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11th-Mar-2016

Money was not hacked but outright stolen

By Editorial Desk

Bangladesh has become a country too easy for plundering money from banks. The planners were trying to heist about one billion US dollars from the Central Bank of Bangladesh. Bangladesh Bank sources claim that transfer of $870 could not be executed from New York Federal Reserve Bank.  
A spokes-woman for the New York Federal Reserve Bank reiterated on Tuesday that the bank had no evidence of breach of its system. The payment instructions were fully authenticated by SWIFT messaging system in accordance with the standard authentication protocols (by Bangladesh Bank). She said further that the Fed has been working with the central bank to provide assistance as appropriate. This makes it clear that the standard instruction was sent from Bangladesh Bank. It was not a case of hacking but outright stealing.   
The episode of theft from the central bank's deposits with the US Federal Reserve Bank is turning out to be a murky, intricate story, one that traversed at least four countries and involved a host of people -- from higher-ups of a bank to casino officials. The $81 million in inward remittance was deposited with five bank accounts of the Rizal Commercial Banking Corp (RCBC), which were found to have been opened against documentation belonging to fictitious identities, as per the report.
It is difficult to comprehend how the hackers could have transmitted such a huge amount of money from Bangladesh in the first place. It is not possible to simply google up the commands which are needed to transfer funds from one central bank to the other — so inside knowledge of the command codes are needed. It is common sense to realize that since only the computers from inside the Bangladesh Bank could actually authorize the commands even if one hacked into the system and stole the passwords it would not be possible as three different officials of the Bangladesh Bank are needed to complete any such transfer of funds.
The problem, it seems, is the way Bangladesh's banking sector is organized. There are broadly two types of banks: private banks, which are overseen by the central bank, and state-run commercial banks, which fall directly under the aegis of the Finance Ministry. While private banks have had their share of loan defaulters (sometimes those who sit on the boards of these banks), it is overwhelmingly the state-run banks that have allowed bad loans to multiply to an unsustainable degree. The international standard for loan defaults is currently at about 2 to 3 percent. In Bangladesh, it is over 12 percent. In a recent study conducted by the Bangladesh Institute of Bank Management, the percentage of nonperforming loans in state-run banks is as high as 29 percent. While this is a much better situation compared to 1994 when the rates of repayment were as low as 16-30 percent, by international  standards it still remains abysmal.
The situation is only getting worse. The Governor of Bangladesh Bank Dr Atiur Rahman has no reputation as a competent banker. Not only that he remains busy with political propaganda of success. We have a Finance Minister who is too happy to be in position and plundering of money does not bother him. When thousand of crores taka were plundered from nationalised banks, his reaction was nothing to worry. The government should be awarded for choosing incompetent persons for high positions of responsibility. Nobody feels any accountability.  
The World Bank's 2013 Bangladesh Development Update states that "weak internal controls, poor corporate governance, and slackening of credit standards resulted in irregularities in loan approvals," which caused state-run commercial banks to classify more than half a billion dollars' worth of loans as "nonperforming." In the past six years, the four major state-run banks have seen sharp spikes in defaulted loans; the total amount of credit in default held by these four banks is about $2.45 billion (not including nearly $2 billion already written off).
But we see no concrete action being taken against the authorities who were in charge of the major default banks in Bangladesh — BASIC Bank and Sonali Bank, or indeed even any steps to recover the money stolen, even though Bangladesh Bank found the then Chairman of BASIC Bank complicit in the embezzlement. In the case of Sonali Bank it failed to recover even one penny out of the Tk 3600 crore given to the Hallmark group — even though its CEO remains behind bars — hardly a severe punishment. Rather the government paid the state-owned banks about Tk 5000 crore taken from the hard earned tax-payers money to these banks to make them solvent — a colossal wastage of public funds.
Punishing junior officials will be a bluff and that is the reason why all sorts of stealing of public money have been carrying on. The real culprits are politically protected and enjoy impunity. So we do not expect the government is in a position to improve the corruption situation that is going on in public life or punish the real ones involved in stealing. If one is politically loyal he has nothing to fear.
We need sensible people in important positions to do the sensible things. But sycophants have all the impunity and they are everywhere. We can only pray.