The use of the Mobile Financial Services is increasing for money laundering, bribery, online gambling, cryptocurrency transactions and even terror financing and other illegal purposes, a Transparency International Bangladesh study has suggested.
The study has also found that MFS customers are required to pay 7鈥�15 times higher service charges compared with the commercial banks. These charges are also several times higher than those in the neighbouring countries.
The TIB unveiled the findings of a research report titled 鈥楪overnance challenges and the way forward in the mobile financial services sector,鈥� at its office in the capital鈥檚 Dhanmondi on Tuesday.
According to the study report, while MFS customers pay 7鈥�15 times higher service charges compared with the commercial banks, they have to pay for services that do not cost anything in other countries.
The report further says that an unholy nexus between the MFS companies, regulatory and supervisory authorities and politically influential individuals exert influence on policymaking, manipulate oversight mechanisms and misuse state institutions.
Their manoeuvring has led to the financial exploitation of the public, embezzlement of state funds, bribery and money laundering.
TIB executive director Iftekharuzzaman said, 鈥楾o capture the MFS sector, politically influential groups have exploited policy and legal loopholes under their protection and used regulatory bodies to serve their interests.鈥�
According to the study report, in 2024, for cash-out transactions of Tk 5,50,000 crore, customers were charged between an estimated Tk 4,410 crore and Tk 10,197 crore, while commercial banks charged only Tk 639 crore for similar withdrawals.
Bangladesh also has the highest MFS service charges among its neighbours鈥攂Kash charges between Tk 372.5 and Tk 462.5 for withdrawing Tk 25,000, 聽compared with Tk 355.7 in Pakistan (Easypaisa), Tk 231.3 in Myanmar (Wave Pay), and absolutely no charge in India (Phone Pay).
The study report further notes that MFS services in the country often neglect customer interests, while the incidents of fraud are rising alarmingly.
A lack of comprehensive legal framework, discriminatory practices and limited regulatory powers of Bangladesh Bank over the MFS have led to the establishment of a monopolistic market, dominated by bKash and Nagad with respectively 84.4 per cent and 30.9 per cent personal account holders.
The monopoly has stifled competition, giving these companies free rein to exploit the public and embezzle the state funds.
The study points out a lack of long-term planning, practice of ad hoc decision making, weak policies, legal gaps and undue influence from political and vested quarters are some of its most plaguing issues.
Regarding efforts to rein in illegal practices on the MFS platforms, the report says that these companies have failed to prevent gambling transactions despite efforts from the regulators. In 2022 alone, around $7.8 billion (Tk 75,000 crore) was laundered through gambling transactions using the MFS.
MFS platforms in the country also lack capacity to detect and prevent suspicious transactions, including those done for laundering money.
According to the study, 6.3 per cent of personal, 17 per cent of agent and 1.6 per cent of merchant MFS users faced fraud, with 3.6 per cent, 8.7 per cent, and 1.4 per cent respectively suffering financial losses between Tk 53 and Tk 3,76,000.
The study also reveals that Nagad鈥檚 operating company, Third Wave Technologies Ltd/Nagad Ltd, violated MFS regulations by creating around Tk 645 crore in excess e-money beyond trust fund limits, risking customer funds.
The study has also identified irregularities in distributing government allowances, including student stipend through the MFS platforms.
Noting the long-term economic risks posed by the use of MFS for bribes, money laundering, online gambling and cryptocurrency transactions, Iftekharuzzaman also said, 鈥極ne key reason behind the record surge in foreign remittance in FY2024鈥�25 after the fall of the authoritarian regime is the control over illegal hundi transactions conducted through MFS.鈥�
鈥楬owever, this control was not achieved due to strict regulations, but rather because of the downfall of the vested groups previously involved in money laundering through MFS.鈥�
Earlier bribes were exchanged directly, now they are being transacted through the MFS, he remarked.
To curb illegal earnings using the MFS, these platforms must be brought under the tax regime so that income inconsistent with legal earnings, tax evasion and bribe transactions can be detected, he added.
Based on the findings, the TIB made 13 recommendations, including enacting a separate law for the MFS sector to ensure fair competition, financial inclusion, transparency and accountability.
The corruption watchdog also recommended aligning MFS governance with international best practices, capping and monitoring service charges and commissions for agents and distributors, and amending the 2019 Money Laundering Prevention Rules to allow BFIU intelligence reports as court evidence. It also urged a significant reduction in service charges for making MFS more affordable.
