Breakthrough regarding the Bangladesh bank heist
During investigations Philippines financial watchdog AMLC also made extensive investigations. Senior executives and staff of the Rizal bank were called for hearing at the senate as part of the investigation
Rais Khandakar
After excellent efficiency shown by our central bankers under the able leadership demonstrated by the new governor and a strong initiative by the Bangladesh legal team are confident as Philippine court ordered to refund the full amount owed to us.
It started with the news that near about US.100 million has been disappeared from the Bangladesh account with Fed US. That is part of our national reserve saved at federal reserve Bank, U.S. for the security, investment, and time again government uses these funds for various payments. As reported in the media the fund account was hacked by rogues and stolen US 100MLN. The hackers followed the strokes of the keyboard for their hacking scheme. Another media reported some non Bangladeshis may have a role in the heist.
This was all possible for the Malware virus in the system as reported in the media. As the event unfolds Fed denied any role of its in the heist. The News was spread all over the news media in Philippines. Some media also informed that the Rogues managed to get hold of the code or password word through some sources outside US. Present investigation showed the signs of our control of lapses were very smartly used in the opportune moment by the outside intruders.
The, media reported also that the hackers managed get into our account and move about USD 81MLN. To Rizal bank in Philippines, and some part in Srilanka, using SWIFT, the Sri Lankan transfer was rejected due name mismatch.
Though the Fed authorities and SWIFT chief both denied and commented that there were no failures noticed with their organizations. More investigations are under progress to reach at the bottom of the heist; in any case the National reserve was hacked and stolen by using some help of individuals outside US. Who may be in Bangladeshis as reported by some media?
You may remember there was a scam in Barings Singapore branch, an investment bank established under a charter in U.K. In Barings an investment bank a single person Mr. Nick Lesson was managing, with deal making, to typing and even disbursement of fund. The scam had been in millions, this financial institution was a shame to financial world.
Since the incident that happened in Barings, then the members of the Basle committee and Central bankers met several times to discover the options to stop such loopholes as in Barings.
After several meetings in Basle they identified that the way to control these failings like in Barings, is to introduce strong and robust operation risk policy in BASLE II along with the credit risk and market risk.
Basle II policy was introduced in global financial market long ago, which was introduced in Bangladesh in early 2010. Including the latest version of risk-based capital standards set as banks worldwide. Bangladesh Bank reminded all banks to follow the guidelines on risk-based capital adequacy from middle 2010. Three types of risks, credit risk, market risk and operational risk, Should be followed along with the minimum capital requirement.
More than 35 swift instructions were routed to our reserve account with FED. However only 5 to 7 SWIFT could break through the firewalls and managed to move out USD 100 million.
However the chief of the SWIFT has denied his companies responsibility. He suggests this is an internal issue, as they made a condition that internal connectivity for any risky situation the SWIFT member will take the responsibility. However later they agreed to support us to recover the fund.
Part of the National our reserve was saved almost over 60 per cent in bonds. As such there was partial cash loss through the hacking incident. Even though almost USD 100MLN is a substantial amount for a developing country like ours, and this cant be ignored.
As I write this article, we are yet to reveal all the reasons of disappearance of our reserve kept with, FED. More investigations are under progress.
During investigations Philippines financial watch dog AMLC has also made extensive investigations. Senior executives and staff of Rizal bank were called for hearing at the senate as part of the investigation.
Since the Anti-Money Laundering Council of Philippines started its probe into the heist in, early part of 2016, a lot has been revealed. There were confessions made and resignations by some of the bank staff.
It has been over 2 months since the AMLC briskly investigating on the probe trail for the $81-million of Bangladesh reserve heist. Where are all the stolen money hidden. So far $5 million of the stolen fund was returned initially to the AMLC. But up to now, we are in the dark who are liable for the heist and where are those hackers who were frequently reported in our media. We hope that a White paper will be published, this will be psycho booster to the nation.
Bangladesh officials, both from Bangladesh bank and a legal team made frequent visit to visit Philippines, to help the Philippine government in its probe into the heist. Few outcomes are clear from the investigation of the Philippine watchdog AMLC. So far, all of those who managed the transactions of moving the $81-million Bangladesh stolen funds in the Philippines all known to each other.
The money trail went through Rizal, PhilRem Service Corporation, Solaire Resort and Casino, Midas Hotel and Resort, and some casino junket operators.
Senate probed that an individual named Wong was acquainted with most of the witnesses when called to the hearing.
According to Wong, he knows RCBC Jupiter branch manager Maia Santos. Wong said he met Maya and Tan at a party.
The $81-million stolen money from Bangladesh Bank entered Rizal more than once; stolen funds entered Rizal via, over 33 SWIFTS. But the bank settlement department still pushed through with the withdrawals and conversion.
On February 4, SWIFT ordered the inward remittance to the Philippines of $81 million. It then found its way to RCBC. Per regulations, before any dollar remittance enters the Philippines, it has to pass through US Nostro accounts of the bank in US. In this case, these are correspondent banks in US.
From the 3 correspondent banks, the $81 million did not enter the RCBC Jupiter branch directly. The money passed through the Settlement Division, which is part of the head office of the same bank, never shown any suspicion.
From there, it was credited to the Jupiter branch i.e. Maia Santos hand. The other part of 81 MLN of Bangladesh was transferred to a remittance company PhilRem.
Senator Mellon in US raised and questioned why no investigation is done in US. She also requested for the report
On early February RIZAL received a SWIFT code from Bangladesh Bank requesting for a refund, putting it on hold if the funds had not been transferred, or freezing the funds for proper investigation.
During the Senate probe, PhilRem President Salad accepted that her company went back to the Rizal Treasury to converted $61 million in different days. So the money went back to Rizal they said during the hearing, which was later confirmed by Tan.
Wong told until now the Senate is investigating about the $81 million stolen from Bangladesh Bank remained silent and $17MLN remained unaccounted for. He said this was still with PhilRem.
Of the stolen money, about $63 million went to Solaire and Midas casinos, while the remaining $17 million is said still lying with PhilRem this claim was denied by its officers.
Benny Tan, the legal chief of Solaire operator in Resorts. Confirmed during the hearing that some $2million went through Solarias gaming tables, a bulk consolidated into the account of a big-ticket foreign junket operator through instructions of Ding Zhize.
We will need a court order to dispose of it, Tan told the Senate. As he promised, Wong turned over to AMLC $4.63 million from the junket operations.
Wong told the Senate panel that casino junket operators Ding Zhize and Gao Shuhua facilitated the entry of the laundered money into Philippine casinos.
Wong mentioned that on February, he received a phone call from Deguito, informing him that there would be a huge amount of funds that would enter the junket operators accounts. He said he advised Deguito to send the money to Solaire Resort and Casino. PhilRem then converted, part of the $81 million into pesos and delivered the money in cash tranches to registered casino junket operator Xu, Eastern Hawaii, and Solaire.
Officials of Bangladesh Bank and members of the Criminal Investigation Department of Bangladesh government visited AMLC to attend the Senate hearing.
De-guito and his friends was running typical Money laundering operation with our stolen reserve money. A full cycle of laundering the stolen money.
PLACEMENT: Funds entered the Financial system sent by hackers. 2. LAYERING: Funds transferred moved into other other accounts, co, and finance co to further separate the money. 3) Funds are reintroduced into the economy by paying the debts other expenses made. To legitimize the money. And the Bangladesh Ambassador consistently maintained his persuasion, and the Philippine government wants to continue investigation and arrange for returning the funds. Our new Governor with his team is now visiting the SWIFT office and FED to discuss for the recovery options of our reserve fund in FED.
Both Fed and SWIFT now have agreed to support in the recovery process. FBI also supported Bangladesh Government with team for recovering the stolen reserve, as reported different medias. From report of Bloomberg it was reported that so far four hacker groups was associated with the heist, there were one North Korean group, one was from Sub.con.
It was also reported that SWIFT has shown weakness in the system, there was another incident that happened in Vietnam.
Finally following initiatives may consider by the authority, to avoid any more such scams.
Besides working with our own intelligence we can also get assistance and training from FBI, who specializes in such kind of scam, who had good experiences in the past.
The government has already appointed some technology company to assist in increasing our financial security strength.
A robust operational standards. and operational risk policy. should also be enhanced to avoid future risk in different banks.
Further Strengthen the firewalls at a higher level for our reserve account.
A full scope of internal control and strong operational risk policy, with Investigation of a specialized management team, who will do the periodical test , and Investigate all internal control policies with more advanced procedures, as practiced in the developed countries, and other Asian countries..
The writer is a former banker and financial consultant
