Tk 199cr defaulted loan: BB allows ‘launderer’ to reschedule it

In a gross violation of its own rules, the central bank has allowed an alleged money launderer to reschedule defaulted loan of Tk 199 crore taken from Bangladesh Commerce Bank Ltd (BCBL) through forged documents.

Bangladesh Bank also gave the BCBL permission to waive interest to the tune of Tk 71 crore on the defaulted loan of SB Exim owned by the alleged money launderer, Shahjahan Bablu.

As per the BB rules, no bank is allowed to reschedule any defaulted loans that have been secured through forgery. In such a case, a bank must file a lawsuit with a court to recover the embezzled fund.

SB Exim swindled the private commercial lender out of the fund through fake export bills for terracotta tiles in 2018, according to probes carried out by several organisations, including Bangladesh Financial Intelligence Unit (BFIU), a government agency fighting money laundering and terror financing.

Though Bablu had not shipped any goods abroad, he sold the fake export bills to the bank. The lender later created a loan against the payments to the borrower as it didn't receive the money from foreign banks.

Instead of going for legal action against the swindler, the BCBL in November last year rescheduled the defaulted loan and also waived interest on it, breaching the banking rules.

A central bank team later detected the anomaly during an inspection at the bank.

In December 2019, the BB took a tough stance against the lender and directed it not to reschedule the loan as the fund was swindled by the business entity, said BB officials.

But surprisingly, higher authorities of the BB on April 19 this year allowed the bank to reschedule the loan and waive the interest on the amount in the face of immense pressure from influential quarters, they said.

INSPECTION TEAM'S FINDINGS IGNORED

Shahjahan applied to the BCBL on September 9 last year for rescheduling the defaulted loan. The lender formed an inspection team to examine whether the loan could be regularised.

A couple of days later, the team inspected the SB Exim's terracotta tiles factory in the BSCIC (Bangladesh Small and Cottage Industries Corporation) area in Jhenaidah and found that its production had been suspended for months, shows BCBL documents.

As per the BB rules, no bank can reschedule the defaulted loan of a company which is not in operation. But the BCBL board on September 16 decided to allow rescheduling of the defaulted loan.

The BCBL's Dilkusha branch subsequently rescheduled the loan amounting to around Tk 270 crore (including interest) on November 4 last year upon a down payment of 5 percent.

The borrower was asked to repay the principal amount of Tk 199 crore within a year. And the interest amount of Tk 71 crore will be waived once the borrower repays the loan within the deadline.

HOW THE FUND WAS EMBEZZLED

On information from sources, the BFIU carried out a probe into the scam involving SB Exim in July 2019 and found proof of money laundering.

In the documents submitted to the BCBL, SB Exim showed that it had exported clay terracotta tiles between February and September 2018. But the BFIU found that the company didn't export any tiles.

As per the central bank's instructions, the BCBL hired A Qasem & Co Chartered Accountants, a chartered accountancy firm, in August 2019 to carry out further investigation.

According to the audit firm's findings, the SB Exim in its documents showed that several businesses in the UAE, the UK and the US imported goods from it. But the addresses in the destination countries of the export items and that of the importers didn't match.

"… the pivotal issue was that even though exports were not made, the value of the exported items were received. That is an indication of money laundering activities," the audit firm said in its report.

Besides, SB Exim opened letters of credit (LCs) through five foreign banks that

didn't have licences from the central banks of the host countries as of 2019 when the BFIU and the audit firm caried out investigation.

The five banks are Suisse Credit Capital and Point Bank in the UK; Euro Exim Bank in Saint Lucia,West Indies; Pan Pacific Bank in the Gambia; and the Bank of West Indies International in the US, according to the audit report.

These are globally known as shell banks and the Financial Action Task Force (FATF), a global anti-money laundering body headquartered in Paris, strictly prohibits any transactions with such entities.

A shell bank is a financial institution that doesn't have any physical presence in any country.

Contacted, Shahjahan, who also owns SB Crop Care Industries Ltd, said he had made a down payment of more than Tk 11 crore as per the bank's conditions for rescheduling the loan.

"I am now repaying the loan … the entire loan will be paid back within September as per the deadline set by the bank," he claimed.

LAWSUITS AGAINST THE COMPANY

The BFIU submitted its probe report to the Criminal Investigation Department, the Anti-Corruption Commission and the Customs Intelligence & Investigation Directorate to investigate the scam further.

In its probe, Customs intelligence found that SB Exim had not exported any items. It filed a case with Motijheel Police Station against the company on November 7, 2019.

The ACC also filed a lawsuit with Dhaka Metropolitan Senior Special Judge's Court in February 2020.

The BCBL filed six cases with courts in the second half of 2019. But it now seems unwilling to carry on legal battle for recovering the funds.

Shahjahan said the bank already withdrew five cases, which were filed after his cheques given to the lender were dishonoured.

Asked, Md Tajul Islam, managing director of the BCBL, advised this correspondent to contact Kazi Md Rezaul Karim, deputy managing director of the bank.

BCBL REINSTATES SUSPENDED OFFICIAL

The BCBL suspended its three high officials, including Rezaul, on August 19 last year, over their alleged involvement in the scam.

The board of the bank, however, withdrew Rezaul's suspension on November 8 on the condition that he helps the bankrecover the defaulted loans from Shahjahan, according to the bank documents.

Contacted over mobile phone on June 13, Rezaul told this correspondent to discuss the matter with him in person at the BCBL head office in the capital's Motijheel.

But when this correspondent went to the BCBL office, he avoided meeting the correspondent.

BB'S CURIOUS STANCE

When the scam came to light, the BB had taken a strong stance over it. But it later backtracked on its position amid immense pressure from influential groups, said BB officials.

On December 15, 2019, the BCBL had requested the central bank to allow it to reschedule the defaulted loan, but the plea was rejected.

In response to the BCBL's application, the BB said there was no scope for giving permission to reschedule the defaulted loan as the fund was embezzled.

But the BB surprisingly made an about-face and allowed the bank to reschedule the loan on April 19 this year, saying half of the loan must be paid by June 30 and the rest by September 28.

Md Serajul Islam, spokesperson for the BB, said the BB had given instructions to recover half of the amount by June and the rest by September.

He, however, avoided giving answer why the BB suddenly changed its stance.