be frozen or seized in any country, subsequent steps will be taken to settle the matters through courts and local laws to repatriate the funds to Bangladesh.
No recovery, no fee
The agreements made with the firms engaged in overseas asset recovery feature a "no recovery, no fee" arrangement. As a result, banks do not have to spend large amounts of foreign currency prior to the commencement of work.
According to the contracts, a firm will receive a fixed percentage of the recovered funds as remuneration only after it successfully identifies and recovers the assets.
Insiders in the banking sector believe this initiative to identify and recover foreign assets could create new opportunities for collecting large defaulted loans. In particular, taking legal actions regarding the foreign assets of loan defaulters alongside ongoing domestic lawsuits will increase the chances of debt recovery.
However, the entire process of freezing, selling, or settling overseas assets to bring money back to the country will depend on the laws and court rulings of the respective nations, which may take time. Nonetheless, stakeholders view the initiative to identify overseas assets as a crucial step toward recovering large defaulted loans that have been stuck for a long time.