Take a loan, buy the bank - the Southeast way
The story is about the Southeast Bank Chairman Alamgir Kabir and his son Raiyan Kabir
A bank employee turned into an owner of that bank by taking a loan from the same lender through sneaky deals and rule bending. It was possible only because that employee is blessed with an influential father who has been the chairman of that bank for the last 18 years, ignoring the Bank Company Act, according to Bangladesh Bank findings.
The story is about the Southeast Bank Chairman Alamgir Kabir and his son Raiyan Kabir.
With the influence of the chairman of the Southeast Bank, a series of companies including a listed leasing company, a merchant bank and a brokerage house which have ownership connection with the bank directors were abused for taking loan and using a portion of loan money for buying shares to make the chairman's son director of that bank. Raiyan Kabir bought 2% shares of the bank worth Tk25 crore from that BO account and came to the board of the bank in October 2020, according to a Bangladesh Bank report obtained by The Business Standard.
Raiyan started his banking career with Southeast Bank in 2004 when he worked in the treasury department and the international division, according to bank records.
The board of the Southeast Bank approved a loan limit of Tk200 crore in the name of Bay Leasing and Investment Limited. The leasing company took the loan to meet the working capital requirement of its subsidiary merchant bank BLI Capital, according to board minutes of the bank.
A case of conflict of interest was created because the parent company of the BLI Capital, Bay Leasing, is also on the board of Southeast Bank. In this case, the loan approval needed the consent of the Bangladesh Bank, but it was not taken, according to the Bangladesh Bank findings. Suraiya Begum, wife of Alamgir Kabir and mother of Raiyan Kabir, is a sponsor director of Bay Leasing.
Moreover, the loan was given violating banking rules, without adequate collateral and proper mortgage, according to board minutes obtained by TBS.
A portion of the loan money was transferred to Raiyan Kabir's BO (Beneficiary Owners) account with a brokerage house through five pay orders, a move that goes against the Money Laundering Prevention Act for fund diversion, according to the Bangladesh Bank report. The Business Standard obtained copies of all five pay orders and could inspect documents of share transaction history of his BO account.
BB circular ignored
Later in May 2021, Bangladesh Bank issued a circular restricting a bank employee from becoming director of the same bank.
However, Raiyan Kabir continued his directorship post, ignoring the circular, as he was elected as member of the audit committee in September 2021, according to the 2021 annual report of the bank.
In May last year, the central bank forced Raiyan Kabir to resign from the board.
However, the central bank did not take any action for loan forgery and violation of the money laundering act yet.
When contacted, a senior executive of the Bangladesh Bank, on condition of anonymity, said the Bangladesh Financial Intelligence Unit (BFIU) is working on this issue.
BB informs BSEC
In November last year, the Bangladesh Bank sent a letter to the Bangladesh Securities and Exchange Commission (BSEC) mentioning that Southeast Bank issued five pay orders worth nearly Tk15 crore between 1 September to 7 September 2020 against an approved loan of BLI capital. However, the money against those pay orders was deposited in the BO account of Raiyan Kabir even before issuing and before encashment. In the letter, the central bank requested the chairman of BSEC to take necessary action.
Meanwhile, after detecting the irregularity in loan approval and misuse of the loan, Bangladesh Bank in December last year slapped a fine of Tk1 lakh on the bank's then managing director Kamal Hossain.
The story of the Southeast Bank reflects how the failure of bank company act implementation brought a bank under the family grip putting the depositors' money at risk.
Bank violates Bank Companies Act
According to the bank company act, the tenure of a director in the board of a bank will be a maximum of nine years but Alamgir Kabir has held the chairmanship for the last 18 years since 2004.
The Bank Companies Act was last amended in 2013 regarding share-holding directors' tenure and regarding the number of family members allowable as directors.
The 2013 amendments were in line with the advice of the International Monetary Fund (IMF) and followed international best practices.
It came against the backdrop of directors getting involved in irregularities.
However, in the year 2017, the act was amended increasing the bank directors' tenure from six years to nine years and number of family members in the board to four from two ignoring international best practice suggested by the IMF.
The new amendment was also ignored in the Southeast bank.
Now, The IMF came up with the condition of amending The Bank Companies Act again by September 2023 in line with the best practice as part of its approved loan of $4.7 billion for Bangladesh.
Southeast Bank Chairman refuses to comment
When asked about the loan issue over the phone, Alamgir Kabir said there were no problems and everything was fine. He refused to say anything more on this issue.