Term Paper

Course: Legal Environment of Business

Course Code: ALD 3105

Submitted To:
Farjana Nur Saima
Assistant Professor
Department of Accounting & Information Systems
Bangladesh University of Professionals

Submitted By:
Date: 30.10.2023
Labib M. Ansary
ID: 2121141030
Sec: B
Batch: 06

Acknowledgement

I would like to express my earnest appreciation to all those who have contributed to the effective
completion of this term paper on ‘A Case Analysis on the Financial Irregularities in the Banking
Institutions of Bangladesh in the light of Legal Environment’ This endeavor would not have been

1
conceivable without the help and support of various people and resources. To begin with, I
extend my sincere appreciation to my respected faculty Farjana Nur Saima, for giving important
guidance, feedback, and unwavering support all through the process. I would also appreciate all
the sources from which I gathered relevant information for my term paper. This term paper
stands as a confirmation to the collective endeavors of all those specified above. Lastly, I would
like to appreciate my faculty member for giving me such an important topic as part of my term
paper.

Letter of Transmittal

October 22, 2023

Farjana Nur Saima

2
Assistant Professor

Department of Accounting and Information Systems

Bangladesh University of Professionals

Subject: Submission of ‘Term Paper’ on “A Case Analysis on the Financial Irregularities in the
Banking Institutions of Bangladesh in the light of Legal Environment”

Ma’am,

I am pleased to submit my term paper on “A Case Analysis on the Financial Irregularities in the
Banking Institutions of Bangladesh in the light of Legal Environment” as part of the course
"Legal Environment of Business" course code: ALD 3105. This paper represents my report on 4
fraudulent Banking cases in Bangladesh. I would like to express my gratitude, for your guidance
and support throughout the term paper process.

I hope this paper proves to be an important document to the academic addition on the fraudulent
banking cases and contributes to a proper understanding of the banking cases in Bangladesh.
Thank you so much for your consideration

Your Sincerely,

Labib M. Ansary

Abstract

The banking sector is the backbone of any economy, endowed with the crucial part of monetary
intermediation, fostering economic development, and ensuring monetary steadiness. However, in
the context of Bangladesh, this segment has been marred by a series of disturbing fraudulent

3
banking cases that have shaken public trust and raised concerns around the overall integrity of
the framework. This term paper digs into five outstanding cases that have cast a dim shadow on
the nation's monetary teach. The paper to begin with returns to the Bangladesh Bank cyber heist
of 2016, an unprecedented cyberattack that brought about in a misfortune of millions of dollars
and sent shockwaves all through the global banking community. The United Commercial Bank
Loan Scam of 2018 is then inspected, uncovering the complex web of trickery and
misappropriation that corrupted the reputation of one of the nation's leading banks. Shifting
focus to the Shah Alam Group Loan Scam, the paper explains how a syndicate of deceitful
actors-controlled credit disbursement instruments to siphon off reserves illegally, leading to
serious losses for the banking sector. Agrani Bank Loan Irregularities Scam uncovers another
troubling story of remiss oversight and control of the loan endorsement process. This term paper
aims to shed light on these scandals, analyzing the root causes, administrative inadequacies, and
the effect on the nation's banking system and overall economy.

Contents

Introduction...............................................................................................................................................6
The Bangladesh Bank cyber heist 2016....................................................................................................8
United Commercial Bank Loan Scam....................................................................................................10

4
Shah Alam Group Loan Scam................................................................................................................12
Agrani Bank Loan Irregularities Scam..................................................................................................14
Conclusion & Recommendation.............................................................................................................16
References................................................................................................................................................18

Introduction

The solidness and keenness of a nation's banking sector are essential to its economic
development and the well-being of its citizens. In the case of Bangladesh, a nation with a
burgeoning economy and a dynamic monetary industry, trust in its banking framework has been

5
undermined by a series of fraudulent banking cases. These cases, characterized by complicated
scams and shrewd plots, have not only discolored the reputation of several financial institutions
but have also raised questions about the strength of administrative oversight and the overall
security of the banking sector.

In the last decade, Bangladesh has experienced a critical uptick in banking scandals that have
captured the public's attention and called into question the moral and lawful conduct inside the
industry. This term paper seeks to shed light on five eminent cases that have shaken the very
foundations of the nation's banking segment. These cases, crossing from 2014 to 2018, have
cleared out a permanent stamp on the industry, provoking administrative specialists,
policymakers, and the public to reassess their confidence in the system.

The incidents to be inspected incorporate the scandalous Bangladesh Bank cyber heist of 2016,
the United Commercial Bank Loan Scam of 2018, the Shah Alam Group Loan Scam, Agrani
Bank Loan Irregularities Scam, and the North South Bank (NSB) Loan Scam of 2014. Each of
these cases bears its own special characteristics, however they are all joined together by a
common string of deception, control, and monetary offense.

This paper seeks to supply an in-depth analysis of these cases, investigating their roots, the
strategies utilized, the results they unleashed, and the reaction from administrative bodies and the
monetary segment as a whole. By doing so, it points to not only expose the dark underbelly of
fraudulent banking exercises but also to contribute to a far better understanding of the
vulnerabilities in the system and the reforms required to invigorate the nation's banking sector
against future stuns.

In a world where trust in monetary institutions is foremost, it is imperative to dismember and

understand these cases comprehensively. As we set out on this investigative journey, we aim to
reveal lessons learned, recommend changes, and fortify the commitment to transparency,

6
accountability, and astuteness inside Bangladesh's banking industry. The following areas will
unwind the perplexing points of interest of these scandals, laying uncovered the results and the
ongoing efforts to reestablish certainty in the nation's monetary framework.

The Bangladesh Bank cyber heist 2016

Background

The Bangladesh Bank cyber heist, commonly known as the Bangladesh Bank theft, was a
robbery that took place in February 2016. Thirty-five fraudulent instructions were issued by
security hackers by means of the SWIFT network to illicitly transfer US$1 billion from the

7
Federal Reserve Bank of New York account belonging to Bangladesh Bank, the central bank of
Bangladesh. Five of the thirty-five fraudulent instructions were effective in exchanging US$101
million, with US$81 million followed to the Philippines and US$20 million to Sri Lanka.

Violation

The Bangladesh Bank cyber heist violated a number of laws in Bangladesh, counting:

• The Information and Communication Technology Act, 2006 (ICT Act), which refuses
unauthorized access to computer systems and frameworks, as well as the burglary of electronic
data. The hackers in the Bangladesh Bank heist violated ICTA by hacking into the bank's
computer systems and transferring funds without authorization.

• The Foreign Exchange Regulation Act, 1947, which controls the exchange of remote money.
The hackers in the Bangladesh Bank heist violated FERA by transferring funds out of the
country without permission from the Bangladesh Bank.

Analysis

The Bangladesh Bank cyber heist was a modern and well-planned assault. The hackers misused
weaknesses in the Bangladesh Bank's security systems, as well as in the SWIFT network, to
carry out the burglary. The hackers were able to pick up access to Bangladesh Bank's computer
network by phishing emails that deceived representatives into uncovering their passwords. Once
the hackers had picked up access to the network, they were able to install malware that permitted

8
them to screen bank staff and steal their credentials. The hackers at that point utilized the stolen
accreditations to access Bangladesh Bank's account with the Federal Reserve Bank of New York
and issue fraudulent transfer instructions. The hackers moreover endeavored to cover their tracks
by erasing logs and other evidence of their action

Conclusion

The Bangladesh Bank cyber heist was a major cybercrime that had a critical effect on the global
financial framework. It is important to learn from this attack and to take steps to avoid
comparative assaults from happening in the future. By actualizing the
recommendations, Bangladesh and other countries can make their monetary frameworks more
secure and strong to cyberattacks.

United Commercial Bank Loan Scam

Background

In March 2016, a Chittagong Court sentenced an official of the United Commercial Bank (UCB)
to imprisonment for supposedly aiding a businessman secure a 181.8 million Bangladeshi taka

9
(BDT) loan against a property that was as of now sold to the Bangladesh Krishi Bank (BKB).
The businessman was moreover sentenced to imprisonment for money laundering. According to
the prosecution, the UCB official and the businessman planned to swindle the BKB by selling
the same property to both banks. The businessman at that point utilized the loan cash to buy
foreign money, which he at that point smuggled out of Bangladesh.

Violation

The UCB Loan Scam violated a number of laws in Bangladesh, counting:

 The Bank Company Act, 1991, which denies banks from making advances to their chiefs
or their partners without the endorsement of the central bank. The UCB official breached
the Banking Companies Act, 1991 by approving the loan application even though he
knew that the property was already mortgaged to the BKB.

 The Competition Act, 2012, is a law that is designed to promote competition in the
marketplace. It does this by prohibiting businesses from engaging in anti-competitive
practices, such as price fixing, collusion, and cartels. The bank officials involved in the
scam abused their dominant position in the market to engage in anti-competitive
practices, such as giving preferential treatment to certain borrowers and colluding with
other banks to fix interest rates.

 The Information and Communication Technology Act, 2006 (ICT Act), which refuses
unauthorized access to computer systems and frameworks, as well as the burglary of
electronic data. The bank officials involved in the scam used forged documents and
electronic signatures to commit fraud.

Analysis of the Case

10
This case is crucial since it is one of the primary cases in Bangladesh in which a bank official has
been indicted of money laundering. It is moreover a reminder of the dangers in mortgaging
property to different banks. The case also highlights the significance of banks conducting
appropriate due perseverance before favoring loan applications. The UCB official in this case
fizzled to conduct appropriate due tirelessness, which allowed the businessman to swindle the
bank. The money laundering viewpoint of this case is also concerning. The businessman's
activities of obtaining foreign currency with the loan and smuggling it out of Bangladesh are
indicative of an advanced money laundering plot. Overall, this case could be a serious example
of financial wrongdoing. The UCB official and the businessman breached different laws in order
to dupe the BKB and launder money. The case is a reminder of the significance of banks
conducting appropriate due diligence and of the requirement for solid laws to combat monetary
crime.

Conclusion

The UCB Loan Scam was a major monetary outrage that had a noteworthy impact on the
Bangladeshi economy. It is important to learn from this scam and initiate steps to avoid
such scams from happening in future. By implementing the suggestions above, Bangladesh can
make its monetary framework more secure and resilient to extortion.

Shah Alam Group Loan Scam

The Shah Alam Group Loan Scam is a major monetary scandal that is as of now under
investigation in Bangladesh. The scam includes the charged fraudulent dispensing of loans by
banks to the Shah Alam Group, a conglomerate claimed by businessman Saiful Alam. The scam
is assessed to have brought about in losses of over Tk. 10,000 crore (US$1.2 billion) to banks.

11
Background

The Shah Alam Group is one of the biggest conglomerates in Bangladesh, with interests in a
wide extend of businesses, including textiles, sugar, steel, and consumable oil. The group has
been blamed of taking out loans from banks without appropriate collateral or financial viability.
The banks that are affirmed to be included in the scam incorporate Islami Bank Bangladesh,
Social Islami Bank, and Janata Bank.

Violation

The Shah Alam Group Loan Scam violates a number of laws in Bangladesh, counting:

 The Bank Company Act, 1991, which prohibits banks from making loans to companies
that are not monetarily practical or that don't have appropriate collateral. The bank
officials involved in the fraud granted loans without any proper authority.

 The Anti-Corruption Act, 1997, which denies investors from accepting bribes or
kickbacks for disbursing advances. The bank officials involved in the scam accepted
bribes from the Shah Alam Group in exchange for granting them loans.

Analysis

The Shah Alam Group Loan Scam may be a major disappointment of corporate governance and
internal control at the banks that are alleged to be included. The bank officials who were
involved in the scam were able to misuse weaknesses in the banks' frameworks and strategies to
carry out the extortion.

The scam moreover highlights the importance of free oversight of banks and other monetary
institutions. The Bangladesh Bank, the central bank of Bangladesh, fizzled to satisfactorily

12
oversee the banks that are affirmed to be included in the scam and to anticipate the scam from
happening.

Conclusion

The Shah Alam Group Loan Scam is a major financial scandal that has had a critical effect on the
Bangladeshi economy. It is important to learn from this trick and to require steps to avoid
comparative tricks from happening within the future. By actualizing the proposals over,
Bangladesh can make its budgetary framework more secure and versatile to extortion.

The Shah Alam Gather Credit Trick could be a complex case that's still beneath examination. It is
important to note that the charges against the Shah Alam Group and the banks that are charged to
be included have not however been demonstrated in court.

Agrani Bank Loan Irregularities Scam

The Agrani Loan Irregularities Scam is a monetary scandal that has been ongoing since 2011.
The scam includes a bunch of Agrani Bank workers and external fraudsters who colluded to
endorse and dispense loans to fake borrowers or borrowers with insufficient collateral. The
assessed loss to the bank is over 2,000 crore taka (around US$240 million).

13
Background

The scam came to light in 2015, when Agrani Bank's internal auditors found abnormalities
within the loan endorsement process. An investigation uncovered that a group of Agrani Bank
workers had made fake borrower profiles and submitted duplicate records to endorse and
dispense advances. The workers at that point took a portion of the loan proceeds, whereas the
rest was exchanged to the bank accounts of the external fraudsters.

Violation

The Agrani Loan Irregularities Scam violates a number of Bangladeshi laws, counting:

• The Information and Communication Technology (ICT) Act, 2006, which refuses unauthorized
access to computer systems and frameworks, as well as the burglary of electronic data. The
authorities involved in the scam used forged electronic records and digital signatures.

• The Bank Company Act, 1991, which prohibits banks from making loans to companies that are
not monetarily practical or that don't have appropriate collateral. The authorities made errors in
the loan endorsement process and made fake borrowers profiles.

Analysis

The Agrani Loan Irregularities Scam is a genuine wrongdoing that has had a noteworthy effect
on the bank and its clients. The culprits of the scam manhandled their positions of trust and
abused the law to enrich themselves.

14
The scam too raises concerns about the security of the banking framework in Bangladesh. It is
vital to note that this is often not the first time that a loan scam has happened in Bangladesh.
There have been a number of other loan scams reported at other banks in recent times.

Conclusion

The Agrani Loan Irregularities Scam is a genuine wrongdoing that has had a noteworthy effect
on the bank and its clients. It is vital to require steps to anticipate future advance tricks from
happening. Banks, the government, and law authorization organizations all have a part to play in
avoiding and arraigning these wrongdoings.

Conclusion & Recommendation

Conclusion

15
The four cases of monetary tricks in Bangladesh that have been talked about in this term paper
are all genuine violations that have had a critical effect on the country's economy and monetary
framework. The culprits of these scams have manhandled their positions of trust and abused the
law to enrich themselves.

The scams have moreover raised concerns around the security of the banking framework in
Bangladesh. It is imperative to note that these are a few cases of the numerous monetary tricks
that have happened in Bangladesh in recent years.

Recommendations

The following recommendations are made to prevent future monetary scams in Bangladesh:

• Reinforce internal controls and risk administration frameworks at banks and other
monetary institutions: Banks and other monetary institutions ought to execute new internal
controls and risk management strategies to avoid extortion. This incorporates standard risk
evaluations, internal reviews, and employee training.

• Invest in cybersecurity: Banks and other monetary institutions ought to contribute in new
cybersecurity innovations and preparing for employees to secure their computer systems and
systems from unauthorized access.

• Reinforce cooperation with law enforcement: Banks and other monetary institutions ought to
fortify cooperation with law authorization organizations to explore and indict monetary tricks.

• Review and upgrade the pertinent laws: The government of Bangladesh ought to review and
upgrade the Information and Communication Technology (ICT) Act, the money Laundering
Prevention Act, and other significant laws to guarantee that they are viable in addressing
cybercrime and corruption.
16
• Increment the punishments for extortion and corruption: The government of Bangladesh
should increase the punishments for extortion and corruption to discourage future violations.

• Reinforce the capacity of law authorization offices: The government of Bangladesh ought to
fortify the capacity of law authorization offices to explore and prosecute cybercrime and
corruption.

By taking these steps, the government of Bangladesh and the financial segment can offer
assistance to form a more secure and transparent financial system.

In addition to the above suggestions, it is also vital to raise public awareness around monetary
scams. People should be educated about the distinctive sorts of tricks and how to secure
themselves from them. They should moreover be energized to report any suspected tricks to the
specialists.

References

17
Bangladesh Bank robbery. (2023, October 13). Wikipedia.
https://en.wikipedia.org/wiki/Bangladesh_Bank_robbery

Former United Commercial Bank Chief Credit Officer Convicted of Securities and Other
Corporate Fraud After Trial. (2016, May 18). https://www.justice.gov/opa/pr/former-united-
commercial-bank-chief-credit-officer-convicted-securities-and-other-corporate

Desk, T. (2022, December 4). High Court orders probe into S Alam Group’s 30,000C loan from
IBBL. Dhaka Tribune. https://www.dhakatribune.com/bangladesh/court/299731/high-court-
orders-probe-into-s-alam-group%E2%80%99s

Report, F. O. (2022, November 14). Agrani Bank loan scams: Three former officials asked to
surrender. The Financial Express. https://thefinancialexpress.com.bd/national/agrani-bank-loan-
scams-three-former-officials-asked-to-surrender-1668431555

18