The Bangladesh Bank heist and pitfalls of hasty digitalisation

Fazle-Kabir-ed

The PM’s ICT Advisor’s remark that Bangladesh may have digitalised too fast which caused it to be vulnerable to hackers brings out a significant aspect of the problem not mentioned by others. The fact remains that digitalisation is closely linked to capacity of the user and systemic ability to deliver. If otherwise, the very objective of ICT to improve the delivery of goods and services fast and efficiently, can produce the opposite result.

When this happens to the home computer broadband-type situation, it causes irritation and frustration. But when the syndrome affects the banking sector, already plagued by pilferage, lack of accountability, influence peddling for loans, use of political clout, and shady business connections coupled with international finance systems, with which the banking economy is obviously barely familiar, the results can be devastating  as it has proven now.

It’s not the 81 million dollars that is gone that hurts – because much more is plundered regularly by banks and nothing happens – but that the Bangladesh Bank transaction system was so inefficient, that hackers studied the global process and then moved in on Bangladesh. That is a slap to our digital face.

Most people who are following the story are shocked at the lack of competence and concern of the persons in charge about it all over time. One equates the Bangladesh Bank with solidity and reliability, but in this case the already fragile banking system of Bangladesh has been exposed rudely, and when this happens many will look for options and alternatives. Since the Bangladesh Bank reserve was built with remittance money, should we be surprised if someone decides to revive the hundi system and finds a positive response?

After all, the Bangladesh Bank has flunked and done so badly, and it represents the governmental, official, and formal delivery system in banking and remittance management. But the hundi system is fail-safe and built entirely around trust. It’s a social tool and has existed for several hundred years, before the Bangladesh Bank came into existence. If governance is weak, financial behaviour will not automatically follow the official word. When it’s not good at all, the risks are multiplied. You can’t steal public money at will and expect the public to have trust in you at your will.

The central bank mess runs deep. If international reports are to be believed, Bangladesh Bank was out of touch with the Federal Reserve because their printers and software were not working. Simply put, the IT protection was absent, but no alarm was raised because “this happened often,” and so no one saw cause for concern. By the time it was noticed and frantic attempts were made to stop further transactions, the US was shut due to the weekend.

So the Bangladesh Bank sucked their financial thumb and by the time all this was noticed, the damage was done. It’s not as alarming as it is embarrassing, proving once more that those who live in the pigeon express world should not use e-mail. Nothing proves the veracity of the PM’s ICT Advisor’s words more than this situation.

But it’s not just about ICT, but the manner in which it was handled including the post-Atiur transition. What one can understand from the accusations, counter-accusations, defence and excuses, the communication protocol in the official world had simply collapsed. One is not sure who was even in charge at the peak of the crisis. Equally puzzling is the visit of the governor to India while all this was on. Clearly, he can’t have travelled without official permission so why did he travel to an event when the heist crisis was on?

What is also worrying is that the finance minister has said that the Bangladesh Bank health is not good and as an indication of that he has sacked several senior staff plunging the already poorly functioning Bangladesh Bank into a worse morass. Something called morale is very low, and the induction of a new governor who is an ex-secretary for the next 4 years is no solution, since there is no evidence of his competence.

Since the banking sector is the most corrupt and with a proven track record of incompetence, how does it qualify him, a person who oversaw banks during which time all sorts of incidents occurred, to be placed in the hot-seat?

Why is he better than Atiur? What quality does he have which says he is the best? Or is it just loyalty given Atiur was loyal to Awami League values, but was not a person with a track record in central banking?

The PM has repaid loyalty and proven once more that, like her father, she will stand by her infantry. But as the financial sector creaks, she may have to pose a few more tough questions to those who profess loyalty but don’t do their job well.

A committee has been set up under Dr. Farashuddin and a report will be duly submitted. So what? So many other reports have been submitted and never acted upon.

A new governor has said that the first objective will be to make sure such things do not reoccur. In our banking world, the list of theft is longer than the billions of dollars we claim to have in our reserve. So what assurance does he bring that he knows how to fix it?

New people will be appointed, a lot of noise will be made, and the hackers elsewhere will know better than all of us that when a system is corrupt and riddled with incompetence, the gaps will be huge and exploit them.

Next time they will be smarter and take more, that’s all. Meanwhile conspiracy theories are mounting particularly around the case of the missing IT specialist and Atiur’s India visit along with the leaking banking system.

Let’s focus on old fashioned security and safety of public money first before we explode in the pleasures of an advanced IT structure which only makes us more insecure. Please focus on what matters.

Source: bdnews24

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