Bangladesh Bank weighs law­suit against NY Fed over hack

The Pak Banker - - COMPANIES/BOSS -

Bangladesh's cen­tral bank has hired a U.S. lawyer for a po­ten­tial law­suit against the Fed­eral Re­serve Bank of New York af­ter hack­ers stole $81 mil­lion from its ac­count with the NY Fed, ac­cord­ing to an in­ter­nal re­port by the Bangladesh bank.

Af­ter the re­port sur­faced on Tues­day in the Bangladesh cap­i­tal of Dhaka, U.S. Rep­re­sen­ta­tive Carolyn Maloney called for a probe of last month's cy­ber at­tack on Bangladesh Bank.

In one of the largest cy­ber heists in his­tory, the hack­ers or­dered the New York Fed to trans­fer $81 mil­lion from Bangladesh cen­tral bank funds to ac­counts in the Philip­pines. "This brazen heist from the Bangladesh cen­tral bank's ac­count at the New York Fed threat­ens to un­der­mine the con­fi­dence that for­eign cen­tral banks have in the Fed­eral Re­serve, and in the safety and sound­ness of in­ter­na­tional mon­e­tary trans­ac­tions," Maloney, a New York Demo­crat, said in a state­ment. The U.S. Fed­eral Bureau of In­ves­ti­ga­tion is help­ing in­ves­ti­gate the heist, which led to the ouster of Bangladesh's cen­tral bank gov­er­nor.

Maloney also sent a let­ter to New York Fed Pres­i­dent Wil­liam Dudley, re­quest­ing a pri­vate meet­ing with bank staff to dis­cuss the cy­ber fraud.

She said she wants to ask a se­ries of ques­tions, in­clud­ing whether it is ap­pro­pri­ate to rely solely on the SWIFT global bank mes­sag­ing sys­tem to au­then­ti­cate out­go­ing pay­ments from for­eign cen­tral bank ac­counts.Her com­ments are the first sign that the at­tack could gain political trac­tion in the United States. The New York Fed has faced sep­a­rate political crit­i­cism since the fi­nan- cial cri­sis for mis­steps and per­ceived con­flicts of in­ter­est in its role as the cen­tral bank's top Wall Street reg­u­la­tor. "We fully in­tend to reach out to the con­gress­woman and will en­deavor to ad­dress her ques­tions," a New York Fed spokes­woman said on Tues­day.

The New York Fed, which holds the ac­counts of some 250 for­eign cen­tral banks and gov­ern­ments, has pre­vi­ously said very lit­tle pub­licly about the heist, be­yond a March 9 state­ment that the pay­ments were made in the usual way and that there was no ev­i­dence its sys­tems were com­pro­mised. The of­fice of the Fed's In­ves­ti­ga­tor Gen­eral has said it is aware of the sit­u­a­tion but has not com­mented on whether it will con­duct its own re­view. Mean­while, Bangladesh Bank crit­i­cized the New York Fed in the in­ci­dent re­port, which sur­faced on Tues­day but was dated March 13. The re­port said that the New York Fed al­lowed five of 35 fraud­u­lent pay­ment in­struc­tions to go through.

"We view this as a ma­jor lapse," Bangladesh Bank said in the re­port, a copy of which was ob­tained by Reuters.

In her let­ter to the New York Fed, Maloney said she wanted to know why the bank treated the 30 trans­fers dif­fer­ently than the other five.

The Bangladesh Bank in­terim re­port also said the bank was con­sid­er­ing "pre­par­ing the ground to make a le­git­i­mate claim for the loss of funds" against the New York Fed "through a le­gal process." A source at Bangladesh Bank con­firmed the au­then­tic­ity of the re­port. Bangladesh po­lice and foren­sics ex­perts hired by Bangladesh Bank are still col­lect­ing in­for­ma­tion from its com­puter sys­tems to de­ter­mine what hap­pened.

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