Bangladesh Bank in money-laundering trap

Bangladesh is again at odds with international financial discipline. Stories of detected gross financial misconduct in international transaction and suspected high-level involvement of the incumbent power elite have returned to haunt the regime. From the very beginning of this prolonged regime, succeeding the military-backed caretaker government’s two-year regimental anti-corruption drive, daring financial irregularities rebounded with vengeance.

Tendencies to make a quick buck by hook or by crook became the order of the day. White-collared crooks were doubly emboldened after bulk of the corruption cases, pending under loopholes of delaying tactics in our legal system, were cavalierly disposed of by administrative closure of prosecution. The first casualty was Dhaka Stock Exchange. When the market crashed under massive manipulation sending to bankruptcy and to streets many thousands of small investors, the Finance Minister did not blame the regulators, and taunted instead the hapless investors themselves for ‘gambling’ with their money.

Then started a series of Bank scams, all involving state-owned financial institutions under the control of the Banking Division of the Finance Ministry and only nominally monitored by Bangladesh Bank. When a Sonali Bank scam revealed defalcation of some five thousand crores of takas funnelled through fictitious accounts of a business group by collusion of bank officials, the Finance Minister cavalierly dismissed the matter as loss of “peanuts” that our much-expanded economy could very well afford. What a shameless ‘tolerance’ of bank fraud!

So encouraged, it is no wonder one after another state-owned banks found out how their liquid assets were hit, not by bad loans, but being siphoned off by rackets involving account-holders with room at the top and officials either colluding or obeying verbal commands from somewhere near the top. Big headlines were made by these bank-swindles-in Basic Bank, Agrani Bank, and others after Sonali Bank. In no case, however, the kingpin in the Bank or in the government, as the investigations or the investigative media discovered, was punished or prosecuted, and cover-up attempts from influential quarters invariably sought to divert the course of investigation.

Last week, a revelation in the foreign media has now involved the Bangladesh Bank (BB) itself in a massive money-laundering scam. On February 29, a report by Daxim L. Lucas in the Philippine Daily Inquirer disclosed:

“The country’s financial regulators are investigating what could be the biggest single money laundering activity ever uncovered in the Philippines—a total of $100 million that was brought into the country’s banking system, sold to a black market foreign exchange broker, transferred to at least three large local casinos, sold back to the money broker and moved out to overseas accounts, all in a matter of days.”

More importantly, the suspected illicit funds are said to be part of funds stolen by computer hackers recently from the accounts of a bank overseas, which Inquirer sources said was a financial institution in Bangladesh. ‘The initial report is that some funds went missing in Bangladesh and the suspicion is that this bank—or the central bank of that country, itself—was hit by hackers based in China,’ said one banking source, relating a story that was corroborated by at least three ranking government officials and four other bankers. ‘Somehow, those funds found their way into the Philippine financial system.’

“This was acknowledged by ranking officials at the Anti-Money Laundering Council (AMLC) who said that an investigation was ongoing as to the extent of the laundering activity, indicating that larger sums and other parties might be uncovered as part of the ongoing probe.

Since learning about the story, the Inquirer agreed to the request of an AMLC official to hold off on its publication by several days to allow the group to uncover more details about the operation and take the appropriate action against the suspects.”

In Bangladesh, it remained all hush hush until Bangladesh Bank (BB) released a statement to the media on March 7 which said the central bank retrieved a portion of the money stolen by “hackers” from its account in the United States. Its Financial Intelligence Unit is working with the Anti-Money Laundering Council (AMLC) of the Philippines to recover the rest of the funds.

According to the statement, the central bank will move court once the AMLC completes its investigation and will tap the World Bank’s Stolen Assets Recovery Initiative (StAR), if necessary, to get the money back. For the sake of proper investigation, BB was keeping a lid on relevant information received at home and abroad.

Finance Minister Abul Maal Abdul Muhith on the same day, after holding a meeting with the World Bank’s new Resident Representative Qimiao Fan, said he was unaware of the central bank losing money to hackers.

He told reporters, “Like you, I have come to know of the matter from the media. Bangladesh Bank did not inform me of anything.” The minister simply described the incident as ‘unusual’ and remained unperturbed.

In U.S.A. on March 7 (possibly March 8 already in Bangladesh), Duncan Riley wrote a commentary in the SoliconANGLE Network, an independent media company founded by Silicon Valley entrepreneur John Furrier, which read as follows: “The Central Bank of Bangladesh has claimed it has had $100 million stolen through a hack of its account with the United States Federal Reserve.

“The Federal Reserve Bank’s New York branch holds accounts for over 250 foreign banks, governments, and large financial institutions due to the bank’s high-end security measures.

“The Federal Reserve is denying the hack ever took place, saying in a statement that to date, there is no evidence of any attempt to penetrate Federal Reserve systems in connection with the payments in question, and there is no evidence that any Fed systems were compromised. (New York Fed spokeswoman Andrea Priest made the statement in response to queries about the claim of hacking by Bangladesh Bank.)

“As Softpedia points out, if what the Federal Reserve has said holds true, in that there was no detected breach of their systems, this means that there is also the real possibility of an inside job, with someone from inside Bangladesh’s central bank aiding the hackers. That’s a touch conspiratorial at this point, but given the nature of the Fed’s security it’s also not beyond the realms of possibility. We’ll keep an eye on the story and if anything new comes up we’ll provide an update.”

Our Finance Minister appeared deaf to the hint about collusion between “someone from inside Bangladesh’s central bank aiding the hackers.”

Instead, Finance Minister AMA Muhith by way of an explanation said on 8 March: “The Bangladesh Bank got a message from there (Federal Reserve) that said it had received such an instruction (for the transfer) and sought confirmation. …. They (Bangladesh Bank) told them (New York Fed) it was false. But the transaction had been executed before the Bangladesh Bank message reached them.”

Presumably, over a month back on February 5 which was a Friday, BB officials slept over the message seeking confirmation of sums as large as $81 million transfer from the US Federal Reserve. Question also remains about when exactly Bangladesh Bank notified the US Federal Reserve about the transfer instruction being false, since as we shall say later a further $870 million was also sought to be skimmed off.

On March 8, Bangladesh Bank officials said that hackers had transferred $81 million to the Philippines and $20 million to Sri Lanka from its account with the Federal Reserve Bank of New York. They said the central bank had already retrieved the money transferred to Sri Lanka and was trying to get back the funds channelled to the Philippines.

Bangladesh Bank Executive Director Subhankar Saha disclosed, after a meeting between the central bank officials and CEOs and treasury division heads of all banks operating in the country on ‘Cyber Security on Payment System Infrastructure in Bangladesh’, that a portion of the money sent to the Philippines had already been withdrawn before the authorities could freeze the accounts in question. Deputy Governor Abu Hena Md Razee Hassan and the central bank’s new IT Governance Specialist Rakesh Asthana also spoke to the media along with Saha.

Finance Minister AMA Muhith made a claim on March 8 that the Federal Reserve Bank of New York was liable for the massive theft, and the Bangladesh Bank was not responsible. He threatened a lawsuit will be filed to recover the money, if necessary. But asked whether the central bank would lodge a case, Deputy Governor Razee Hassan said while they were considering all legal options, they could not say right now “what will be our next step on this.”

Daxim L. Lucas, writing in Philippine Daily Inquiry on 9 March 2016, further revealed:

“An attempt to launder through the Philippine banking system an additional $870 million—funds reportedly stolen by computer hackers from the account of the Bangladesh central bank—was foiled last month after international banks recalled an order to transfer the amount to local banks. Just a few days before this, however, $81 million, suspected to have come from the same source, managed to enter the local banking system and was released to local clients of Rizal Commercial Banking Corp. (RCBC).

Various sources told the Inquirer that the money, worth almost P3.7 billion at the prevailing exchange rate, were channelled to a foreign exchange dealer and then transferred to casinos—Solaire Resort and Casino, City of Dreams and Midas—where they were converted into chips for betting at the gaming tables, then converted back into cash and remitted to accounts in Hong Kong soon after. All told, these transactions comprise the largest documented case of money laundering ever uncovered in the country by regulators.

At the same time, the Inquirer learned that the head of the RCBC branch on Jupiter Street in Makati City where the transactions were made has issued a statement to the bank’s management that top officials of the Yuchengco family-controlled bank were ‘aware of the transactions at every stage, from the very beginning to the end.’

“According to the documents seen by the Inquirer, the $81 million in inward remittance happened on Feb. 5. As with all international wire transfers, the funds were cleared through US-based correspondent banks, in this case, the Bank of New York, Citibank and Wells Fargo.

“Two officials of the Bangladesh Bank were also reported to have visited the Bangko Sentral ng Pilipinas to demand the return of the funds that were allegedly stolen by hackers.

“The Senate blue ribbon committee holds a public hearing on the matter on March 14. Besides the Senate, the National Bureau of Investigation and state-owned Philippine Amusement and Gaming Corp. (Pagcor) are conducting their own investigation of the money laundering incident. Pagcor operates its own casinos and licenses a few private firms to run their own casinos.”

In other words, all authorities in the Philippines are vigorously and transparently pursuing the money trial of the missing millions from BB account. While the BB and the Finance Minister are keeping their cool, discerning citizens are very much perturbed. But all they can do is to keep an eye on the full story if it at all comes out.

Source: Weekly Holiday