ICB AMCL tracks down siphoning of Tk 31.9m from dividend funds

Two executives of ICB Asset Management Company Ltd (ICB AMCL) have been accused of embezzling at least Tk 31.9 million meant to be distributed in dividends to unitholders of open-ended mutual funds.
As many as 440 people were beneficiaries of the cash dividends, most of whom are elderly citizens who had invested in mutual funds in the 1980s, while the others live abroad.
Having detected the fund misappropriation, the company authority last week terminated the mastermind, Susamo Rumi Khan and sent Md. Shahedul Hasan on forced retirement for assisting Mr Khan in the fraudulent acts.
The ICB AMCL has filed a complaint against them with the Anti Corruption Commission (ACC).
When contacted by the FE, Mr. Khan said he was not in a position to make any comment over the phone. Mr. Hasan said he did not have any involvement in the fund misappropriation and that it was Mr Khan who had faked his signature to commit the crime.
Tampering with dividend warrants
Mr Khan had been siphoning off unitholders' money since 2021, said Md Masudul Hassan, acting chief executive officer of the ICB AMCL.
Two executives of the asset management company are required to sign dividend warrants sent out to mutual fund unitholders.
Mr Khan and his associate Mr. Hasan were tasked with signing dividend cheques.
According to company officials, Mr Khan opened 16 accounts in several banks, using the names of his friends and trusted people.
After the issuance of the dividend warrants, Rumi tampered with the cheques and then revalidated those before sending those to the addresses of the 16 bank account holders.
On receipt of the warrants, Rumi or the account holders deposited the money into respective bank accounts.
All warrants or cheques of dividends issued by the ICB AMCL are settled by the Shantinagar branch of Jamuna Bank.
In February, a desk officer of The City Bank became suspicious on receiving a revalidated dividend warrant worth more than Tk 700,000.
The City Bank communicated the matter to Jamuna Bank and Jamuna Bank contacted the fund manager. The cheque was then held up.
When Rumi was charged, he said the warrant had been revalidated owing to the demise of the actual investor, but could not present any succession certificate required to change the name of the beneficiary.
There is a provision of revalidating dividend warrants if there is a succession certificate issued by the court.
Digging further into the matter, the ICB AMCL found as many as 440 cheques that had been revalidated and settled by Jamuna Bank.
When the ACC summoned the 16 account holders, they said Mr Khan had opened the accounts and taken the money using them. The anti-graft watchdog has been conducting an investigation into the financial crime.
Why did the crime go unnoticed?
A majority of the beneficiaries of the dividends are yet to be aware of the matter.
The fund manager had been oblivious of the fraudulent acts for so long because no one filed any complaint of not receiving dividends, said acting CEO Md. Hassan.
Asked why Jamuna Bank did not raise any red flag, Mohammad Mohsin, Shantinagar branch manager of the bank, said they were obligated to settle warrants if validated by signatories.
In case of any query, the signatories, whose office is located on the ground floor of the same building, confirmed the validation, he added.
Next course of action
The board of the ICB AMCL will pay back unitholders from the company's own fund, said acting CEO, Mr. Hasan.
To avoid repetition of the crime, the asset management company has warned different banks against acceptance of tampered documents. At the same time, it has planned to file a lawsuit against the accused to realise the funds.
Moreover, the company has decided to deduct the dividend payouts from the job benefits of the accused.
Risk tied to non-digital payment system
Most of the owners of the dividend cheques are elderly people who had made investments at a time when opening a BO account was not necessary. And even if they did open BO accounts, they have not updated the fund manager with their bank account numbers.
Hence, cash dividends are still paid to these unitholders through cheques, though the payment system has been digitalized.
Many investors, who live abroad, also occasionally try to seek information about dividends from mutual funds.
Being a pioneer of the country's mutual fund industry, the Investment Corporation of Bangladesh (ICB) previously managed a large number of accounts of elderly citizens.
Over time, the ICB transferred the management of the funds, except the first ever unit fund, to its subsidiary company ICB AMCL.
After the revelation of the financial fraud, concerns over distributing dividends by issuing cheques have been heightened.
The ICB AMCL's acting CEO said the organisation had published adverts seeking attention of the unit holders to the matter but to no avail.
The fund manager is required to print around 80,000 warrants every year to as many as 15,000 unitholders.
As per the securities rules that came into effect in 2021, the listed securities are required to deposit dividends, which have remained undistributed for more than three years, into the account of the Capital market Stabilisation Fund (CMSF).
The risk of fund misappropriation is there until the ICB AMCL transfer the undistributed dividends to the Stabilisation Fund.

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