The country’s foreign exchange reserves to the tune of US$101 million dollars were stolen on 4 Feb.2016 from its account at the Federal Reserve in New York.The cyber heist at the Bangladesh Bank (BB) jolted the nation in which thieves tried to illegally transfer US$951 million to several fictitious bank accounts around the world. Earlier in 2013, the Sonali Bank was also targeted by hackers who were able to steal US$250,000. But the BB did not take cautionary measures against possible attacks.
Lo and behold, its very eloquent and articulate governor Atiur Rahman—-the custodian of the nation’s coffers, as well as guardian of the apex regulatory body for the country’s monetary and financial system—-in his wisdom maintained inordinately long silence for long 42 days.
Things in the Bangladesh Bank (BB) were so much hush-hush that neither Finance Minister AMA Muhith nor fairly large Dkaka media corps got any information whatsoever about the $81m theft, while the Philippines daily Inquirer, Reuters, the NY Post, the WSJ and ABS-CBN News reported since 8 March. Out of public view for long, Atiur came into sight on 15 March to declare without qualm or remorse, to some extent brazenly, that he was leaving like a ‘hero’ and with ‘satisfaction’ after the worst ever financial disaster in the BB. [Vide Editorial, the Holiday “The BB’s forex cyber theft: Probe must be just, transparent, unbiased”, March 18, 2016].
Proved himself to be a “brave person”
What is more, Atiur Rahman quoted PM Sheikh Hasina as saying that he (Atiur) had set an “example by volunteering to resign” and had proved himself to be a “brave person”.
Finance Minister Muhith was upset with Atiur for not informing him right away about the theft of Bangladesh’s foreign exchange reserves kept with US Federal Reserve Bank. Muhith also disapproved of Atiur’s visit to India at this juncture. Muhith was quoted as saying he was “kept in the dark about such a sensitive matter in the name of maintaining secrecy”; even the Prime Minister was informed about the matter on February 9, the New Age reported on 15 March.
Because of the weaknesses in the security of the BB, including the possible involvement of some of its employees, perpetrators attempted to steal $951 million from the BB’’s account with the Federal Reserve Bank of New York when BB’s ‘s offices were closed. The criminals managed to compromise BB’s computer network, observe how transfers are done, and gain access to the bank’s credentials for payment transfers. They used these credentials to authorise about three dozen requests to the Federal Reserve Bank of New York to transfer funds from the account Bangladesh Bank held there to accounts in Sri Lanka and the Philippines.
Thirty transactions worth $851 million were flagged by the banking system for staff review, but five requests were granted.
Sri Lanka Shalika Foundation
The $20 million transfer to Sri Lanka was intended by hackers to be sent to the Shalika Foundation, a Sri Lanka-based private limited company. The hackers misspelled “Foundation” in their request to transfer the funds, spelling the word as “Fundation”. This spelling error gained suspicion from Deutsche Bank, a routing bank which put a halt to the transaction in question after seeking clarifications from the BB.
The government-constituted probe body, headed by former BB governor Mohammed Farashuddin, submitted the report to Finance Minister AMA Muhith at his office on 29 May.2016. Talking to journalists after receiving the report, the minister hoped that he would be able to make public the contents of the report in 15-20 days after going through it.
The committee was also instructed to assess the possibility of recovering the stolen funds and suggest measures to stop a recurrence of such incidents.
Probe hints at involvement of insiders in Bangladesh Bank
Probe body hinted at involvement of insiders in Bangladesh Bank heist. The committee was assigned to determine how the payment instructions were sent and to whom. The committee was also asked to check the central bank’s measures to stop theft, the logic behind concealing the theft and whether central bank officials related to the matter were negligent in performing their duties.
Speaking to journalists at the ministry, Farashuddin said the committee had shifted ‘a bit’ from its earlier assumption that no Bangladesh Bank insider was involved in the $81 million heist from its reserves in a United States bank. “We initially thought that no one at the Bangladesh Bank was involved. That has changed a bit. Our report details what kind of involvement it is,” he said. The probe chief said, “SWIFT is responsible too. The report contains an analysis on whether they (SWIFT) are fully responsible or not. SWIFT cannot avoid responsibility.” ( See bdnews24.com dated 30 May.2016 ).
He, however, said Bangladesh Bank’s ‘future problems will have to be solved’ in cooperation with SWIFT (Worldwide Interbank Financial Telecommunication). Neither the finance minister nor the probe body chief has disclosed who were found to be involved in the heist and what the recommendations are like. (Ibid)
In a news report entitled “Five state-owned banks in poor condition” dated Sep 22, 2014, en. prothom-alo.com said the government was in a predicament as regards running the country’s state-owned banks. The capital deficit of the banks increased, default loans shot up alarmingly and large amounts of loans were written off. Then again there is the massive misappropriation of funds.
UK Sonali Bank fined £3.3m
The UK offices of the Sonali Bank was fined £3.3m and its top anti-money laundering official, Steven Smith, has been banned from any similar job in banking. The UK operations of Bangladesh’s biggest bank, Sonali Bank, have been banned from accepting deposits from any new customers for 24 weeks. The Financial Conduct Authority (FCA) of UK said the bank had failed to put anti-money laundering controls in place. (bbc.com/news/business dated 12 October 2016).
An FCA investigation found that the bank’s failure to operate proper controls against potential money laundering had taken place despite previous warnings from the regulator as long ago as 2010.
“Sonali Bank failed to maintain adequate anti-money laundering (AML) systems between 20 August 2010 and 21 July 2014,” said the regulator. “The FCA found serious and systemic weaknesses affected almost all levels of its AML control and governance structure, including its senior management team, its money laundering reporting function, the oversight of its branches and its AML policies and procedures. (Ibid)
“This meant that the firm failed to comply with its operational obligations in respect of customer due diligence, the identification and treatment of politically exposed persons, transaction and customer monitoring and making suspicious activity reports,” the FCA added. (Ibid)
Catalogue of failings
To make matters worse, the bank also failed to tell the FCA for at least seven weeks of an allegation of “significant fraud” against a customer at the bank. The bank’s board and senior management were criticised for failing to take the requirements of the anti-money laundering rules sufficiently seriously. Mr Smith, the bank’s money laundering reporting officer, was personally fined £17,900. Sonali Bank announced last December that it would stop taking on any new non-business customers and it will operate only two branches by the end of this year.
The regulator said the bank had agreed to improve its AML procedures, including taking on new senior staff, using outside experts and giving staff refresher training.
Sonali Bank was permitted to resume banking operations in Britain in 2001 after its operations had been closed down two years earlier because of charges of gross irregularities. (Ibid)
According to a news report, the central bank of Bangladesh has asked the four state-owned commercial banks (SoCBs) to improve their financial health immediately through slashing the amount of classified loans. The public sector banks have also been advised to expedite credit flow to small and medium enterprises (SMEs) instead of large ones for minimising risks, officials said. The instructions were given at a meeting, recently held at the Bangladesh Bank (BB) headquarters with BB Governor Fazle Kabir in the chair. The meeting was convened to review the progress of implementing memorandums of understanding (MoUs) and key financial indicators of the four SoCBs —- Sonali Bank, Janata Bank, Agrani Bank and Rupali Bank..
Irregularities in the public sector bank—-Sonali Bank, Janata Bank, Agrani Bank and Rupali Bank—-have been a deplorable blight; the sooner these diseases are treated the better it will be for the nation.