Wednesday, 15 January, 2025
A former Deputy Governor of the Bangladesh Bank often visited Sydney, Australia where his daughter and her family reside under the guise of official visits. Following his retirement, this influential central banker, Ziaul Hasan Siddiqui, was appointed Chairman of Sonali Bank, the largest state-run bank in Bangladesh.
Siddiqui has played a remarkable role in the country’s banking sector, enjoying political favour across successive governments under both the Awami League and BNP eras. Even during the infamous cyber heist, where foreign hackers stole billions of dollars from the central bank’s vault, Siddiqui’s accountability was never questioned. Upon his retirement, his close associate Saidul Islam, who served as the General Manager of the central bank’s foreign exchange department, succeeded him as Deputy Governor.
Ziaul Hasan Siddiqui’s case is not unique. Many former central bankers, entrusted with sensitive responsibilities during their tenure, have transitioned into roles in commercial banks after retirement. This trend emerges at a time when numerous skilled bankers are losing their positions due to declining profits and power struggles in boardrooms.
The Bangladesh Bank heist of February 2016 serves as a stark reminder of the central bank's vulnerabilities. Cybercriminals exploited security flaws to steal $101 million from its account at the Federal Reserve Bank of New York. Though some funds were recovered, the heist highlighted significant lapses in cybersecurity and institutional accountability.
Investigations showed outdated systems and unprepared personnel, while the bank's delayed response and lack of transparency raised concerns. The incident tarnished the country's global reputation and exposed systemic weaknesses, exacerbated by years of political interference within Bangladesh Bank.
This has raised a critical question within the banking industry: Why do former central bankers often join commercial banks post-retirement? Could this phenomenon be linked to the persistent issues of money laundering and widespread irregularities in the country’s banking sector?
Both officials working in the central bank and commercial bank say the Bangladesh Bank (BB), the financial watchdog organisation is now a mere paper tiger. Corruption, nepotism, and rampant government intervention during the Awami League era reduced Bangladesh Bank, the central bank of Bangladesh, to a blind watchdog.
The new governor of Bangladesh's central bank, Ahsan Mansur, calculates that about $17 billion was siphoned from the country's financial system in the 15 years before the government of Sheikh Hasina collapsed in August.
Both officials working in the central bank and commercial bank say the Bangladesh Bank (BB), the financial watchdog organisation is now a mere paper tiger. Corruption, nepotism, and rampant government intervention during the Awami League era reduced Bangladesh Bank, the central bank of Bangladesh, to a blind watchdog.
Billions of taka were looted from commercial banks’ vaults in the name of loans in front of Bangladesh over the years. Mustafa K Mujeri, former chief economist of Bangladesh Bank, told Prothom Alo that bank looting occurred with the political patronage of the past government.
Corruption within the banking sector, abetted by weak oversight from the central bank, became a defining feature of the era. Reports surfaced of loans being approved without proper scrutiny, often to companies with dubious credentials but strong political backing. These practices not only destabilized individual financial institutions but also put the broader banking sector at risk.
The boards of the relevant banks facilitated the looting, while Bangladesh Bank remained silent. An unethical circle had formed among these three parties. When the S Alam Group was withdrawing money from the banks, there was no one to stop them because all parties were benefiting.
There are allegations that, with political decisions and state patronage, S Alam and his family have committed various financial crimes, including bank seizures, over the past decade. Bangladesh Bank officials suspect that money was laundered from the banks under their control.
The S Alam Group was one of the businesses that received special benefits through irregularities and corruption during her government. Central bank officials were forced to maintain office work at night to ensure his looting operations.
In the second week of August, the NBR summoned the bank accounts of individuals associated with S Alam. Letters were sent to all commercial banks, financial institutions, the National Savings Directorate, and 91 postal department institutions requesting information on all bank accounts and credit card transactions.
Alam, the chairman of S Alam Group, and his family members used the central bank's special permission to unprecedentedly possess large shares of seven banks and two financial institutions despite prohibition by the Bank Company Act.
The Bangladesh Bank is supposed to protect customers' interests, but it did not do so when it permitted Mohammed Saiful Alam and his family to seize multiple banks and funnel enormous sums as loans.
For example, they have a 30 per cent stake in Islami Bank while the law caps such shareholding by a family in a bank at 10 per cent. That allowed Alam's relatives to take a total of Tk 25,000 crore loans from the bank with far less investment in it, official data shows. The actual amount is believed to be more than three times the official figure.
Not only S. Alom Group but billions of taka were looted from banks during the ousted Prime Minister Sheikh Hasina by the Bismillah Group, Hall Mark Group and others. The controversial Bismillah Group swindled the money with the help of bank officials between June 2006 and October 2012. Hallmark Group is accused of embezzling around Tk4,000 crore of Sonali Bank through forgery in 2010-12.
Perhaps the most glaring failure of the Bangladesh Bank during the BAL era was its inability to stem the tide of money laundering. According to estimates, billions of dollars were siphoned out of the country through illegal channels, facilitated by lax regulatory oversight and complicity at various levels.
High-profile cases, such as the laundering of funds by politically exposed individuals (PEIs), highlighted the central bank’s inability or unwillingness to enforce anti-money laundering (AML) regulations effectively. Instead of taking decisive action, the bank often turned a blind eye, creating an environment where illicit financial flows became the norm rather than the exception.
One significant example was the role of non-banking financial institutions (NBFIs) and weak enforcement mechanisms that allowed illicit transactions to thrive. Despite warnings from international bodies like the Financial Action Task Force (FATF), little was done to rectify the glaring deficiencies in the country’s financial regulatory framework.
Perhaps the most glaring failure of the Bangladesh Bank during the BAL era was its inability to stem the tide of money laundering. According to estimates, billions of dollars were siphoned out of the country through illegal channels, facilitated by lax regulatory oversight and complicity at various levels. High-profile cases, such as the laundering of funds by politically exposed individuals (PEIs), highlighted the central bank’s inability or unwillingness to enforce anti-money laundering (AML) regulations effectively. Instead of taking decisive action, the bank often turned a blind eye, creating an environment where illicit financial flows became the norm rather than the exception.
Government Intervention: A Double-Edged Sword
The BAL government’s interventions in the banking sector extended beyond the central bank to encompass the broader financial landscape. State-owned banks were routinely used to channel funds to politically connected businesses, often without proper due diligence. The resulting rise in non-performing loans (NPLs) became a severe drag on the economy, with the central bank unable to enforce accountability or recover losses effectively.
The government also leaned heavily on the Bangladesh Bank to manage public perception during economic crises. By manipulating exchange rates and foreign exchange reserves, the central bank was often forced to prioritize political objectives over sound economic management. This short-sighted approach not only undermined the bank’s credibility but also left the economy vulnerable to external shocks.
The cumulative effect of these issues was a significant erosion of public trust in the Bangladesh Bank and the country’s financial institutions. For ordinary citizens, the central bank’s failures translated into rising inflation, a depreciating currency, and dwindling economic opportunities. For businesses, the lack of a stable and predictable financial environment hindered investment and growth.
Internationally, the central bank’s inability to enforce regulatory standards damaged Bangladesh’s standing in the global financial community. The country’s inclusion on watchlists for money laundering and financing of terrorism further underscored the need for comprehensive reforms to restore the central bank’s credibility.
The Road to Reform
Addressing the systemic issues plaguing the Bangladesh Bank requires a multifaceted approach. First and foremost, the bank’s independence must be safeguarded through legislative reforms that insulate it from political interference. Appointments to key positions should be based on merit and expertise rather than political allegiance.
Strengthening the bank’s oversight mechanisms and cybersecurity infrastructure is also critical. The lessons from the 2016 heist should be used to develop a robust framework for preventing and responding to cyber threats. Additionally, enforcing stringent AML regulations and holding violators accountable will be essential to curbing money laundering and restoring confidence in the financial system.
Furthermore, the central bank must prioritise transparency and public accountability. Regular audits, public disclosures, and proactive engagement with stakeholders can help rebuild trust and ensure that the Bangladesh Bank operates as a pillar of economic stability.
Strengthening the bank’s oversight mechanisms and cybersecurity infrastructure is also critical. The lessons from the 2016 heist should be used to develop a robust framework for preventing and responding to cyber threats. Additionally, enforcing stringent AML regulations and holding violators accountable will be essential to curbing money laundering and restoring confidence in the financial system.
Last But Not Least
The Bangladesh Bank’s struggles during the BAL era serve as a cautionary tale of what happens when a central bank is stripped of its independence and integrity. Nepotism, corruption, and government intervention not only weakened the institution but also inflicted lasting damage on the country’s economy and reputation.
As Bangladesh looks to the future, rebuilding the central bank’s capacity and credibility will be crucial to ensuring sustainable economic growth and financial stability. The time for action is now before the nation’s financial foundations are further eroded.
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A former Deputy Governor of the Bangladesh Bank often visited Sydney, Australia where his daughter and her family reside under the guise of official visits. Following his retirement, this influential central banker, Ziaul Hasan Siddiqui, was appointed Chairman of Sonali Bank, the largest state-run bank in Bangladesh.
Siddiqui has played a remarkable role in the country’s banking sector, enjoying political favour across successive governments under both the Awami League and BNP eras. Even during the infamous cyber heist, where foreign hackers stole billions of dollars from the central bank’s vault, Siddiqui’s accountability was never questioned. Upon his retirement, his close associate Saidul Islam, who served as the General Manager of the central bank’s foreign exchange department, succeeded him as Deputy Governor.
Ziaul Hasan Siddiqui’s case is not unique. Many former central bankers, entrusted with sensitive responsibilities during their tenure, have transitioned into roles in commercial banks after retirement. This trend emerges at a time when numerous skilled bankers are losing their positions due to declining profits and power struggles in boardrooms.
The Bangladesh Bank heist of February 2016 serves as a stark reminder of the central bank's vulnerabilities. Cybercriminals exploited security flaws to steal $101 million from its account at the Federal Reserve Bank of New York. Though some funds were recovered, the heist highlighted significant lapses in cybersecurity and institutional accountability.
Investigations showed outdated systems and unprepared personnel, while the bank's delayed response and lack of transparency raised concerns. The incident tarnished the country's global reputation and exposed systemic weaknesses, exacerbated by years of political interference within Bangladesh Bank.
This has raised a critical question within the banking industry: Why do former central bankers often join commercial banks post-retirement? Could this phenomenon be linked to the persistent issues of money laundering and widespread irregularities in the country’s banking sector?
Both officials working in the central bank and commercial bank say the Bangladesh Bank (BB), the financial watchdog organisation is now a mere paper tiger. Corruption, nepotism, and rampant government intervention during the Awami League era reduced Bangladesh Bank, the central bank of Bangladesh, to a blind watchdog.
The new governor of Bangladesh's central bank, Ahsan Mansur, calculates that about $17 billion was siphoned from the country's financial system in the 15 years before the government of Sheikh Hasina collapsed in August.
Both officials working in the central bank and commercial bank say the Bangladesh Bank (BB), the financial watchdog organisation is now a mere paper tiger. Corruption, nepotism, and rampant government intervention during the Awami League era reduced Bangladesh Bank, the central bank of Bangladesh, to a blind watchdog.
Billions of taka were looted from commercial banks’ vaults in the name of loans in front of Bangladesh over the years. Mustafa K Mujeri, former chief economist of Bangladesh Bank, told Prothom Alo that bank looting occurred with the political patronage of the past government.
Corruption within the banking sector, abetted by weak oversight from the central bank, became a defining feature of the era. Reports surfaced of loans being approved without proper scrutiny, often to companies with dubious credentials but strong political backing. These practices not only destabilized individual financial institutions but also put the broader banking sector at risk.
The boards of the relevant banks facilitated the looting, while Bangladesh Bank remained silent. An unethical circle had formed among these three parties. When the S Alam Group was withdrawing money from the banks, there was no one to stop them because all parties were benefiting.
There are allegations that, with political decisions and state patronage, S Alam and his family have committed various financial crimes, including bank seizures, over the past decade. Bangladesh Bank officials suspect that money was laundered from the banks under their control.
The S Alam Group was one of the businesses that received special benefits through irregularities and corruption during her government. Central bank officials were forced to maintain office work at night to ensure his looting operations.
In the second week of August, the NBR summoned the bank accounts of individuals associated with S Alam. Letters were sent to all commercial banks, financial institutions, the National Savings Directorate, and 91 postal department institutions requesting information on all bank accounts and credit card transactions.
Alam, the chairman of S Alam Group, and his family members used the central bank's special permission to unprecedentedly possess large shares of seven banks and two financial institutions despite prohibition by the Bank Company Act.
The Bangladesh Bank is supposed to protect customers' interests, but it did not do so when it permitted Mohammed Saiful Alam and his family to seize multiple banks and funnel enormous sums as loans.
For example, they have a 30 per cent stake in Islami Bank while the law caps such shareholding by a family in a bank at 10 per cent. That allowed Alam's relatives to take a total of Tk 25,000 crore loans from the bank with far less investment in it, official data shows. The actual amount is believed to be more than three times the official figure.
Not only S. Alom Group but billions of taka were looted from banks during the ousted Prime Minister Sheikh Hasina by the Bismillah Group, Hall Mark Group and others. The controversial Bismillah Group swindled the money with the help of bank officials between June 2006 and October 2012. Hallmark Group is accused of embezzling around Tk4,000 crore of Sonali Bank through forgery in 2010-12.
Perhaps the most glaring failure of the Bangladesh Bank during the BAL era was its inability to stem the tide of money laundering. According to estimates, billions of dollars were siphoned out of the country through illegal channels, facilitated by lax regulatory oversight and complicity at various levels.
High-profile cases, such as the laundering of funds by politically exposed individuals (PEIs), highlighted the central bank’s inability or unwillingness to enforce anti-money laundering (AML) regulations effectively. Instead of taking decisive action, the bank often turned a blind eye, creating an environment where illicit financial flows became the norm rather than the exception.
One significant example was the role of non-banking financial institutions (NBFIs) and weak enforcement mechanisms that allowed illicit transactions to thrive. Despite warnings from international bodies like the Financial Action Task Force (FATF), little was done to rectify the glaring deficiencies in the country’s financial regulatory framework.
Perhaps the most glaring failure of the Bangladesh Bank during the BAL era was its inability to stem the tide of money laundering. According to estimates, billions of dollars were siphoned out of the country through illegal channels, facilitated by lax regulatory oversight and complicity at various levels. High-profile cases, such as the laundering of funds by politically exposed individuals (PEIs), highlighted the central bank’s inability or unwillingness to enforce anti-money laundering (AML) regulations effectively. Instead of taking decisive action, the bank often turned a blind eye, creating an environment where illicit financial flows became the norm rather than the exception.
Government Intervention: A Double-Edged Sword
The BAL government’s interventions in the banking sector extended beyond the central bank to encompass the broader financial landscape. State-owned banks were routinely used to channel funds to politically connected businesses, often without proper due diligence. The resulting rise in non-performing loans (NPLs) became a severe drag on the economy, with the central bank unable to enforce accountability or recover losses effectively.
The government also leaned heavily on the Bangladesh Bank to manage public perception during economic crises. By manipulating exchange rates and foreign exchange reserves, the central bank was often forced to prioritize political objectives over sound economic management. This short-sighted approach not only undermined the bank’s credibility but also left the economy vulnerable to external shocks.
The cumulative effect of these issues was a significant erosion of public trust in the Bangladesh Bank and the country’s financial institutions. For ordinary citizens, the central bank’s failures translated into rising inflation, a depreciating currency, and dwindling economic opportunities. For businesses, the lack of a stable and predictable financial environment hindered investment and growth.
Internationally, the central bank’s inability to enforce regulatory standards damaged Bangladesh’s standing in the global financial community. The country’s inclusion on watchlists for money laundering and financing of terrorism further underscored the need for comprehensive reforms to restore the central bank’s credibility.
The Road to Reform
Addressing the systemic issues plaguing the Bangladesh Bank requires a multifaceted approach. First and foremost, the bank’s independence must be safeguarded through legislative reforms that insulate it from political interference. Appointments to key positions should be based on merit and expertise rather than political allegiance.
Strengthening the bank’s oversight mechanisms and cybersecurity infrastructure is also critical. The lessons from the 2016 heist should be used to develop a robust framework for preventing and responding to cyber threats. Additionally, enforcing stringent AML regulations and holding violators accountable will be essential to curbing money laundering and restoring confidence in the financial system.
Furthermore, the central bank must prioritise transparency and public accountability. Regular audits, public disclosures, and proactive engagement with stakeholders can help rebuild trust and ensure that the Bangladesh Bank operates as a pillar of economic stability.
Strengthening the bank’s oversight mechanisms and cybersecurity infrastructure is also critical. The lessons from the 2016 heist should be used to develop a robust framework for preventing and responding to cyber threats. Additionally, enforcing stringent AML regulations and holding violators accountable will be essential to curbing money laundering and restoring confidence in the financial system.
Last But Not Least
The Bangladesh Bank’s struggles during the BAL era serve as a cautionary tale of what happens when a central bank is stripped of its independence and integrity. Nepotism, corruption, and government intervention not only weakened the institution but also inflicted lasting damage on the country’s economy and reputation.
As Bangladesh looks to the future, rebuilding the central bank’s capacity and credibility will be crucial to ensuring sustainable economic growth and financial stability. The time for action is now before the nation’s financial foundations are further eroded.
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