The AB Bank has allegedly laundered around Tk 165 crore to the United Arab Emirates through two shady organisations in the name of investment, according to a Bangladesh Bank probe report.
The board of directors of the AB Bank in December 2013 approved investment of $20 million in Singapore-based fundraising and investment company Pinnacle Global Fund Pte Ltd (PGF) through the bank's Offshore Banking Unit (OBU).
In February 2014, the OBU laundered the money to an account at the UAE-based Abu Dhabi Commercial Bank (ADCB).
The account belonged to Cheng Bao General Trading LLC which acted as a Special Purpose Vehicle (SPV) or a mediator for the PGF. Cheng Bao immediately withdrew the money and closed the account.
It could not be known where the money went after the withdrawal, as the AB Bank has failed to give the BB any substantial documents on Cheng Bao and the PGF.
The first generation private bank was also found to have signed the investment deal with the PGF on a white paper, raising questions about the deal's effectiveness.
A BB team unearthed all this in an investigation in late October this year.
AB Bank Chairman M Wahidul Haque, two ex-managing directors M Fazlur Rahman and Shamim Ahmed Chaudhury, and its former head of financial institutions and treasury Abu Hena Mustafa Kamal were directly involved in laundering the money, says the BB report.
The BB team has recommended the removal of Wahidul from the AB Bank board in line with the Bank Company Act 1991, and also suspension of Abu Hena for their alleged involvement in the laundering.
The BB sent the report to the Anti-Corruption Commission on November 15.
The Daily Star has obtained a copy of the report from the ACC.
The central bank on October 13 wrote to the AB Bank, asking it to suspend Abu Hena, ex-treasury head, from his job at the bank in line with the service rules.
The BB also instructed it to immediately classify the laundered money as bad loans, and stop borrowing, investing and lending through the OBU.
This is the second instance of money laundering by the AB Bank in the last two years.
The BB last year detected that the bank laundered $40.25 million (Tk 340 crore) to Singapore and the UAE through its OBU.
The AB Bank has been taking advantage of the existing rules on OBU, which allow a local bank to invest abroad without the central bank's prior approval.
“The AB Bank board cannot avoid the responsibility in this case, as the agreement was signed following its approval,” the probe report says.
The local bank struck the deal with the PGF to invest $20 million on condition that the firm will give it eight percent interest and invest $80 million in it within 95 days of getting $20 million.
Also, Cheng Bao's bank account with the ADCB was supposed to be controlled jointly by the AB Bank and the PGF. But nothing of this sort happened in the last three and a half years, mentions the report.
Besides, interest on the investment amounted to $5.56 million as of October this year. As the interest is yet to be repatriated to Bangladesh, the BB report counted it as further laundering.
The total amount of laundered money, including $25,000 as consultancy fee, now stands at $24.89 million (Tk 206 crore).
The BB probe found that AB Bank Chairman Wahidul was named as a nominee of the bank's fund and a joint signatory of the account with the ADCB. He visited the UAE in February 2014 to complete the deal.
“Wahidul was well aware of the whole thing as he was a joint signatory of the account. He and AB Bank's ex-treasury chief Abu Hena collaboratively laundered the money to the UAE,” cites the BB report.
The AB Bank raised the fund from the interbank foreign exchange market. It was supposed to take legal advice from both local and foreign law firms before making the investment. But it did not do so, mentions the report.
The private bank failed to show the BB any formal offer letter from the PGF. It also could not show any article of association, business profile, registration certificate and memorandum of the PGF.
The PGF got a licence in November 2007 from Singapore's Accounting and Corporate Regulatory Authority (ACRA) to operate as a financial organisation. But the ACRA cancelled its registration in May last year, the BB team revealed.
Abdus Samad Khan, a Canadian citizen, signed the deal on behalf of the PGF. He was mentioned as PGF director in it but was referred to as a partner of the firm in another document.
BB officials said the AB Bank could not produce any document to prove that Cheng Bao was authorised to work as a SPV or a mediator.
Only a financial institution or an investment company is allowed to perform as SPV, but Cheng Bao is a trading company, they pointed out.
The BB wrote to the ACC on November 15, asking it to take legal action against those involved in the money laundering.
The ACC formed a probe body and summoned the persons involved, including the bank's chairman, last week.
Talking to this newspaper yesterday, ACC Public Relations Officer Pranab Kumar Bhattacharya said the corruption suspects were yet to be interrogated as they sought time to face the commission.
Contacted, Wahidul said the invested fund would be brought back home within the shortest possible time.
Replying to a question, the AB Bank chairman claimed that he was not a joint signatory of the bank account with the ADCB.
Former MD of AB Bank M Fazlur Rahman, whose name came up in the BB report, said he had left the bank before the deal with the PGF was signed.
“I left AB Bank on January 1, 2014. I performed my responsibilities at the initial stage of the agreement. My tenure ended before its signing. I am not responsible for it.”
The laundered money could be recovered by conducting a cross-boundary inspection, he added.
Asked, BB spokesperson and Executive Director Subhankar Saha said he was unaware of the matter.