Sunday, July 29, 2007

Bangladesh: Overseas remitting system shaken: Million-dollar scam

Overseas remitting system shaken: Million-dollar scam: Corrupt people close to past political regime involved
By Pulack Ghatack
Tue, 3 Jul 2007, 13:37:00
From New Nation Online Edition
The million-dollar scam of First Solution Money Transfer Limited has shaken the overseas money remitting system and credibility of the entitled institutions. People are also raising questions about the surveillance mechanism of the governments and the central banks of Bangladesh and the United Kingdom.
Some sources on Monday said that certain corrupt people close to the last political regime in power were involved in business with First Solution Money Transfer Ltd.
They said that move was taken during the previous government to close down Sonali Exchange, the foreign currency collecting branch of the Sonali Bank in London to facilitate growth of money transfer companies in the UK. But the information is yet to be confirmed, for Bangladesh Bank and the authorities of eight other banks, which were involved in business with the fraud company, do not know who the owners are. When asked, Bangladesh Bank officials could not confirm the names of the people involved. Then, what was the basis of their trust in establishing drawing arrangements with the fraud company?
"We want business. Bangladesh High Commission in London recommended the company to establish drawing arrangements. Bangladesh Bank also gave permission after checking their documents. Then where is our fault?", replied a mid-level executive of a private bank on condition of anonymity.
Bangladesh Bank permits banks in Bangladesh to establish drawing arrangements with foreign banks and exchange houses to facilitate remittance by Bangladeshi nationals living abroad.
Persons willing to remit their earnings through official channels can buy either Taka draft or US dollar draft from these foreign banks and exchange houses having drawing arrangements with different banks in Bangladesh.
With this arrangement, Bangladeshi nationals living abroad can send foreign exchange directly to their own bank accounts or to their relatives' bank accounts in Bangladesh.
Questions are, however, being raised about the credibility of Bangladesh Bank about giving permission to any bank to establish drawing arrangements with foreign banks and exchange houses.
People are now questioning about the difference between the "hundi" and the so-called legal money supply of accredited companies. If a criminal gang forms a company and starts to transfer legal or illegal money, will the banks get involved in business with it without verifying its credibility? "How could the central bank allow banks to establish drawing arrangements with a company without having enough information about it?," a host of people told the New Nation yesterday.
Globally, some 86 institutions including the foreign branches of Bangladeshi banks are involved in money transfer to Banladesh. A total of 38 institutions including four branches of Sonali Bank are engaged in money transfer from the UK.
Of those, First Solution maintained relationship with the highest number of Bangladeshi banks. The fraud company remitted money through eight Bangladeshi banks including Uttara Bank, Eastern Bank, National Credit and Commerce (NCC) Bank, SouthEast Bank, Mutual Trust Bank, BRAC Bank Limited, Prme Bank and Islami Bank.
The firm claimed itself as one of the biggest Bangladeshi money-transferring firms in London. They had 42 branches in different cities. But, all the branches were suddenly closed down on Thursday last.
It was also involved in business like travel services, Hajj and Umrah services, property finance, business loan, personal loan, general insurance, tax consultancy, pensions etc. It lured people offering higher profit in the name of religion terming it "Islamic finance" and "Shariah Compliant Investments."
"We are committed to providing Shariah compliant products and services to all our clients. As part of our vision, we want to be at the forefront in encouraging more and more British Muslim Women to become successful entrepreneurs through participation in First Solution Investment Projects such as property developments as individuals or in groups," says the website of the fraud company.
Reports received from London revealed that the expatriate Bangladeshis living in the UK sent 9 million pound sterling worth Tk 126 crore to Bangladesh through the company during the last six weeks.
Meanwhile, UNB reports that Bangladesh Bank has asked Bangladesh High Commission in London to take up with the British authorities the remittance scam by UK-based First Solution Money Transfer Ltd that allegedly misappropriated huge money sent by NRBs.
"We wrote a letter to the High Commission in this regard today," Bangladesh Bank Governor Dr Salehuddin Ahmed told reporters Tuesday.
"They (the remittance house) are not under our supervision. The UK authorities gave them license to operate," he said after a function at the auditorium of National Press Club.
He was addressing a function marking the distribution of stipends among meritorious students by Islami Bank Foundation.
Replying to a question, he said the commercial banks here would pay the beneficiaries from their covered funds. "Later, we'll see what we can do in this regard."
The company, which had money transfer arrangements with the local banks, reportedly closed down all of its branches immediately after misappropriating the huge amount of money remitted by the expatriate Bangladeshis living in the UK.
They advised the local commercial banks to send the money to the beneficiaries but did not post the remitted money for the banks.
A senior Bangladesh Bank official told UNB that the High Commission has already started collecting relevant documents for sending the remittance from the expatriate Bangladeshis in UK and they would take up the problem with the UK authorities for its settlement as per UK's legal provisions.
"Otherwise, we'll look for a satisfactory solution locally," he said, adding that the remitted money, if necessary, should be given from the profits of the banks concerned.
He said Bangladesh Bank has also launched an internal investigation whether the commercial banks had proper agreements with the remittance house for transaction or the agreements had any discrepancy. "Bangladesh Bank will take action after examining the documents," he said.
To avert future problems related to remittance, Bangladesh Bank has decided to publish ads in newspapers urging people not to make transactions with fake exchange houses.
The central bank would also formulate a policy to regulate the local exchange houses to avert future problems relating to wage earners' money.
Meanwhile, Bangladesh Bank executive director Yasin Ali summoned senior executives of the commercial banks involved and had case-to-case talks with them in this regard.
The central bank convened the meeting as part of its investigation into the alleged misappropriation of remittance. It has so far detected an amount of Tk 18 crore remitted from the United Kingdom that remained to be disbursed among the recipients in Bangladesh by the local commercial banks.
Of the amount, South East Bank alone is responsible for Tk 14 crore as reported at a meeting between the Bangladesh Bank and eight commercial banks at the central bank's conference room on Monday.

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Westminster Hall debates
Wednesday, 18 July 2007
What is Westminster Hall?
First Solution Money Transfer Ltd

4:15 pm

George Galloway (Bethnal Green & Bow, Respect)

The collapse of First Solution Money Transfer Ltd hit the community of the east end of London and elsewhere with all the force of a flood. It has devastated some of the poorest people in England: some of the lowest paid and some of the poorest housed, who live in the chilly shade of the hedge fund operators in the richest square mile on earth in the City of London and the gleaming spires of capitalism at Canary Wharf. Those people sweated from their brow to save what often may be small amounts to you and me, Mr. Cummings, but large amounts to them, and bigger amounts to those in Bangladesh, the poorest country in the world, to whom the money was destined to be sent.
No one will know the full scale of the losses until the Insolvency Service has concluded its forensic examination of the accounts, but at the moment the directors are claiming that £1.7 million is owed to 2,000 creditors. Those figures do not begin to paint the human picture of the suffering. One man from Manchester has lost £70,000, his life savings, which has brought him to the edge of despair. Another has lost the money that he had saved for retirement back in Bangladesh. In yet another case, money saved by a man for a whole year to buy essential medical treatment for his brother has gone missing. The tale of misery is represented among the strangers here, who are some of the poorest and some of the oldest victims of this collapse.
I was first alerted to the problems in the company almost four weeks ago. Agents working for First Solution in the Home Counties contacted me and said that money that they had taken in over the previous two months for transfer to Bangladesh—some £150,000—had for the most part failed to get there. They said that a meeting had been held between more than 40 agents and the directors of First Solution in the middle of May after money had stopped getting to Bangladesh. They had been told by the directors that there were problems, but that they would soon be put right. More than one month later, the situation had merely got worse as the amount of money owed to clients had grown.
As the evidence mounted that there were problems in the company, and that good money was being paid in after bad in large quantities daily, my response was to seek the authorities' assistance to find out what had gone wrong. I contacted the Financial Services Authority, but to my amazement was told that this financial service fell outside its remit, and that I would have to approach trading standards officers.
My office contacted trading standards officers at Tower Hamlets council with the evidence that had been presented to me, but they said that the matter was too big for them and that the police should be contacted. I sent a personal letter straight away to the borough commander in Tower Hamlets, again outlining the evidence of the very serious problems in the company, and of the suspicions, now widespread, of wrongdoing, and asked him to engage whatever agencies in the police were responsible for investigating the company. Commander Savill referred the matter to the local fraud office and an officer then contacted my office to say that he was preparing a report to send to Her Majesty's Revenue and Customs, as it was in fact the regulating body and should carry out any investigation. This was some three days before the company finally ceased trading.
Under mounting media pressure—I commend the excellent investigative reporting of Ted Jeory of the East London Advertiser—the company seems to have engaged with its accountants and lawyers, and I believe the directors were advised that they were almost certainly trading as an insolvent company, which is a criminal offence. They were advised by their lawyer to instruct their agents to stop taking business, but to this day, many agents claim that they never received any such instruction. Early in the morning on 21 June, the directors posted a notice on their office in the London Muslim centre, saying that their office was closed until further notice.
That was no tin-pot business. It had grown from a £4 million turnover in its first year of operation, 2004, to an estimated £87 million turnover in 2006-07. That growth was achieved in several ways. First, the business offered higher exchange rates for lower fees and a quicker service to more outlying areas of Bangladesh than its rivals, in particular the banks, which are subject to financial security regulation. Secondly, with its headquarters located in the London Muslim centre next to the East London mosque, it was assiduously and ruthlessly promoted as a community service on the Bangladeshi TV station Channel S. Not coincidentally, Dr. Fazal Mahmood, the driving force behind First Solution, which also includes real estate, investment, travel and other services, was also the managing director of Channel S until the day before First Solution collapsed.
I have asked Ofcom, and I demand it again today through you, Mr. Cummings, to investigate whether there was a breach of the broadcasting code as a result of that close relationship and the apparent conflicts of interest, but so far Ofcom has not agreed to an inquiry. I want to know whether the adverts that ran interminably on Channel S for First Solution, even though the two companies shared Dr. Fazal Mahmood's services, were properly billed and paid for, and whether it was really commercial advertising or a relentless drive to get the TV station's audience to do their business with First Solution. Ofcom has a duty to the population of east London in that regard.
Mr. Cummings, you may be surprised to know—I was—that Dr. Fazal Mahmood was convicted in 2004 on two counts of the criminal offence of breaching section 84 of the Immigration and Asylum Act 1999. A convicted criminal in 2004 was allowed to build up an £87 million business within three years because of the failure to put a fit and proper person regulation in place for people operating money transfer businesses.
The next point is even more interesting. Upon the collapse of the company, the directors appointed an insolvency firm, Panos Eliades, Franklin and Co., to register creditors, set up a creditors' meeting and advise on liquidation. Panos Eliades himself fronted and continues to front that operation. Mr. Eliades, however, was excluded from membership of the Institute of Chartered Accountants in 2000, and, in a legal dispute over debts with the boxer Lennox Lewis, a New York court and the High Court in London ruled that Mr. Eliades had comprehensively lied in order to avoid paying the debts that he was alleged to owe. His partner, Mr. Franklin, is qualified as an insolvency practitioner, although he is subject to restriction and monitoring by the Insolvency Practitioners Association. In a word, he is in "special measures".
One cannot help wondering why among all the insolvency firms operating in London, many of which have bombarded me with offers of help, the directors of First Solution managed to choose that one. There is a very important point to make. There is a great deal of anger in the British Bangladeshi community in the east end, and in Bangladesh itself about what has happened. There is a feeling, which I share, that it should be impossible for a money transfer company to lose money. After all, it merely takes money from Peter and promises to transfer it to Paul. In the east end, there has been much rumour and speculation that something criminal must have happened to that money.

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