It ain't over

THERE are still developments in the case involving hackers who stole $81 million from Bangladesh Bank in February. The main one is that the Federal Reserve Bank of New York has recently asked the Bangko Sentral ng Pilipinas (BSP) to help Bangladesh Bank retrieve the stolen money

This may indicate a warming of the relationship between Bangladesh Bank and the New York Fed. Initially, the Fed held Bangladesh Bank responsible for the robbery.

BSP is carrying out an investigation as to how the $81 million arrived at Rizal Commercial Banking Corp. (RCBC), was accepted by the bank, and then departed from the bank.

The situation is made more delicate since Bangladesh Bank made early representations to BSP who then contacted RCBC. Nevertheless the funds had gone.

The $15 million has been returned by junket operator Kim Wong, but the remaining $66 million has evaporated. Presumably a “follow the money” audit is being carried out.

The first port of call of the stolen money was with Philrem. There is dispute as to whether Philrem has retained some of the money. There should be a provable audit trail which determines where and when the money went. Disputes indicate that proper audit procedures were not adhered to.

I am disappointed that the returned $15 million was not quickly passed to Bangladesh Bank. This is based on a communication between two sovereign states – the Philippines and Bangladesh – so, as a courtesy, the Philippines should have returned the money without the need for court proceedings. If after the money was returned to Bangladesh, someone claims the money (an unlikely occurrence), then this problem could be addressed by requiring the claimant to prove his claim.

The Philippines is treating Bangladesh as a supplicant which is not a good way to conduct international relations. President Duterte should order the immediate release of $15 million to Bangladesh.

Meanwhile, the relationship between BSP and RCBC continues to be sensitive. After RCBC accepted the resignation of its president and CEO “Five Levels” Tan, RCBC recruited his replacement, Gil Buenaventura who took up the position from July 1. Apparently Buenaventura's appointment was implemented without BSP's approval. BSP reportedly was not pleased.

I am not sure of BSP's range of authority. Does RCBC need BSP's permission to recruit Buenaventura? BSP is also reportedly insisting on RCBC's appointment of independent directors. Does BSP have this authority?

Independent, non-executive directors, can indeed be helpful to the stew- ardship of major organizations. They can have a broader perspective and insights not always possessed by internal executive directors.

Would the presence of independent directors have had any influence at all on RCBC's conduct of the Bangladesh Bank problem?

RCBC, through its corporate vice chair Cesar Virata, is still blaming Jupiter Street Branch head Maria Deguito for what happened. Many who listened to the Senate hearing do not subscribe to the “rogue employee” hypothesis.

Corporate culture is not always tangible, but clearly has a major impact as to how financial institutions conduct their affairs.

In my very first article for Sun.Star Bacolod in September 2008, I mentioned the case of Jerome Kerviel, a “rogue trader” for Société Générale de Banque in Paris. It seemed that although Kerviel engaged in misconduct, his bank had an environment where there was insufficient hostility towards improbity.

Kerviel was found guilty of malpractice and served a prison sentence. This year, however, the French court also fined Société Générale 450,000 euros for its role in tolerating malpractice by Kerviel in 2008.

More recently, in the Philippines, an employee of Citibank's Binondo branch, Bryan Ang, also allegedly indulged in malpractice. Citibank reportedly refunded its wronged clients. But Citibank's role in creating an environment in which malpractice became tempting was never explored.

Commissions paid to salesmen are at the heart of the problem and financial institutions need to receive more vigorous scrutiny from BSP and/or the Insurance Commission.-- from Sun.Star Bacolod