Recovering stolen BB reserve money through lawsuits

In the early 90s, when this writer was working in a private commercial bank, his core job responsibility was to look after export-oriented garments. One of our valued clients had a back- to-back import LC against corresponding export LC for importation of fabrics from Hong Kong. This was 120 days' deferred payment LC for US$ 0.18 million. When export documents arrived from the negotiating bank, the customer provided acceptance and received the import documents with which he rushed to the Chittagong port for releasing the consignment. Accordingly, we also conveyed our acceptance to the negotiating bank in Hong Kong confirming due date for payment and thereby firm bank-to-bank commitment was established.
After two days, the customer came to our bank and said that goods against the import LC did not arrive in the Chittagong port. This indicated a fraudulent act behind this documentary credit transaction.
The customer made a humble request for withholding payment against the accepted documents. But this was not possible under the banking practice because UCPDC (Uniform Customs and Practice of Documentary Credit) unequivocally states that banks deal with documents, not goods. So physical movement of goods is in no way related to banking transaction and therefore, the bank cannot defer this payment against the acceptance of documents.
Nevertheless, the customer's request was forwarded to our ID (International Division) Head who also declined his request to withhold the payment on the same ground. He instead advised us to ensure timely payment because any delay over the payment against acceptance may adversely impact the bank's reputation in the international arena.
The matter was then referred to the country's two renowned lawyers with expertise in commercial law for their  opinion and unfortunately they also offered a similar opinion saying that the bank cannot stop payment because, as per UCPDC, the bank deals with documents.
This adverse opinion from reputed legal experts really devastated the customer. This writer too was not happy with this decision because goods did not arrive but our country's hard-earned foreign currency would go out. As a part of his academic subject Commercial Law, he had opportunity to study some cases related to banking transaction based on which he told the aggrieved customer that only stay order from the court could allow the bank to withhold this payment.
Accordingly, the customer went to the High Court for obtaining stay order but the court advised him to produce valid documents of legal dispute or legal case related to this alleged fraud which compelled him to file a lawsuit in a Hong Kong court because place of occurrence was there. Based on legal action, the High Court division of the Bangladesh Supreme Court issued a stay order which enabled the bank to withhold the payment until the court case was resolved. After four/five years of legal battle, the Hong Kong Court had given verdict in favour of the aggrieved customer. So in spite of clear mandate in UCPDC and despite negative opinion from the bank's ID Head as well as renowned lawyers, he won the case and did not have to pay for the accepted documents against which goods did not arrive in the country. Expert professionals and lawyers provide opinion based on interpretation of various legal sections but a judge considers other factors viz. equity, his/her inherent power, circumstantial evidence, relevant party's involvement, consequence and overall impact to deliver judgement.
ADVANTAGES OF FILING LAWSUIT: In case of the $101- million heist, there is a possibility that the Bangladesh Bank (BB) may go for a lawsuit to recover the money that was lying in the reserve account of the Federal Reserve Bank of New York. Although the measures so far undertaken by the BB may ostensibly seem to be appropriate, yet the process is being inordinately delayed and the way the main accused in the Philippines have agreed to return money indicates their dilly-dallying tactics. Nevertheless, it is possible the BB will be able to recover the entire amount through mutual cooperation and action.
However, the Bangladesh Bank should undertake multiple actions; if any plan fails, the alternative option can be activated immediately so as to heighten pressure on all parties involved. History shows that money siphoned off can hardly be recovered without resorting to appropriate legal action. Bangladesh Bank should therefore keep the option of legal action open until the entire amount is recovered. Legal action is always a very complicated measure for which extensive preparation is required.
We have to keep in mind that money recovered from illegal transaction always takes two forms: first, the direct return of the amount if withheld or frozen by the concerned entity after the reported fraud, secondly, compensation is paid by the guilty parties because of their negligence and violation of rules and regulations. Usually the accused entity is required to compensate the aggrieved party if and when assets illegally transferred move out of the entity's reach. This method of recovering lost asset is mostly decided in the court.
STEPS TO BE INITIATED: First step of any legal action is collection and compilation of all relevant documents and proofs so as to substantiate the case against the alleged fraudulent activity. In our country, law enforcing agencies and specially-constituted professional enquiry committee have been investigating this issue separately. Besides, the Senate committee and law enforcing agencies in the Philippines have also been conducting investigations into the Reserve heist case and even the US Federal Reserve and the FBI are supposed to conduct similar investigations. After completion of enquiries and based on findings, all committees will submit investigation reports to their respective authorities. There should be close coordination and communication among the various inquiry committees and their reports may be mutually be collected and shared. In this connection, the Financial Intelligence Unit (FIU) of each country may help in collecting the required reports and documents.
The enquiry being conducted by four countries viz. Switzerland, Singapore, Hong Kong and China into 1.2 billion US dollar investment scam that occurred early last year in China may be used as a reference in support of mutually sharing and exchanging documents and enquiry reports.
In addition, various relevant news and reports involving all parties, individuals and entities are being regularly published in newspapers in the Philippines. These reports should be collected and retained as reference and proof. The Rezal Commercial Banking Corporation (RCBC) has eventually admitted its negligence and involvement with this Reserve hacking incident and even it has taken some punitive actions against its alleged corrupt officials which is an unequivocal proof of their failure and involvement. In addition, some accused persons have testified to the Philippines Senate committee wherein they have admitted their involvement with the Bangladesh Bank's reserve heist and returned a part of the stolen money. This will also be considered as valid proof against this fraudulent activity. All these documents should be collected and compiled as a supporting document of the enquiry committee reports.  After reviewing and analysing all the relevant documents, proofs and enquiry committee reports, the involved parties will be identified and their degree of involvement, negligence, failure and responsibility could be ascertained in order to determine the related parties of the lawsuit.  
IDENTIYING DEFENDANTS: Identifying the defendant parties are the most important part of initiating any legal action and this becomes more complicated when multiple parties of various countries are involved. In the present case, the ultimate beneficiary of fraudulent transaction and eventual paying bank are in the Philippines. The regulator in the Philippines is also involved in the sense that it had failed to play its proper role. So these persons and entities will definitely be the party to this case.
On the other hand, money has been transferred from the account of Federal Reserve Bank of New York. So it is also associated with this reserve heist and therefore it constitutes a party to this case.
The involvement of these parties and entities is being openly discussed in every forum and media but there is involvement of some other parties who are not coming to the forefront of discussion related to this unprecedented money laundering case. These are the intermediary banks which have credited money to the Nostro account of the Philippines bank Rezal Commercial Banking Corporation (RCBC) [A Nostro account is a bank account held in a foreign country by a domestic bank, denominated in the currency of that country. Nostro accounts are used to facilitate settlement of foreign exchange and trade transactions.] In fact, based on the SWIFT (Society for Worldwide Interbank Financial Telecommunication) message fraudulently received from the Bangladesh Bank, the Federal Reserve Bank of New York credited this fund to three intermediary American banks viz. The Bank of New York, The Citi Bank and Wells Fargo Bank which finally credited this amount to the Nostro account of the RCBC. So these intermediary banks cannot avoid their responsibility. INTERMEDIARY US BANKS: The intermediary American banks are not expected to transact with the banks which are not well compliant and not in good standing. Many commercial banks in our country always face constant threat of losing correspondent relationship with the banks of developed countries, particularly the US banks, because they have been facing tremendous problem in satisfying the compliance standard of those banks.
Now, a question arises how a bank in the Philippines can pass high standard of compliance of those intermediary banks when that bank opens fake accounts and carries out fraudulent transaction. Under the present Anti-Money Laundering Acts, every bank must have to ensure not only KYC (Know Your Customer) but also KYCC (Know Your Customer's Customer). Similarly, they have to apply not only DD (Due Diligence) but also EDD (Enhanced Due Diligence) while carrying out any financial transaction. Whenever we go to the bank for remitting even a thousand dollar, the banks ask innumerable questions and documents related to KYC. So it is unbelievable that three large banks with standard compliance in place have transferred million dollars without ensuring proper KYC and applying due diligence.
The overall circumstance reveals that these three intermediary US banks, which credited money to the Nostro account of the RCBC, have clearly failed to comply with KYC, KYCC, DD and EDD while crediting the Bangladesh Bank's money hacked from Federal Reserve Bank to Nostro account of the RCBC. Therefore, The Bank of New York, The Citi Bank and the Wells Fargo Bank cannot avoid their responsibility and as such should be the parties to this case.  

The writer is a banker based in Toronto, Canada.
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