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ON
Title
Objective of Presentation of the Paper.
What is Fraud.
The Circumstances those indicate the possible existence of Fraud.
Fraud prone areas.
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Fraud
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WHAT IS FRAUD
The term "Fraud" refers to an intentional and an unethical act by
one or more individuals among the management, those charged
with the governance, the employees and the third parties to
obtain an unjust or illegal advantage causing a material
misstatement in the financial statements.
The term "Fraud" in relation to the Banks generally refers to
manipulation in the Books of Accounts, fraudulent encashment
of negotiable instruments, unauthorized handling of the
Securities pledged or hypothecated to the Banks, embezzlement,
misappropriation of funds, pilferage of cash etc by the Bank
employees, account holders and also by third parties.
FEATURES OF FRAUD
It is Deceitful
It is Intentional
It breaches Trust
It involves Losses
Concealment of Fact
Appearance of Outward
Respectability
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TYPES OF FRAUD
Consumer Fraud
Kickbacks
Bid Rigging
Inflated Invoices
External Fraud
Inventory Theft
Theft of Cash
Cheque Fraud
Identity Fraud
Banks Fraud
Computer Hacking
Financial Statement Fraud Sundry Frauds
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MONEY
LAUNDERING
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It conceals the true sources of the Funds so that they can be used
freely;
Placement
Structuring
Layering
Integration
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Dormant Accounts
Telegraphic Transfers
Fund Generation through Non-profit
Organization
Charitable Organization
Abnormal Business Facilities
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Drug Trafficking;
Tax Evasion;
Terrorisms;
Smuggling.
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Financing of Terrorism
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Placement &
Structuring
Cash is deposited
into Account
Bank
Securities
Firm
Bank
Bank
Placement &
Structuring
Asset deposited into
the Financial System
Non-Bank
Financial
Institution
Layering
Funds moved to
other institutions to
Obscure Origin
Layering
Funds moved to
other Institutions to
Obscure Origin
Integration
Funds used to
Acquire Legitimate
Assets
Insurance
Company
Legitimate Asset of
Distribution
Legitimate Asset or
Cash from Criminal
Act
Integration
Funds used to
Acquire Legitimate
Assets
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Transaction Profile
Step - 1
Suppose that a fund for Tk. 10 crore was created under 10 benami / fictitious
accounts by issuing 10 unauthorized IBDAs from M Branch of ABCD Bank
Ltd. by debating Head Office General Account for Tk. 10 crore and crediting
Loans and Advance Account for Tk. 10 crore.
Step - 2
Cash was withdrawn for Tk. 7 crore and 3 Pay Orders have been issued for Tk. 3
Crore from 10 benami/ fictitious accounts in favour of Mr. Alam Account
maintained with O Branch of XYZ Bank Ltd. by debiting Loans and
Advance Account for Tk. 10 crore and crediting Cash and Bank Accounts for Tk. 10
crore.
Step - 3
Step - 4
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Transaction Profile
Step - 1
A fund for Tk. 100 crore was disbursed through 20 Traceable Account of Mr. Monir from L
Branch earlier.
Step - 2
25 IBDAs with different amount were issued in total for Tk. 100 crore on different dates for
Offsetting the Loan liabilities for Tk. 100 crore by debiting the Head Office General
Accounts and crediting the Inter Branch Transaction (M Branch) Account.
Step - 3
For giving the closing entry in L Branch, the Inter Branch Transaction (M Branch)
Account for Tk. 100 crore has been debited and (Traceable 20) Loan & Advances
Accounts (Mr. Monir L Branch) Tk. 100 crore has been credited.
Step - 4
For responding of the 25 IBDAs Tk. 100 crore issued from L Branch, the M Branch has
debited Loans & advances (25 benami Accounts) for Tk. 100 crore by crediting Inter
Branch Transaction (L Branch) Account for Tk. 100 crore.
Step - 5
For giving the closing entry in M Branch, the Inter Branch Transaction (L Branch)
Account for Tk. 100 crore is debited and the Head Office General Accounts for Tk. 100
crore is credited.
Step - 6
The illegal Loan liabilities of TK. 100 crore under 25 benami accounts are classified in
M Branch as Bad Loss Loans for non finding of the beneficiaries of such benami
accounts which have been offsetted in consolidation of the financial statements with the
Adjustable Blocked Account by debiting the Adjustable Blocked Account and crediting
the Loans and Advances Account for Tk. 100 crore.
Step - 7
Ultimately in consolidation of the financial statements for Clean off this defalcated amount
from the records the Profit and Loss Appropriation Account has been debited and
Adjustable Blocked Account has been credited for Tk. 100 crore.
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Transaction Profile
Step - 1
A fund for Tk. 100 crore was disbursed through 20 Traceable Accounts of Mr. Bashir from M
Branch earlier.
Step - 2
25 IBCAs with different amounts were issued from L Branch to M Branch in total for Tk.
100 crore on different dates by debiting Loans and Advances for Tk. 100 crore (against 25
benami Account in L Branch) and crediting the Inter Branch Transaction in M Branch
Account for Tk. 100 crore.
Step - 3
For giving the Closing entry in L Branch, the Inter Branch Transaction (M Branch) Account
has been debited for Tk. 100 crore and the Head Office General Accounts has been credited
for Tk. 100 crore.
Step - 4
For responding of the 25 IBCAs for Tk. 100 crore issued from L Branch, the M Branch has
debited Inter Branch Transaction (L Branch) Account for Tk. 100 crore and credited the
Loans and Advances Account for TK. 100 crore (20 Traceable Accounts of Mr. Bashir for
Offsetting of the Loan liabilities of Tk. 100 crore as was given earlier).
Step - 5
For giving the Closing entry in M Branch, the Head Office General Accounts has been
debited for Tk. 100 crore and Inter Branch Transaction, L Branch has been credited for Tk.
100 crore.
Step - 6
The aforesaid illegal Loan liabilities for TK. 100 crore under 25 benami accounts in L Branch
have been Classified as Bad Loss Loans for non finding of the beneficiaries of such benami
accounts for which full provisions have been made by debiting the Profit and Loss Accounts
for Tk. 100 Crore and crediting the provisions on Loans and Advances for Tk. 100 Crore.
Step - 7
Ultimately, the said Loans and Advances Tk. 100 Crore has been written off in the Accounts
by Debiting Provision on Loans and Advances Tk. 100 Crore and crediting Loans and
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Advances Account Tk. 100 Crore.
Step - 1
Step - 2
4.
Step - 1
Step - 2
5.
Illegal Transfer of the Branch Investment Profit to Benami Accounts of the Bank
Officials, which was earned for the timing gap of the illegal Transaction of the
IBDAs and IBCAs for restating the previously Offsetted Loan Liabilities.
Case No. 6
Transaction Profile
Step - 1
Suppose that 20 IBDAs were issued for Tk. 30 crore on 1st January
2008 and 25 IBCAs were issued for Tk. 32 crore on 29th January
2008 for the time gap of 29 days.
Step - 2
Step - 3
Step - 4
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6. General Case:
Case No. 7
i. Illegal Loan Facilities
Providing of Loans and Advances to the Entrepreneurs through legal
methods of the Bank is one of the regulated Banking Operational
Functions of the Commercial Banks. But it has been experienced through
some investigations that the influential and the vested group of people of
our society and the dishonest Bank Officials jointly defalcate money from
the Bank through disbursement of Loans and Advances committing the
following irregularities:
BANGLADESH
DD Bank Ltd.
X Br.
Issued 90 IBDAs for creating
Tk. 90 crore by crediting 25
fictitious CD A/Cs
CC Bank Ltd.
Z Branch
Issued pay orders
for Tk. 10 crore
Y Br.
Transferred from Z Br. Tk. 10 crore
Transferred from X Br. Tk. 90 crore
Total
100 crore
Transferred from
Y Br. Tk. 25 crore
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ECONOMIC
AFFECTS
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RECOMMENDATION
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MINISTRY OF FINANCE
BANGLADESH BANK
Organizational Issues
Functional and Operational Issues
Accounting and Financial Reporting
Issues
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Organizational Issues
The Ethics Officer and other key players have well-defined roles
and are discharging their responsibilities properly;
Departmental Head, Dealing Boss and the other officers and staff of
the DBI, DOS and the proposed Management Audit Cell should be
changed with in 2 years.
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Managing Director
The Internal Audit Department should be kept free from the control of
the Management. They should be allowed to report their actual
findings to the Audit Committee;
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Each and every big Branch of the Bank should have a "Audit Cell." The
Audit Cell at the end of the Transaction hours of each and every day will
check the Vouchers/ Transaction of all the Risky Sectors such as;
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