Weaknesses in internal control, auditing in banks behind forgery

Rezaul karim Weaknesses in internal control and auditing have been identified as the main reasons for the growing incidence of financial forgery in the country's banking sector, sources said. "The major cause behind the recent cases of financial forgery in the country's banking sector is weakness of their internal control and audit system" a bankers' meeting at the Bangladesh Bank, was told. The central bank has detected this after analysing the reports of different commercial banks on forgery-related cases at different times, it was mentioned. "The BB has found out weakness of internal control management of state-run and private banks through proper analyses of inspection reports by the central bank," said Deputy Governor Shitangshu Kumar Sur Chowdhury, at a recent meeting with bankers. "The main reason of the financial forgery is weakness of their internal control and audit," he added. In that meeting, Dr Atiur Rahman, Governor of the Bangladesh Bank (BB), urged the bankers for removing the structural problem soon, if any, through strengthening of their internal control and audit department. He asked the bankers to be aware of overall fund situation, views of the fund management department and other important information, before sanctioning any loan. The central bank has directed the banks to follow properly its guidelines and circulars in this connection, bankers' meeting sources said. All the managing directors of the banks were present at the meeting. Last year, Hall-mark scam and a massive forgery in Sonali Bank were detected by the BB. For this, the central bank was also criticised by various quarters, said a BB high official. There is no coordination in most banks in their internal departments. Many directors do not know about transactions taking place in their banks, sources said. In response to such scams, the central bank, the BB governor said, has tightened its onsite and offsite vigilance on risk management, corporate governance, internal controls and internal audit functions in banks, His remarks came at an International Chamber of Commerce, Bangladesh (ICCB) interactive session on international trade held in the city recently. The Sonali Bank scam occurred because of weaknesses in the management of the bank, its internal oversight and control and, most of all, due to collusion of some insiders in the bank with the outsiders, sources said. A central bank investigation also found that Hall-mark and five other companies had embezzled Tk 35. 47 billion from the Ruposhi Bangla Hotel branch of Sonali Bank through false documents. Of the amount, Hallmark took Tk 26.86 billion, it was mentioned. The situation also reflected the state of affairs about lack of governance and overall control mechanism, largely on the part of board of directors of banks. They should have exercised properly their supervision and control over such a huge amount of loan, they said.