2 of 11 Report on Bismillah Group Scandal Iftakhar UL Alam Chowdhury (ID-221001906) Nasiruddin Siddiqul (ID-221004306) Tasnim Ferdous(ID- 21004206) East Delta University, Chittagong Course Code: 561.1:Leyal and Ethical Environment of Business Instructor Name: Fahmida Akhter Due Date:19/04/2022Introduction: As a developing country Bangladesh has made enormous progress after independence in terms people's per capita income, literacy rate, life expectancy and so on. Economy of Bangladesh has expanded in the last few decades thanks to out local consumption, private sector's contribution and foreign remittance. However much of the progress of Bangladesh has been taken away by corruption in financial sector. In this particular assignment we are going to talk about one of the biggest loan scandals by a fraudulent group name Bismillah group. In this assignment efforts will be made to investigate the whole financial crime starting from beginning of the scam, how It happened, who were the masterminds, what were the consequences of It and what lesson we can take from it and finally what can be done not to repeat this sort of money laundering act in future, (One of the most notorious scandals in financial sector was done by an organization name Bismillah group in between 2011 to 2012, This group used to produce terry towel and export them to the overseas market, The fraudulent group Bismillah Group, in association with the bank offictals, embezzled the money through loans agalnst trust recelpts using names of fake foreign buyers. They secured cash Incentives against fake export documents, taking advantage of {inland bills purchases and overpricing non-existing export items. Banks that ent money to this, ‘unscrupulous group were Jamuna, Janata, Prime, Premler and Shahjalal Islam Bank. Key Story: ‘The Bismillah group, a terry towel producer and exporter took loan from five separate local banks by showing fake sales contract. Then with the help of the bank officials opened letter of credit (LC) to swindle the money to overseas country. They embezzled around Tk5.27bn from Janata Bank, over Tk3.26bn from Prime Bank, Tk. S4bn from Jamuna Bank, Tk1.O4bn fromJanata Bank, over Tk3.20bn from Prime Bank, Tk1.54bn from Jamuna Banls, Tkl.O4bn from Shabjalal Islam Bank and T625.3m from Premier Bank n three yeas. ‘This massive scam would not have been possible without the cooperation and involvement of Bank officials. ‘The Anti-Comuption Commission (ACC) filed 12 cases against 53 officials of five banks and the Bismillah Group, a tery towel producer, for their alleged involvement in the embezzlement of funded loans worth over Tk9.9bn. What exactly happened? Bismillah Group, a manufacturer of terry towel products, has swindled around Rs 1,100 crore from five banks In the counay. Khwaja Soleimen Anvcar Chowdburyis the Managing Direcor (MD) of Bismillah Group Chairman is his wie Nawsrin Hasib. They are both out ofthe county now. Acconding to banking sources, the owners af the group have fled with about Rs 1,100 crote. According to vartous Sources including the investigation repo of Bangladesh Bank, Bismila’s journey in Forgery started even before Hall-Mark, However, according to the information received so far, they have not been able to release Hall-Mark. But Bismillah has gone beyond the hallmark by shawlng fake exports, setting up overseas companies, over-valulng imports from Bangladesh and using the government's cash assistance to encourage exports. In addition to this, lke Hall-Matk, with the open local LC (lon letter) of his own oxgantzation, another (also ovwn) organization has made bill with the recognition (accommodation bil) and the money bas heen withdrawn by depositing tn the bank. A number of bank officials have already been sacked for thet alleged ‘Involvement in Bismnillah’s tansactions. Among them Is a deputy managing director of a bank. \leed the answer? , ; Get it—with , 2347 tutors online. Answers in as fast as 15 ne a minutes. explanationAccording to the latest information, the state-owned Janata , private Prime, Shahjalal , Premier, Jamuna and Southeast Bank are involved in this loan scandal. A special inspection of Bangladesh Bank has revealed all the disturbing information about irregularities and fraud. The central benk has instructed the banks to take necessary steps to prevent any adverse impact on the banking sector as a resuilt of this new scandal. Fraud Strategies: Bismillah Towels and Alpha Composite Towels are two of the Bismillah Group companies. From April 24 to June 26, 2012, Alpha Towels borrowed Tk 26.81 crore from Motifheel branch of Prime Bank against 72 export bills of Tk 92.59 crore. Similarly, from May 26 to July 11, Prime Bank lent Tk 26.81 crore against 71 export bills of Tk 7.8 crore from Bismillah Towels. According to the rules, the money of this bill is supposed to reach the country ‘within 120 days after shipping the goods. But it did not come back to the country. All exports are not LCs, but contracts (exports or sales contracts). Interestingly, buyers and sellers are all owned by the same organization. Bangladesh Bank said in a report that the agreements show Alpha Composite and Bismillah Towels as suppliers. And as an importer, there is the name of Bangalore Middle East in Dubal. Company Chatrman Nawrin Habib signed on behalf of the wo supplier companies. The name or seal is not given even if the signature is on behalf of the importing company. As a result, doubts have been expressed about the veracity of the report. ‘This is not the end. Prothom Alo's own investigation has uncovered some evidence of Bangalore in Singapore and Dubai. As can be seen, Khwaja Soleiman Anwar Chowdhury is the director of this orgenization. Bangladesh Bank has asked Prime Bank to identify the loan of Ti $5.42 crore 4s defaulter in terms of quality and loss. Again, Bismillah Towels and Alpha Composite Towels created a loan of Taka 16 crore 44 lakh against the approved bill from Prime Bank. The bank ‘made the Ford loan after it was not repald on time. In this case, the central bank has given extraje 6 offf time to repay the forced loan and has asked to identify the defaulter ata loss. This ts only {information about money fraud through the Gulshan branch of Prime Bank, On the other hand, the value of 8 export bills of 74 crore 71 lakh take of Premier Bank has not been paid for a long time, The bills are kept in Abu Dhabi Commercial Bank. Abu Dhabi Commercial Bank has sent back the export documents (proofs) to the bank in a letter dated Sth December, 2012 as the importing customer did not collect the bills. According to a report of Bangladesh Bank, it appears that the exporters, importers and freight forwarders have embezzled the money from the bank in exchange for export (Foreign Document Bill Purchase ot FDBP) by making fake documents, Out of these loans, the central bank has directed Premier Bank to identify the loan of ‘Tk 59.21 crore as defauiter. Liability and punishment in different banks: Bismillah Group has created a total loan (funded or loan and non-funded or guaranteed national) loan of Tk. 69 lakh, Shahjalal Bank 146 crore 79 lakh and Premler Bank 62 crore 98 lakh, Mozammel Hossain, the deputy managing director of Jamuna Bank and Dilkusha’s branch manager have been suspended due to these fraucis. The manager of Motijheel branch of Premier Bank was sacked and kept at the head office for a few days. He was later handed over to the police after filing 2 criminal case. In the report, Bangladesh Bank said that the Toan was approved without proper review and verification by the head office. The bank's board of directors also approved a loan limit of Tk 22 crore in favor of Alpha Composite on November 13, 2011. Bangladesh Bank has asked to take ‘action against those responsible for the failure of supervision and monitoring at the head office ‘Who were the main culprits? The main perpetrators from Bismillah group were: * Managing Director Khwaza Solalman Anwar Chowdhury (Bismillah Towel Ltd)Ww MIT Chairman Nawrin Hasib * Directors Safiqul Anwer Chowdhury, Abida Hasib, Nahid Anwar Khan, Khandaker Moinuddin Ashuaf, Sarwar Jahan DMD Akbar Aziz Muttaki * Manager Riazuuddin Ahmed * Bismillah Group's sister concern Network Freight System Ltd Chairman Aktar Hossain « Proprietor of TW Express Md Moinuddin “Bay Yatn Lud’s Golam Mohiuddin Ahmed. “Former Janata Bank general manager Abdus Samad Azad. “Former Deputy Managing Director Mozammel Hossain, Jamuna Bank “Janata Bank Official Mostak Alunad Khan & $.M Shoeb Ul Kabir Consequences ‘The state-run Janata Bank has decided to rework the outstanding debts of the fake terry towel maker Bismillah Group, worth Tk 560 crore, on the more generous conditions. The bank's board of directors approved the plan in a committee session, as per an individual involved with the matter and spoke on requested anonymity for fear of punishment. The defaulting debt of the Bismillah Group has been rescheduled in accordance with restructuring regulations, according to Janata Chairman SM Mahfuzur Rahman, The firm made national news in 2013 when it was accused of diverting Tk 1,200 crore through five creditors. Tk 445 crore of the amount is owed to Janata Bank alone. Although the mortgage balanceje 8 of ft ballooning to Tk 560 crore, the government lenders has not been able to restore a damn cent from the unscrupulous teny tower manufacturer in seven years, according paperwork shown by. the Dhake Tribune, Bismillah Group had sought Janata to extend the loans with a 2% purchase price undemeath the central bank's financial assistance rearrangement policy, which gives a 10- year amortization horizon with a one-year time limit. Including a high official of the governmentally bank who asked to remain anonymous since he's not authorized to interact with the press, Bismillah convinced Janata to forgive the interest completely. On November'8, the tople was raised at Janata's board of directors, but no resolution was taken. However, it has now been given the green light. Abdus Salam Azad, the general manager of Janata, did not respond to calls and texts from either the Dhaka Tribune. The journalist attempted to visit Azad's office, but ‘was denied admission, Azad, on the other hand, revealed a few days ago that Bismillah was trying to restart operations by borrowing money and rescheduling loans He indicated just at time that Janata would've been possible to renew the bad debts and retrieve at least a portion of the money. The company, according to local residents, had shuttered Its headquarters many decades previously. By an Anti-Corruption Commission audit report, the produce company has taken in more Tk 1,200 crore from five banks among 2012 and2013, such as Prime, Premier, Jamuna, and Shahjalal Islami, by committing fraud and taking funds out of Bangladesh via fake cheques. Prime Bank provided a loan of Tk 327 crore, while Jamia provided a loan of Tk 154 crore. The rest Tk 274 crore was funded by private creditors Premier and Shahjalal Islami, After embezzling the money, Bismillah Group Managing Director Khwaja Solaiman Anwar Chowdhury flew to Dubai for the night. According to Jamune Bank's Managing Director and Chief Executive Officer Muza Ellas Uddin Ahmed, Bismnlllah’s woubled loans were wiped off. He informed the Dhakaje 9 offf Times, "Right now, we're inittating legal action to recover the defrauded monies.” The bank has already recovered Tk7 crore from the sale of mortgaged properties, according to Ahmed, and has filed ten charges against the group in the Artha Rin Adelet (Financial loans court). High-ranking authorities from the Premier's office, the Prime Minister's office, and Shahjalal Islamt's office have all declined to comment on the situation, stating that the problem is still being investigated. Patt of an investigation, the Anti-Cormuption Commission (ACC) filed 12 complaints charging 53 people, included 13 Bismillah Group offictals and 40 bankers, of fleecing the money. On Septemberl10,2018, a Dhaka court condemned Chowdhury, his wife Nowrin Hasib, the chairman of Bismillah Group, and seven others to ten years in prison and fined Tk30.7 crore. Unfortunately, all of the accused have fled the country, includes Chowdhury and Hasib. The High Court, with the help of Interpol, instructed the relevant authorities to publish a red notice toward Chowdhury and six other people in a money laundering case on February 25. Lesson Bismillah Group, a private limited company, is the company in this case. A towel manufacturing company Is accused of defrauding five banks, one of which Is a state-owned bank, and the other four private commercial banks, of 10.74 billion takas. The stolen money was funded to the tune of Taka 990.03 crores, but Taka 184.43 crores was not, Bank name Amount of taka: 1. Janata bank 3.92 billion Prime bank 3.06 billion 3, Jamuna bank 1.64 billionje 10 of lt 4, Shabjalal Islami Bank 1.49 billion 5, Premier Bank 629.7 million ‘The sem! executives of Bismillah Group, Durjoy and Ali, were among those who were perplexed by the money laundering case. They are accused of assisting the company’s top officials in carrying out the plot and then fleeing the country. Bismillah Group Managing Director Khaza Solaiman Anwar Chowdhury, who was helped by certain high-ranking officials from the five ‘banks, was the brains behind the embezzlement. According to the ANTI-CORRUPTION COMMISSION. Thirteen of the defendants are founders and chief execs of the Bismillah Group and its substdiarles— Shaharish Composite Factory Ltd, Alpha Composite Towel Ltd, Shaharish KT Ltd, Hindul Wali Ltd, and Bismillah ‘Towel Ltd— and the remainder are directors of five banks — Janata Bank, Prime Bank, Punjab National Bank, and Punjab National Bank, respectively. While compiling the report, the investigators examined all ive banks' records and questioned around 70 of their employees. According to a commission official, several of the bank officials who are currently employed by the five banks worked for the Prime Bank at the time of the swindling A government official, according to certain sources, is also engaged in this fraud case. Chowdhury, like several of the group's top officials, has fled the country with a considerable sum of the stolen funds. The following rules have been broken by the Bismillah group: 1 They have manipulated the banks on purpose. 2. With the help of bank officials, the controversial group and its sister concems, the majority of which are fake, swindled the money between June 2006 and October last year, according to the inquiry, the majority of the money was obtained through LTTR [loan against trust receipt]0 ‘transactions nvolving bogus international buyers and fraudulent documentation. When lending money through LTR, clients normally do not have to put their properties lien on the property, since these loans are granted on trust as long as specific documentation iskept up to date By committing this con, they have betrayed the confidence ofthe public. The Bismillah group, ‘ransaction was ruled a fraudulent transaction for the reasons stated above The following are the consequences for persons accused of taking part in the Bismillah grou deception 1. The Anti-Corruption Commission filed 12 complaints under the Anti-Money Laundering Act alleging embezzlement of Tk 1,174.46 crore by 53 top employees from five banks and the controversial terry towel company Bismillah Group, 2 According to the ACC, the accused could face up to ten years in mprisonment as wellas the forfeiture of their self - acquired property f proven in antimoney laundering laws. Implementing Lesson: ‘At present, various types of bank frauds are being seen all over our country The Bismillah group has committed a kind of deception. But it should stop tn our opinion, we recommend some measures from our lessons to reduce such fraud 1. The corporate governance system of the organization must be strictly designed and followed. 2. Theresponsibilities of the board member, chairman and other authorized persons should be clearly defined 3. There isa need to improve the quality of aucits, both internal and external, and the highest regulatory bodies need to be proactive in this regard. “ 4, Political involvement must be eliminated in order to establish a good corporate culture.wo 1 ooffl a 4, Political involvement must be eliminated in order to establish a good corporate culture, 5, Proper monitoring of Bangladesh Bank should be ensured. 6. Verify the collateral and proper document before providing loan. In case of providing loan, legal activities of bank's employee should be controlled by the bank authority. 8, All type of organizational ethics should be followed by organization. 9. Ifany organization involve in illegal activities, it should be highly punished, 10. The Govt. should handle such kind of bank's fraud strictly. ‘Questions for the intended user: 1, Are strong anti-fraud controls in place and operating effectively with the company? 2. Are surprise fraud audits performed in addition to regularly scheduled audits in the company? 3. Has the organization established, implemented, and tested a mechanism for monitoring the risk of fraud by the Board of Directors or others charged with governance? 4, Is dhe management climate or thelr tone at the (op one of honesty and Integrity? 5. Is the company has an effective fraud reparting mechanism in place? Need the answer? » 2347 tutors online. Answers in as fast as 15 minutes. Get it-with an explanation