We are concerned that the central bank has taken an unduly lenient approach in dealing with its findings that Prime Bank has committed several serious breaches of banking regulations.
Bangladesh Bank’s inquiries uncovered substantial evidence of identity theft and fraud at two unauthorised Prime Bank branches.
The central bank has fined Prime Bank Tk10 lakh and has recommended action against officials directly involved, including the institution’s former managing director, who was discovered to have appointed a third party firm, without authority, to give the appearance of verifying illegal transactions.
Although it is commendable that Prime Bank has admitted to offenses and apologised, we believe a stronger response was warranted by the central bank in this case.
The deep-rooted nature of the fraud found strongly suggests that Prime Bank’s auditors and board should have been aware of the problems earlier and taken more prompt action to stamp it out.
In addition to finding a large number of suspect loan accounts at two Prime Bank branches, which had been operating without approval for over four years, the probe report discovered a $30m disbursal to a non-resident subsidiary institution.
This large payment appears to have not only breached foreign exchange regulations, but also have been fraudulent as the salaries of two officials of the recipient company were paid by Prime Bank in violation of its license conditions.
Given the nature of the irregularities, not least the blatant breach of operating branches without approval, it is clear that the bank’s board and governance procedures should have identified and stopped these wide-spread illegalities sooner.
Bangladesh Bank should have gone beyond fining Prime Bank a nominal amount and imposed clear conditions on its board to improve its audit procedures. The public needs regulators to take tougher action when fraud is found to help deter offenders. A stronger message needs to be sent to ensure boards are not negligent in preventing fraud and upholding the law.