BB decides to stamp 'innovative' forgery out of banking sector

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FE Report
The Bangladesh Bank (BB) has decided to stop opening letters of credit (L/Cs) by "fake" sister concerns of a single business group to put a lid on the "innovative" forgery in the banking sector.
The decision came following a recent central bank investigation that uncovered ways through which some local business groups having multiple sister concerns allegedly misappropriated bank loans and other facilities, showing export-import in favour of non-existent trading outlets.
The sources said the banking sector watchdog is likely to issue a circular soon in this connection asking commercial banks to be cautious while allowing business houses to open L/Cs.
According to competent sources, the BB found that a single business group or several companies owned by a single person had been opening back-to-back L/Cs locally for long, producing fake export-import documents.
In this way, the companies in question plundered huge bank loans and abused government incentives for exports, the sources added.
The central bank probe found one Chittagong-based businessman used 32 companies several times for obtaining bank credits. The probe found evidence against a number of Dhaka-based corporate houses and companies owned by influential political figures which indulged in similar fraudulent activities.
The case is among some of the high-profile forgery cases detected by the BB.
The investigation found that a Chittagong-based businessman defaulted at least Tk 6.0 billion loans from 10 commercial banks in the port city.
"He (Chittagong businessman) opened back-to-back L/Cs from several banks in Chittagong in favour of 32 companies, keeping exports bills, pay-order and cheque as collateral," the source noted.
Other companies also allegedly did not export goods against the L/C opened by them, although they are supposed to do that.
The source said one enterprise, owned by a detained political leader, imported edible oil from Khatunganj branch of United Commercial Bank, a private commercial bank, but sold the item without paying back the money to the bank.
The Sonali Bank and United Commercial Bank Limited are among the banks, which extended credit facilities to the delinquent and mostly non-existent trading houses.