Transcript Fraud and Money Laundering in the banking sector

CPE
SEMINAR
ON
Fraud and Money Laundering in the Banking
Sector- Bangladesh Perspective
AUTHORMD. SYFUL ISLAM, FCA, FCMA
30 November 2008
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STRUCTURE OF THE PAPER
Session
Title
Objective of Presentation of the Paper.
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What is Fraud.
The Circumstances those indicate the possible existence of Fraud.
Fraud prone areas.
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Conceptual Approach of Money Laundering
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Case study of Fraud and Money Laundering in the Banking
Sector- Bangladesh Perspective
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Economic Affects of Fraud and Money Laundering
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Current situation in Bangladesh for preventing crime of Fraud
and Money Laundering.
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Recommendation
Ministry of Finance
Bangladesh Bank
Management of the Bank
The Institute of Chartered Accountants of Bangladesh
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Objective of Presentation of the Paper
I being a Professional Chartered Accountant have got plenty of opportunity to
work as a Public Accountant in both home and abroad for the last eighteen years,
now I am working as one of the Directors of the state owned Bank (Rupali Bank
Ltd.) and also having the opportunity of working in the Investigation Task
against the Grievous Offences of the country with the Legal Agency of the present
Government. Through which I have been able to acquire sufficient practical
knowledge and experiences in the field of Accounting, Auditing and
Investigations of the malpractices done by the unscrupulous and vested group of
people of our society particularly in Banking Sector by which our economy as
well as the political situation has come to a very worst condition.
As such I would like to express the intention to share my practical experiences
through discussion with the honorable Regulatory Authority, Chairmen and
Directors of the Public and Private Commercial Banks, the Auditors, General
Members of the Institute of the Chartered Accountants of Bangladesh, the Law
Enforcing Authority, the Chief Executives and the other High Official of all the
Banks, the High Level Executives of the Trade and Commerce Associations with
the view to identify the defects or the defaulting activities as are being committed
in the Banking Sector of the country for creating awareness of the appropriate
authorities of the country to take the Right Steps to Expel and Uprooting of all the
Fraud, Money Laundering and other Malpractices from the Banking Sector of our
country.
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Fraud
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WHAT IS FRAUD
The term "Fraud" refers to an intentional and an unethical act by
one or more individuals among the management, those charged
with the governance, the employees and the third parties to
obtain an unjust or illegal advantage causing a material
misstatement in the financial statements.
The term "Fraud" in relation to the Banks generally refers to
manipulation in the Books of Accounts, fraudulent encashment
of negotiable instruments, unauthorized handling of the
Securities pledged or hypothecated to the Banks, embezzlement,
misappropriation of funds, pilferage of cash etc by the Bank
employees, account holders and also by third parties.
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FEATURES OF FRAUD
It is Deceitful
It is Intentional
It breaches Trust
It involves Losses
Concealment of Fact
Appearance of Outward
Respectability
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THE CAUSES OF FRAUD
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Absence of social Condemnation;
Malafide Intention;
Willful deviation from Laws and Practices;
Degradation of overall Moral Values;
Management inefficiency to Withstand Pressure;
Procedural Lapses/Bottlenecks;
Organized Crime;
Corrupt Managers;
Employee Scams;
Financial Misstatement;
False Accounting (e.g., bonus schemes);
Financial Frauds;
Computer Hackers;
Any other significant Corporate Abuse.
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TYPES OF FRAUD
 Consumer Fraud
 Credit Card Fraud
 Kickbacks
 Bid Rigging
 Inflated Invoices
 External Fraud
 Inventory Theft
 Theft of Cash
 Basic company Frauds
 Cheque Fraud
 Identity Fraud
 Banks Fraud
 Computer Hacking
 Financial Statement Fraud
 Sundry Frauds
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THE CIRCUMSTANCES THOSE INDICATE THE
POSSIBLE EXISTENCE OF FRAUD
Banking Sector
 Limitation of Audit
 Unusual Circumstances
 Financial Misstatement
 Non Cooperation
 Non Existence of Good Governance
 Abnormalities in the Financial Statements
 Abuse of Information Technology Security
General Circumstances
 Behavioral Issues
 Poor Controls
 Often Ignored the Straight Information
 Inconsistencies
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FRAUD PRONE AREAS
Loans & Advances
Deposit Accounts
Remittances
Inter-Branch Suspense Accounts
Clearing
Nominal Accounts
Foreign Exchange Transactions
Lockers & Safe Deposit Vaults
Cash Shortages
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MONEY
LAUNDERING
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CONCEPTUAL APPROACH OF MONEY
LAUNDERING
Literally “Money Laundering” is the practice of engaging in
specific financial transactions in order to conceal the identity,
source and/or destination of money and is a main operation of
underground economy.
‘Money Laundering’ as legal term is, which in fact a process of
Multi steps but interlinked with one another with the aim of
laundering the illegal proceeds.
Now- a- days Money Laundering has become a burning issue for
economic growth and social security of the nation for the following
factors.
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 Criminals need to conceal the real ownership and origin of the
money;
 They need to control the money;
 They need to change the form of money;
 It conceals the true sources of the Funds so that they can be used
freely;
 The concealment or disguise of the true nature, sources,
Location, disposition, movement, rights with respect to the
ownership of the property.
 Illicit money is turned into Legitimate useful Funds;
 The conversion of profits of illegal activities in the Financial
Assets, which appear to have Legitimate Origin.
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POSSIBLE STEPS OF MONEY LAUNDERING
“Money Laundering” basically involves the following
independent steps that often occur simultaneously.
These are:
Placement
Structuring
Layering
Integration
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THE POSSIBLE WAYS OF GENERATING
TERRORIST FUNDS
Dormant Accounts
Telegraphic Transfers
Fund Generation through Non-profit
Organization
Charitable Organization
Abnormal Business Facilities
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METHODS OF MONEY LAUNDERING
 Establishment of "anonyms" Companies/Firms that
operate with normal processes like paying Loans and
paying of taxes on profits even though these firms may
be non-existent in its operations.
 Use of over and under invoiced Exports or Imports and
creating a cache of Foreign Currency.
 Cross Boarder Transfers through a set of zigzag
patterns.
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COMMON SOURCES OF MONEY LAUNDERING
 Drug Trafficking;
 Tax Evasion;
 Organized Crime e.g. Extortion, Prostitution;
 Loan Sharking, Kidnapping, Contract Killing,
Gambling, Adulation, Bank Fraud and Corruption etc.;
 Slush Funds maintained by the big corporations e.g.
Bribery, Payment to the Political Parties, Politicians
etc.;
 Terrorisms;
 International Traffickers in arms;
 International Trafficking in human beings smuggling;
 Smuggling.
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The Process Of Money Laundering And Financing Of
Terrorism
Money Laundering
Financing of Terrorism
Cash from Criminal
Act
$$$$
$$$$
Placement &
Structuring
Cash is deposited
into Account
Bank
Securities
Firm
Bank
Bank
Placement &
Structuring
Asset deposited into
the Financial System
Non-Bank
Financial
Institution
Layering
Funds moved to
other institutions to
Obscure Origin
Layering
Funds moved to
other Institutions to
Obscure Origin
Integration
Funds used to
Acquire Legitimate
Assets
Insurance
Company
Legitimate Asset of
Distribution
Legitimate Asset or
Cash from Criminal
Act
Integration
Funds used to
Acquire Legitimate
Assets
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CASE STUDY OF FRAUD AND MONEY LAUNDERING IN
THE BANKING SECTOR- BANGLADESH PERSPECTIV
Due to some technical reason without mentioning the name of the person
and any organization some cases have been stated here under for our better
understanding that what illegal ways and techniques are applied by
unscrupulous group of people of our society to defalcate of money from the
Banking Sector.
Issuing of illegal IBDAs (Inter Branch Debit Advices)
Issue of illegal IBCAs (Inter Branch Credit Advices)
Generation/ Creation of the Fund against Benami Accounts by
excessively charging of the Accrued Profit / Interest payment on
Deposits Accounts.
Creation/ Generation of the fund against Benami Accounts by
excessively charging of the Expenditure Accounts.
Illegal Transfer of the Branch Investment Profit to Benami
Accounts of the Bank Officials, which was earned for the timing
gap of the illegal Transaction of the IBDAs and IBCAs for
restating the previously Offsetted Loan Liabilities.
General Case:
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Issuing of illegal IBDAs
(Inter Branch Debit Advices)
i) Issuing of illegal IBDAs from the Branch:
Case No - 1
Suppose that 10 unauthorized IBDAs i.e. without the approval
of the Head office for Tk. 10 crore were issued from the “M”
Branch of ABCD Bank Ltd. in favour of 10 benami accounts
which has been withdrawn in cash Tk. 7 crore and issued 3 pay
orders Tk. 3 crore in favour of Mr. Alam Account on “O”
Branch of “XYZ” Bank Ltd., a beneficiary of the aforesaid
Originating 10 benami accounts from where he withdrawn Tk. 3
crore in cash.
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Transaction Profile
Step - 1
Suppose that a fund for Tk. 10 crore was created under 10 benami / fictitious
accounts by issuing 10 unauthorized IBDAs from “M” Branch of ABCD
Bank Ltd. by debating Head Office General Account for Tk. 10 crore and
crediting Loans and Advance Account for Tk. 10 crore.
Step - 2
Cash was withdrawn for Tk. 7 crore and 3 Pay Orders have been issued for Tk. 3
Crore from 10 benami/ fictitious accounts in favour of Mr. Alam Account
maintained with “O” Branch of “XYZ” Bank Ltd. by debiting Loans and
Advance Account for Tk. 10 crore and crediting Cash and Bank Accounts for Tk. 10
crore.
Step - 3
For offsetting the Head Office General Account, Adjustable Blocked
Accounts has been debited for Tk. 10 crore and Head Office General
Account has been credited for Tk. 10 crore.
Step - 4
Ultimately in consolidation of the financial statements for clean off this
defalcated amount from the records, Profit and Loss Appropriation Account
has been debited for Tk. 10 crore and the Adjustable Blocked Account has
been credited for Tk. 10 crore.
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ii) Issuing of the illegal IBDAs from One Branch to another
Branch:
Case No - 2
Suppose that 25 unauthorized IBDAs i.e. without the approval of the
Head Office for Tk. 100 crore were issued from the “L” Branch of ABCD
Bank Ltd. to “M” Branch of the same Bank for offsetting of the
outstanding Loan Liabilities for Tk. 100 crore of 20 Traceable Accounts of
Mr. Monir of “L” Branch, which was disbursed him earlier.
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Transaction Profile
Step - 1
A fund for Tk. 100 crore was disbursed through 20 Traceable Account of Mr. Monir from “L”
Branch earlier.
Step - 2
25 IBDAs with different amount were issued in total for Tk. 100 crore on different dates for
Offsetting the Loan liabilities for Tk. 100 crore by debiting the Head Office General
Accounts and crediting the Inter Branch Transaction (M Branch) Account.
Step - 3
For giving the closing entry in “L” Branch, the Inter Branch Transaction (M Branch)
Account for Tk. 100 crore has been debited and (Traceable 20) Loan & Advances
Accounts (Mr. Monir “L” Branch) Tk. 100 crore has been credited.
Step - 4
For responding of the 25 IBDAs Tk. 100 crore issued from “L” Branch, the “M” Branch has
debited Loans & advances (25 benami Accounts) for Tk. 100 crore by crediting Inter
Branch Transaction (L Branch) Account for Tk. 100 crore.
Step - 5
For giving the closing entry in “M” Branch, the Inter Branch Transaction (L Branch)
Account for Tk. 100 crore is debited and the Head Office General Accounts for Tk. 100
crore is credited.
Step - 6
The illegal Loan liabilities of TK. 100 crore under 25 benami accounts are classified in “M”
Branch as Bad Loss Loans for non finding of the beneficiaries of such benami accounts
which have been offsetted in consolidation of the financial statements with the Adjustable
Blocked Account by debiting the Adjustable Blocked Account and crediting the Loans
and Advances Account for Tk. 100 crore.
Step - 7
Ultimately in consolidation of the financial statements for Clean off this defalcated amount
from the records the Profit and Loss Appropriation Account has been debited and
Adjustable Blocked Account has been credited for Tk. 100 crore.
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Issuing of illegal IBCAs
(Inter Branch Credit Advices)
2. Issue of illegal IBCAs (Inter Branch Credit Advices)
i) Issuing of the illegal IBCAs from One Branch to another
Branch:
Case No – 3
Suppose that 25 unauthorized IBCAs i.e. without the approval of
the Head Office for Tk.. 100 crore were issued from the “L” Branch
of ABCD Bank Ltd. to “M” Branch of the same Bank for offsetting
the outstanding Loan Liabilities for Tk. 100 crore of 20 Traceable
Accounts of Mr. Bashir of “M” Branch, which was disbursed him
earlier.
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Transaction Profile
Step - 1
A fund for Tk. 100 crore was disbursed through 20 Traceable Accounts of Mr. Bashir from “M”
Branch earlier.
Step - 2
25 IBCAs with different amounts were issued from “L” Branch to “M” Branch in total for Tk.
100 crore on different dates by debiting Loans and Advances for Tk. 100 crore (against 25
benami Account in “L” Branch) and crediting the Inter Branch Transaction in “M” Branch
Account for Tk. 100 crore.
Step - 3
For giving the Closing entry in “L” Branch, the Inter Branch Transaction (M Branch) Account
has been debited for Tk. 100 crore and the Head Office General Accounts has been credited
for Tk. 100 crore.
Step - 4
For responding of the 25 IBCAs for Tk. 100 crore issued from “L” Branch, the “M” Branch has
debited Inter Branch Transaction (L Branch) Account for Tk. 100 crore and credited the Loans
and Advances Account for TK. 100 crore (20 Traceable Accounts of Mr. Bashir for Offsetting of
the Loan liabilities of Tk. 100 crore as was given earlier).
Step - 5
For giving the Closing entry in “M” Branch, the Head Office General Accounts has been
debited for Tk. 100 crore and Inter Branch Transaction, “L” Branch has been credited for Tk.
100 crore.
Step - 6
The aforesaid illegal Loan liabilities for TK. 100 crore under 25 benami accounts in “L” Branch
have been Classified as Bad Loss Loans for non finding of the beneficiaries of such benami
accounts for which full provisions have been made by debiting the Profit and Loss Accounts
for Tk. 100 Crore and crediting the provisions on Loans and Advances for Tk. 100 Crore.
Step - 7
Ultimately, the said Loans and Advances Tk. 100 Crore has been written off in the Accounts
by Debiting Provision on Loans and Advances Tk. 100 Crore and crediting Loans and
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Advances Account Tk. 100 Crore.
3. Generation/ Creation of the Fund against Benami Accounts by
excessively charging of the Accrued Profit / Interest payment
on Deposits.
Case No. – 4
Transaction Profile
Step - 1
Suppose that the Actual Interest / Accrued Profit was required
to be paid Tk. 100 core but the Interest Accounts/ Profit was
charged in the Accounts for Tk. 110 crore by crediting (110100) Tk. 10 crore to 10 Benami Accounts.
Step - 2
Tk. 10 core was subsequently been withdrawn illegally by the
dishonest Bank Officials.
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4.
Creation/ Generation of the fund against Benami Accounts
by excessively charging of the Expenditure Accounts.
Case No. – 5
Transaction Profile
Step - 1
Suppose that the actual Expenditure was Tk. 50 crore but
the Expenditure Accounts were charged for Tk. 60 crore
by crediting (60-50) Tk. 10 crore to Benami Accounts.
Step - 2
Tk. 10 crore was subsequent illegally been withdrawn by
the dishonest Bank Officials from the aforesaid Benami
Accounts.
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5.
Illegal Transfer of the Branch Investment Profit to Benami Accounts of the Bank
Officials, which was earned for the timing gap of the illegal Transaction of the
IBDAs and IBCAs for restating the previously Offsetted Loan Liabilities.
Case No. – 6
Transaction Profile
Step - 1
Suppose that 20 IBDAs were issued for Tk. 30 crore on 1st January
2008 and 25 IBCAs were issued for Tk. 32 crore on 29th January
2008 for the time gap of 29 days.
Step - 2
Accounting Entries were made on 1st January 2008
When IBDAs were issued
Dr.
Head Office General Accounts
Tk. 30 crore
Cr.
Loans and Advances
Tk. 30 crore
Step - 3
Accounting Entries were made on 29th January 2008
When IBCAs were issued
Dr. Loans and Advances
Tk. 32 crore
Cr. Head Office General Accounts
Tk. 30 crore
Cr. "X" Benami A/c (instead of Branch Income Account) Tk. 2 crore
Step - 4
Withdrawal of the Investment Income Tk. 2 crore from the Benami
Accounts by the dishonest Bank Officials by debiting "X' Benami
Accounts and crediting the Cash Account.
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6. General Case:
Case No. – 7
i. Illegal Loan Facilities
Providing of Loans and Advances to the Entrepreneurs through legal
methods of the Bank is one of the regulated Banking Operational
Functions of the Commercial Banks. But it has been experienced through
some investigations that the influential and the vested group of people of
our society and the dishonest Bank Officials jointly defalcate money from
the Bank through disbursement of Loans and Advances committing the
following irregularities:
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Payment of Loans before the Sanctioning;
Overvaluation of the Property;
Overvaluation of the Collateral Securities;
Accepting of the Inadequate Securities;
Accepting no Securities;
Having False Particulars;
Improper Documentation;
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 Inexistence of the Proper Introduction;
 Unauthorized Cash Payments;
 Sanctioning of the Loans without the approval of the
Competent Authority;
 False Mortgage of the Property;
 Accepting of the False Deed Documents of the Property and
etc.
ii) Other possible ways of Fraud and Money Laundering.
 Use of Over and Under Invoiced Exports or Imports and
creating a Cache of Foreign Currency;
 Cross Boarder Transfers through a set of zigzag patterns;
 False Pay-Order, Demand Draft, Telegraphic Transfer;
 False Letter of Credit (Import);
 False Import & Export Bills;
 Through Capital Flight;
 Through Nostro Accounts.
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A Simple Example of Transaction of Money Laundering
Transaction Profile for Tk. 90 crore which was defalcated through Money
Laundering by issuing of 90 illegal IBDAs from X Branch of DD Bank Ltd.
OVERSEAS ACCOUNT
Tk. 100 (25+75) crore
BANGLADESH
DD Bank Ltd.
X Br.
Issued 90 IBDAs for creating
Tk. 90 crore by crediting 25
fictitious CD A/Cs
CC Bank Ltd.
Z Branch
Issued pay orders
for Tk. 10 crore
Y Br.
Transferred from Z Br. Tk. 10 crore
Transferred from X Br. Tk. 90 crore
Total
100 crore
Transferred from
Y Br. Tk. 25 crore
Withdrawn & transferred
by Y Branch Tk. 75 crore
to overseas account
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ECONOMIC
AFFECTS
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ECONOMIC AFFECTS OF FRAUD AND MONEY
LAUNDERING
The Bad money can gradually turn out the good money.
There are other negative Micro Economic Consequences for
example, It could compromise Bank soundness with potentially
large fiscal Liabilities lessen the ability to attract the Foreign
Investment, and increase the volatility of money flows and
exchange rates. In this era of Technological Development in almost
all the aspects and very high capital mobility, financial crime
makes National Tax Collection and the Law Enforcement more
difficult. the Financial system abuse the Financial Crime and
Money Laundering may also be distorted the allocation of wealth
and can be costly to detect and eradicate.
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CURRENT SITUATION IN BANGLADESH FOR
PREVENTING CRIME OF FRAUD AND MONEY
LAUNDERING
Bangladesh Penal Code, Foreign Exchange Regulations Act- 1947 (FERA)
Income Tax Ordinance- 1984 Money Laundering Prevention Act- 2002
(MLPA) and Anti- Corruption Commission (ACC) Act- 2004, the Bank
Companies Act- 1991 and The Companies Act - 1994 are the suitable Laws
to prevent such crimes. While there is always scope for improvement in the
Legal Framework, the blame cannot be impute squarely on those Acts and
Regulation.
We do not have a functioning Financial Intelligence Unit (FIU) that can
collect information, the capability to analyze the same and identify specific
cases and trend of committing Fraud,Money Laundering, Defalcation and
other Financial Crimes.
Our Investigation Agencies are not well trained with adequate knowledge
and procedures to investigating Financial Crimes/ Corporate Corruptions
and File Cases.
Our Prosecutors and the Legal System look understanding of the
complexities involved in the Financial Crimes.
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 However, since 1/11 Anti-Corruption Drive in Bangladesh
Got Momentum
 The Corrupt People are Under Legal Scrutiny
 The Financial Intelligence Unit (FIU) in Bangladesh Bank is
working with the help of US Embassy
 The Cooperation Agreement with the Other Central Banks
are Needed to carry out the investigation work against
money laundering.
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RECOMMENDATION
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Effective Anti Money Laundering Mechanisms
invariably include co-operation between the Bank
Management, Regulators (i.e. the Central Bank) and
the Law Enforcement Agencies. Therefore it is in
the best interest to develop the interaction and coordination among the above parties.
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MINISTRY OF FINANCE
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The Banking Wing of the Ministry of Finance need to be strengthened
with the Independent Professionals for Research and Developed
Standard Operating Procedures, Monitoring and Compliances;
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Constitute an Independent Body to monitor Debt Management,
Recovery, Bad Debt, Written Off Loans and Advances and involvement
of the Financial Scam of the Banks and other Financial Institutions;
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A 3 Member High Power Committee may be formed in the Bank for
evaluating the performances of the Board of Directors. The Members of
the Committee shall be one from the Bangladesh Bank holding the
position of at least Executive Director, one member from the Director of
the Board and one from the Ministry of Finance holding the position of
at least Joint Secretary;
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Further amendment of the Bank Companies Act (amendment act of
2003) and the Bangladesh Bank (nationalization) order (2003) so that the
Govt. owned Banks come under the sole supervision and regulation of
Bangladesh Bank instead of the Ministry of Finance, and strengthening
oversight through Appropriate Reformation of the Bangladesh Bank.
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BANGLADESH BANK
Organizational Issues
Functional and Operational Issues
Accounting and Financial Reporting
Issues
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Organizational Issues
 Induction of the Professionals in the Board of Directors of
Bangladesh Bank from the Private Sector to ensure that at least
one each from Business, Economics, Chartered Accountants,
Legal and Engineering background discouraging the
appointment of the Retired Bureaucrats.
 Ensure that Cash Dividend/Bonus shares and Incentive Bonus
to employees not paid / issued out of Artificial Profit created by
undercharging of the Expenditure and/or under -provision of
the Classified Loan Loss and over accruing of the Investment
Income or other Operating Income;
 The terms and conditions of the Board of Directors of the
Bangladesh Bank shall be Redefined emphasizing of close
monitoring on the present state of Malpractices, Money
Laundering and Defalcation of money from the Banking Sector
in Bangladesh;
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 Bangladesh Bank should be kept free from all Political
pressures.
 Legal and Operational Independences of Bangladesh Bank
should be ensured;
 Establish an Ethical Standards Committee (ESC) in every Banks
for ensuring of 
The Ethical Standards are carefully developed and are firmly in
place;

The Ethics Officer and other key players have well-defined roles
and are discharging their responsibilities properly;
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The Employees are behaving in an Ethical Manner as defined by
the Organization;
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The organization is complying with all the Laws, Regulations, and
Rules that affect it;
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There is a system in place for resolving Ethical Dilemmas;
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There is an effective and Robust System of compliance checks in
place and all Significant Problems are reported to the ESC.
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Functional and Operational Issues
 The tools and instruments used by the Department of the Offsite
Supervision (DOS) and the Department of Banking Inspection (DBI)
shall have to be upgraded and new effective Tools and Instruments
i.e. new Measures to be introduced which are very capable to
Controlling and finding out the Fraudulent Activities as are now
being Committed in the Banking Sector;
 A Separate Management Audit Cell (MAC) may be established
headed by the Governor of the Bank for checking and verification of
the performance of the DBI and DOS Personnel on Regular Basis;
 Departmental Head, Dealing Boss and the other officers and staff of
the DBI, DOS and the proposed Management Audit Cell should be
changed with in 2 years.
 Accountability of all officers and staff of the Bank shall have to be
established through necessary Amendments in the existing
Bangladesh Bank Order-1972 (President's Order no.127 of 1972) and
the Bangladesh Bank's (Nationalizations) Order 1972 (President’s
Order no. 26 of 1972)
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Accounting and Financial Reporting Issues

Accounting and Financial Reporting Policy as outlined in the BRPD
Circular no. 14 dated 25 June 2003 issued by the Bangladesh Bank shall
be redefined in line with the IASs, as adopted by the ICAB;

Bangladesh Bank shall redefine the Accounting and Financial Reporting
Policies of all the Banks and the Financial Institutions in line with the
best practices and ensure the Public Disclosure;

Establishing an Ethical Standards Committee (ESC) for adopting the
Corporate Code of Ethics for the Board and the Management and
ensuring the compliance thereof as part of their Employment Contract;

Ensuring induction of at least 2(two) independent Directors in the
Board of Directors in every Banks and Financial Institutions (except the
borrower, political allegiance and those who held office of profit from
the Bank) one of them should have Economic back ground and another
should be a Chartered Accountant having sufficient knowledge of the
Banking and the other Financial Institution affairs ;

Adopting the policy of submitting quarterly Classification of Loans (CL)
Statements to Bangladesh Bank along with the External Auditors
reviewing Report thereof.
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MANAGEMENT OF THE BANK
Board of Directors
 The Board of Directors shall morally be obliged to carry out their
responsibilities as outlined by the Regulatory Authority and the
Controlling Authority.
Managing Director

Ensure the preparation of the Accounts and the Financial Reporting of
the Bank which in compliance with all the BASs and the BFRSs as
adopted by the ICAB and as per the BRPD Circular no. 14 dated 25
June, 2003;

Ensure of the Inter Branch Transaction Accounts which to be
reconciled every week;

Ensure that the Rules of the Money Laundering Prevention Act-2002
which have been complied accurately in all the Branches of the Bank;

The Internal Audit Department should be kept free from the control of
the Management. They should be allowed to report their actual
findings to the Audit Committee;
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
One (1) Chartered Accountant should be appointed in every Bank as
the Head of the Internal Control and Compliance Department for
carrying out the Internal Audit in compliance with the Bank Companies
Act- 1991, Rules, Regulations and Circulars issued by the Bangladesh
Bank and the Office Circulars as issued by the Management from time
to time;

Confirm that of the Internal Audit Department which makes their
report on the following Core Risks Management:
 Credit Risk Management;
 Assets Liabilities Risk Management;
 Prevention of Money Laundering;
 Internal Control and Compliance Management;
 Foreign Exchange Risk Management;
 Information and Communication Technology Management
One (1) Chartered Accountant should be appointed in every Bank as
the Head of the Financial Control Department for maintaining the
Books of Accounts, preparation of Financial Statements and Reporting
in compliance with the BASs and BFRSs adopted by the ICAB and in
compliance with the Bank Companies Act-1991, Companies Act-1994,
the Securities and Exchange Commission Rules-1987, Rules, Regulation
and Circulars issued by Bangladesh Bank.

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
Each and every big Branch of the Bank should have a "Audit Cell." The
Audit Cell at the end of the Transaction hours of each and every day will
check the Vouchers/ Transaction of all the Risky Sectors such as;



Credit related Transaction and Vouchers;
Cash Payment Vouchers;
Out ward Clearing

Special Monitoring Cell regarding the big amount of Loans to be created
in each and every Branch / Regional Office / Head Office. Special care for
regular monitoring to be taken at the Regular Interval. Board Audit
Committee may over see the Monthly Report of this Cell.

The Beneficiaries of the Bank Guarantees (up to certain amount) may be
sent to the Head Office for verification / reconfirmation;

Cheque Frequency Machinery must be available in the big Branches;

Verification of the Land and Building Documents to be done by the
Government approved Surveyor. A certificate from the Surveyor / Branch
should be obtained stating that the properties are in the possession of the
Mortgagor;

Ensure of the decentralization of the Inter Branch Clearing Work;

Ensure of the Reconciliation of the Nostro Accounts timely etc.
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The Institute of Chartered Accountants of Bangladesh (ICAB)
Being the member of the IFAC the ICAB shall take necessary steps
immediately to adopt the following pending issues for keeping the Members
with the up to date knowledge of the present requirement of the IFAC:
ISA (International Standards on Auditing)
ISAs - 701
Modifications to the Independent Auditors Report.
IAPS (International Auditing Practice Statements)
IAPS - 1006
Audits of the Financial Statement of Banks
IAPS - 1012
Auditing Derivative Financial Statements
Being the Regulatory Body of the Chartered Accountants the Institute shall
ensure that its members have been rendering their Professional
Responsibilities in compliance with its By-laws and the Council Directives.
The Institute shall also ensure that its members have been rendering their
Professional Responsibilities in compliance with BASs and BFRSs and BSAs
and BAPSs and in compliance with the section 39(3) Kha of the Bank
Companies Act-1991 and the other applicable section of the Bank Companies
Act-1991, the Rules, Regulations and the Circulars issued by the Bangladesh
Bank, the Companies Act- 1994, the Securities and Exchange Commission
Rules-1987, the Income Tax Ordinance-1984 and the other applicable Rules
47
and Regulations.
Quality Control Department
The Institute shall have a Quality Control Department through which it
can exercise to Close Monitoring, Supervising, Reviewing, Controlling
and maintaining the quality of audit of Banks and Financial Institutions as
audited by its auditors.
Investigation and Disciplinary Committee
The Institute should strengthen its Investigation and Disciplinary
Committee for taking proper action against the Auditors those who have
failed to conduct the Audit of the Banks and the Financial Institutions in
compliance with the Bangladesh Standards on Auditing (BSAs), BFRS,
BAPS and in compliance with the applicable section of the Bank
Companies Act -1991, the Rules and Regulations issued by the
Bangladesh Bank, the Companies Act-1994, the Securities and Exchange
Commission Rules 1987, the Income Tax Ordinance 1984 and the other
applicable Rules and Regulations and those who have also violated the
By- laws of the Institute of Chartered Accountants of Bangladesh and the
Coun1cil Directives.
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Before conclusion, I would like to express my sincere thanks and
gratitude to some of the middle level and high officials of the
present Govt. and also to some high officials and auditors of DBI
& DOS of Bangladesh Bank for their kind cooperation and support
in discharging my professional responsibilities successfully as
mentioned at the out set of my speech.
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Thanks to Every Body
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