Small victory for BB as NY court dismisses appeal challenging case

A US court has rejected an appeal that challenged a Bangladesh Bank case against a Filipino bank and others over $81 million reserve heist from its account with the New York Federal Reserve.

The US District Court in the Southern District of New York issued its opinion and order on the motions filed by several defendants in the BB case against Rizal Commercial Banking Corporation of the Philippines, Solarie Resort & Casino, Midas Resort & Casino and others.

The court denied the defendants' motions to dismiss the action for a lack of subject matter jurisdiction and under the forum non conveniens doctrine, according to a statement of the Bangladesh Bank yesterday.

The forum non conveniens is a discretionary power that allows courts to dismiss a case where another court, or forum, is much better suited to hear the case.

On February 1 last year, the BB filed the case with the Court for the Southern District against RCBC and others for their involvement in a "massive and multi-year conspiracy" to steal its money.

The theft targeted a major US institution -- the Federal Reserve -- located in New York City. Critical evidence of the fraudulent payment orders, the movement of the stolen funds into correspondent accounts and the movement out of the accounts abroad exists in or close to the district, the BB statement said. 

Three of the four correspondent accounts are in New York City and one is located nearby in Philadelphia.

Taking into account public interest, the court decided that New York is the correct forum for the resolution of the disputes to recover the sum lost as a result of the heist, said the BB statement.

Federal Reserve Senior Vice President Anne Baum attested that the Fed and the BB entered into a formal agreement, whereby the Fed will provide technical assistance to the central bank of Bangladesh in its litigation.

The court, however, did not accept another case filed by the BB under the Racketeer Influenced and Corrupt Organisations Act against RCBC and the casinos for trial at the federal court on technical ground.

But the claims of fraud, theft, conversion, conspiracy and other claims against RCBC, Solaire, Midas and other defendants could be brought the New York state courts as opposed to the Southern District Court, the BB said.

The BB is taking further steps to pursue its claims in New York courts to recover the stolen funds. 

In February 2016, hackers breached the BB's systems and used the SWIFT messaging network to order the transfer of $951 million from the central bank's account at the New York Fed.

The hackers generated 35 SWIFT messages and instructed the NY Fed to release the fund to four beneficiaries through intermediary banks. While the NY Fed's security system flagged the payment orders, five of them fell through, and $101 million against them was released.

Of the amount, $81 million was wired to RCBC branch in Manila and $20 million to Sri Lanka's Shalika Foundation.

The funds that went to the Philippines were quickly withdrawn and sucked in by the huge casino industry in the Southeast Asian country. But the Sri Lankan bank that received that payment order -- the Pan Asia Banking Corporation -- flagged it because it misspelled the word "Foundation" as "Fundation".

Since 1973, the BB has held its international reserves in a custodial account in New York City with the New York Fed. This account enables the central bank to participate in the international financial system.

The BB conducts approximately 85 per cent of its international transactions in the US dollars, and it does so through its custodial account at the New York Fed.