Police said the 30-year-old man died in an early morning gunfight between two groups of human traffickers in Teknaf near Bangladesh's border with Myanmar.
The area is home to 32,000 registered Rohingya refugees who are sheltering in two camps, as well as between 200,000 and 300,000 undocumented Rohingya.
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"He was charged with at least three human trafficking offences and his name was in the list of human traffickers prepared by the home ministry," local police chief Ataur Rahman told AFP, referring to the dead suspect, who he identified only as Amanullah.
However, a Rohingya community leader in the Nayapara refugee camp said Amanullah, a resident of the camp, had been shot dead while in police custody.
"Police arrested him at 4pm Sunday and this morning they shot him dead in cold blood near a road," the leader said, speaking on condition of anonymity.
Every year thousands of Bangladeshi economic migrants and Rohingya from Myanmar attempt perilous boat journeys organised by people-smugglers, mostly to Malaysia and Thailand.
The trade was thrown into the spotlight this year after thousands were left stranded following a Thai crackdown on trafficking that threw well-worn regional routes into chaos.
In the last few weeks at least five suspected traffickers have been shot dead during gunfights with police in Teknaf, whose islands and coastal villages are used as the main trafficking hub.
Local people say all five were deliberately killed in fake encounters -- a commonly used term in South Asia for staged confrontations in which police execute unarmed suspects and later claim it as self-defence.
Police deny the charge.
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