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BB probe reveals AB Bank scam

by December 17, 2017 General

The AB Bank has allegedly laundered around Tk 165 crore in the name of investment to the United Arab Emirates through two shady organisations, according to a probe report of Bangladesh Bank.

The AB Bank board in December, 2013, gave its approval to invest $20 million in a Singapore-based fundraising and investment company, Pinnacle Global Fund Pte Ltd (PGF), through its Offshore Banking Unit (OBU).

In February 2014, the OBU of the bank laundered the money to an account of Cheng Bao General Trading LLC at UAE-based Abu Dhabi Commercial Bank (ADCB).

Cheng Bao, which acted as a Special Purpose Vehicle (SPV) or a mediator for the PGF, immediately withdrew the money and closed the account. It still remains unknown where the money went after the withdrawal as the AB Bank has failed to provide the BB with 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 and 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 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, investment and lending through the OBU.

This is the second instance of money laundering by AB Bank in the last two years.

The BB last year detected that the bank laundered $40.25 million (Tk 340 crore) through its OBU to Singapore and the UAE.

The AB Bank has been taking advantage of the existing rules on OBU, which allow a local bank to invest abroad without the BB’s prior approval.  

“The AB Bank board cannot avoid the responsibility in this case as the agreement was signed following the board’s approval,” the report says.

The local bank signed the agreement with the PGF to invest $20 million on conditions that the PGF will give it eight percent interest and invest another $80 million in it within 95 days of getting $20 million.

Also, the Cheng Bao’s bank account with 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.

Interest accrued against the investment was $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.

Now, the total amount of laundered money, including $25,000 as consultancy fee, 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 strike the deal between the AB Bank and the PGF.

“Wahidul was well aware of the whole thing as he was a joint signatory of the account. Wahidul and AB Bank’s ex-treasury chief Abu Hena collaboratively laundered the money to the UAE,” the BB report cites.

The AB Bank failed to provide the BB with 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 the Singaporean national regulator, Accounting and Corporate Regulatory Authority (ACRA), to operate as a financial organisation. But the ACRA cancelled the company’s registration in May last year, the BB team revealed.

Abdus Samad Khan, a Canadian citizen, who signed the deal on behalf of the PGF, was mentioned as its director of PGF in the deed. But he was referred as a partner of the company in another document.

BB officials said the AB Bank also failed to produce any document to prove that Cheng Bao was authorised to work as a special purpose vehicle 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 the persons involved in the money laundering.

The ACC already 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 alleged persons were yet to be interrogated as they sought more 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, he claimed that he was not a joint signatory of the bank account with the ADCB.

Former AB Bank MD M Fazlur Rahman whose name came up in the BB report said he left the bank before the deal with the PGF was signed.

“I have left AB Bank on January 1, 2014. I performed my responsibilities at the initial stage of the agreement. My tenure ended before the singing of the agreement, I am not responsible for it,” said Fazlur.

He said the laundered money could be recovered by conducting a cross-boundary inspection.

Asked, BB spokesperson and Executive Director Subhankar Saha said he was unaware of the matter.