Unverified bank balances raise fears of fraud in insurance sector
The scale of the unverified amounts is staggering, led by Eastern Insurance PLC, where the auditor was unable to confirm the existence of Tk120 crore.
Highlights:
- Eastern Insurance has largest unverified amount of Tk120 crore
- Northern Islami Insurance fails to provide bank confirmations for FDRs worth Tk82.55 crore
- Eastland Insurance's Tk42 crore unconfirmed
- Central Insurance's Tk69.72 crore bank balance unverified
- Phoenix Insurance's 207 FDR accounts worth Tk24.42 crore unconfirmed
- Islami Commercial Insurance's 498 FDR balances unconfirmed
- Eastern Insurance declines to explain Tk120 crore discrepancy
A series of alarming audit reports has cast a shadow over the transparency of Bangladesh's general insurance sector, revealing that auditors have been unable to independently verify crores of taka reported as cash and fixed deposits held in various banks.
The failure to obtain direct bank confirmations for these substantial assets has triggered "Qualified Opinions" and "Emphasis of Matter" paragraphs in the 2025 financial statements of at least seven major insurers. This lack of third-party verification raises serious questions about the actual existence of these funds, pointing to potential risks ranging from forged documentation to a significant overstatement of corporate net worth.
The scale of the unverified amounts is staggering, led by Eastern Insurance PLC, where the auditor was unable to confirm the existence of Tk120 crore. This figure represents an incredible 98% of the company's total cash and cash equivalents and nearly half of its entire asset base.
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Jahidul Islam FCA, managing partner of Islam Jahid and Co, noted that these funds were spread across 563 accounts in 46 different banks. More distressingly, the audit identified that Tk26.39 crore of this amount is held in five distressed banks currently grappling with severe liquidity constraints. The auditor warned that the recoverability of these funds is highly doubtful, yet management failed to recognise any impairment — resulting in a significant overstatement of profit.
Northern Islami Insurance PLC faces similar scrutiny after its auditor, KM Alam and Co, reported that confirmations for 747 Fixed Deposit Receipts (FDRs) worth Tk82.55 crore were never received. Although the management provided internal statements, the absence of independent verification from the banks leaves a massive gap in financial reliability.
Meanwhile, Eastland Insurance PLC could not satisfy its auditor KM Alam and Co regarding Tk42 crore held in banks, while Central Insurance saw a significant portion of its Tk69.72 crore bank balance go unconfirmed.
Phoenix Insurance's auditor reported that it failed to receive replies from banks for 207 FDR accounts totaling Tk24.42 crore, alongside several current and notice deposit accounts.
This systemic lack of response from the banking sector has left auditors unable to fulfil their fiduciary duty to shareholders, forcing them to rely on internal company records that may not reflect the true state of liquidity.
A partner at a leading audit firm, speaking on the condition of anonymity, explained that direct bank confirmation is the fundamental bedrock of an audit. Without it, there is a legitimate risk that the money simply is not there or that the instruments being presented to auditors are forged. Unconfirmed balances, he added, allow companies to paint a far healthier financial picture than reality warrants, potentially misleading investors and policyholders alike.
He emphasised that unconfirmed balances allow companies to paint a much healthier financial picture than reality warrants, potentially misleading investors and policyholders alike.
The regulatory response has been a mix of concern and an admission of limited capacity. Saifunnahar Sumi, the spokesperson for the Insurance Development and Regulatory Authority (IDRA), told The Business Standard that the failure of auditors to confirm these balances is a grave matter. She noted that if the reported balances do not exist in reality, it constitutes a serious criminal offense. However, she also admitted a significant bottleneck in oversight, stating that IDRA often fails to adequately verify such audit observations due to a lack of sufficient workforce within the regulatory body.
The Bangladesh Securities and Exchange Commission (BSEC) is also tightening its grip. A senior BSEC officer said the commission views these audit notes with the utmost seriousness and initiates independent investigations following such observations. If a company is found to have misrepresented its cash positions or failed to provide accurate data, he said, the commission will not hesitate to penalise the responsible individuals and entities.
He confirmed that following such observations, the BSEC initiates its own independent investigations. If a company is found guilty of misrepresenting its cash positions or failing to provide accurate data, the commission will not hesitate to penalise the responsible individuals and entities to maintain market integrity.
Kazi Farhana, company secretary of Eastern Insurance, declined to provide a detailed explanation regarding the unconfirmed Tk120 crore, saying only that the company is preparing a formal response to be presented at its upcoming Annual General Meeting. Other insurers, including Northern Islami and Islami Commercial Insurance — where 498 FDR balances went unconfirmed — declined to comment when approached.
