Tk10,500cr syphoned thru inflated export orders at Premier Bank: BB probe 

Highlights

• BB finds Tk10,500cr siphoned via inflated export orders.
• Twenty-nine firms opened excessive back-to-back LCs.
• Imported goods were allegedly sold in local markets.
• Bank officials allegedly aided the irregularities.
• Premier Bank's Narayanganj AD licence was revoked.
• Experts demand accountability beyond licence cancellation.

A Bangladesh Bank investigation has uncovered the syphoning of nearly Tk10,500 crore through inflated export orders routed via Premier Bank's Narayanganj branch between 2018 and 2023.

Infographics: TBS

The probe found that 29 clients at the branch opened back-to-back letters of credit (LCs) ranging from 100% to 375% above the limit by showing inflated export orders. Under existing rules, the limit is up to 80% of the value of an actual export proceeds.

"As a result, clients siphoned a huge amount, estimated at $968.14 million (about Tk10,455.95 crore) by exploiting financing facilities beyond the limit through back-to-back LCs," reads the probe report. 

The central bank report said it found no evidence that the raw materials imported against those LCs were ever used for exports and allegedly were sold in the local market. 

The probe, analysing transaction data of the branch between 2018 and 2023, also found bank officials actively facilitated the process by ignoring due diligence and failing to report the information to the central bank. A copy of the report  has been obtained by The Business Standard.

The audit also uncovered other irregularities, including alleged revenue evasion through the misuse of duty drawback and bonded warehouse licence facilities by the 29 companies. 

A leading exporter, whose two firms were named among those disputed companies, alleged that many exporters were not even aware of the export LCs opened in their names and the bank's branch officials concerned made exporters sign fake documents by withholding export proceeds payments.   

Although the report was completed in 2023, action was delayed for three years before the branch's authorised dealer (AD) licence was cancelled in March this year. The delay was linked to the alleged influence of individuals with control over the bank during the period.

Officials and experts said most trade finance irregularities occur through back-to-back LCs and export orders. They said the bank's then management must also be held accountable, along with closer scrutiny of the entities involved in executing such transactions.

Figures paint a stark picture

The report shows Total Fashion opened back-to-back LCs worth $231 million against declared export orders of $364 million. Its actual exports amounted to only $62 million. 

Avanti Color Tex opened LCs worth $146 million against export orders of $290 million, while its actual exports stood at $67 million. Dowas-Land Apparels exported goods worth $55.5 million but opened back-to-back LCs worth $208 million. 

Besides, Ahona Knit Composite exported only $13.5 million worth of goods but opened LCs worth $99 million. HK Apparels exported $60.85 million worth of goods but opened back-to-back LCs amounting to $126 million.

Bangladesh Bank found similar irregularities involving another 24 companies, where LC openings far exceeded actual export values.

Bank officials implicated

A back-to-back LC is a secondary letter of credit opened against an export LC to finance the import of raw materials for export, with banks providing financing support to exporters.

The Bangladesh Bank report said there was no trace of the raw materials imported against the back-to-back LCs being used in export industries. Rather, goods brought in under bonded warehouse licences and duty drawback facilities were sold in the local market, enabling companies to evade taxes and duties. 

"And the bank authorities have facilitated this offence for years. In none of the instances the bank branch gave any information to Bangladesh Bank," it said. 

It found that back-to-back LCs were opened among different companies belonging to the same business groups against export orders and LCs.

The central bank report further alleged that the branch failed to conduct due diligence in these transactions and that the irregularities took place in collusion with branch officials.

Branch manager for 10 years

The report said that during the period of the irregularities, Md Shahid Hassan Mallik was the manager of Premier Bank's Narayanganj branch. He served as manager of the same branch for 10 years in violation of banking rules. It also said 24 other officials served extended tenures in breach of regulations.

Mallik could not be reached for comment despite repeated attempts.

Md Monzur Mofiz, managing director of Premier Bank, told The Business Standard that he assumed office on 16 April and could not comment without reviewing the audit report.

He said a forensic audit is currently underway at the head office and several branches, with a separate firm appointed for the Narayanganj branch.

Regarding the central bank report, Mofiz said, "Those involved, including the branch manager, have been dismissed and the matter has been reported to the Anti-Corruption Commission, with cases under process."

Why delay in action

At the time the Bangladesh Bank prepared the investigation report in May 2023, the bank's board included former Awami League lawmaker HBM Iqbal.

The board had largely been under the control of the Iqbal family for more than two decades, with HBM Iqbal serving as chairman since the bank's establishment in 1999.

In 2025, under the interim government, then Bangladesh Bank governor Ahsan H Mansur dissolved the board and constituted a new one.

In March this year, nearly three years after the investigation report, Bangladesh Bank revoked the authorised dealer (AD) licence of the Narayanganj branch.

A senior central bank official said that although the report had been prepared earlier, the central bank could not take action due to various pressures at the time.

Bangladesh Bank spokesperson and executive director Arif Hossain Khan said the AD licence had been cancelled, adding that "although delayed, action has been taken".

A senior central bank official, requesting anonymity, said, "There's no doubt that external influence played a role in the delay, as a powerful chairman was in place at the time."

'Exporters may not even be aware of LCs opened in their names'

Among the 29 companies, one firms owned by Mohammad Hatem, were also named in the findings.

Hatem, also president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), said a complaint had been filed with Bangladesh Bank seeking an investigation into the irregularities at Premier Bank.

He said the irregularities were carried out in collusion with the bank. "We have also learned that back-to-back LCs were opened far beyond actual export volumes," he said.

Hatem added that Premier Bank did not provide all necessary documents during LC transactions, instead shifting liability onto exporters.

"Even when we asked for documents, the bank did not provide them," he said, adding that exporters were forced to sign papers as payments were withheld against documents.

"We don't know how or when these liabilities were created," he said. "The bank opened back-to-back LCs using alleged fake export orders, and at times obtained signatures from exporters by warning that other export proceeds would be blocked."

He also claimed that many garment exporters may not even be aware that such LCs were opened in their names.

The industry leader said they would explain their position on the issue at a press conference next week.

Cancelling AD licence not enough

Shah Md Ahsan Habib, professor at Bangladesh Institute of Bank Management (BIBM), said the irregularities could have been driven by attempts to secure cash incentives or subsidies.

"Although incentives were claimed, in reality no exports were made," he said. "Most trade finance irregularities occur through back-to-back LCs. Therefore, cancelling licences alone is not enough."

He said members of the bank's then board and management must be held accountable, along with closer scrutiny of the entities involved in executing such transactions.