The systemic failures within BDBL that led to a Nu 576 mn fraud

While the Anti Corruption Commission (ACC) report pinpointed the illegal and inflated term loans and Over Draft loans given by a Bhutan Development Bank Limited (BDBL) project officer, Pema Nidup, coming to around Nu 576 mn, questions remain about the system and lack of oversight that allowed this to happen.

Office order saying no need to verify OD withdrawals
Office order saying no need to verify OD withdrawals

A reliable source told this paper that there were several issues of not following established procedures and also lack of supervisory control that contributed to the fraud happening.

The BDBL bank, like most banks, has a list of financial manuals that list out the procedures and processes to follow.

One key area process that was not followed was on the disbursement report generated by the system every month. This report was supposed to be verified and signed by all the staff involved in the loan or OD disbursement from the loan officer to the supervisor and in  between.

If this important process had been followed then the fraud would either not have happened or would have been caught at an early stage.

Ironically, while this process was not followed in the BDBL headquarters in Thimphu, where the fraud happened, the BDBL branch offices had been told to follow this.

Another serious issue is an office order dated 12th December 2014 and signed by the BDBL deputy Managing Director of Operations Sonam Rigyel. The letter in point number six states, “Over Draft withdrawals by our clients through the current cheque account cheques shall not have to go through the verifying process.”

This meant that this lack of another level of check and balance meant that BDBL was in no position to verify the large withdrawals made from its inflated OD accounts. This order was applicable only to the main branch where the fraud happened.

It was also the lack of supervisory control and checks and balances that lead to the sharing of a common system password which allowed for the illegal loan enhancements. This is even more serious as it happened under the noses of the top BDBL brass in Thimphu.

Another strange matter is also the fact that though BDBL was subject to its own internal audit and checks by the Royal Audit Authority and Royal Monetary Authority respectively the above fraud was not detected raising questions on the thoroughness of these audits and checks.

A source said that a BDBL staff had got suspicious about the huge withdrawals and the perpetrator and informed her supervisor but she was told that there is no problem.

When the fraud was found out around the last quarter of 2016 through sources, which included an anonymous letter, it took around a week to block the account during which more withdrawals were made.

The whole above incident raises question about the institutional culture in BDBL.

It has been learnt that the RMA over the years questioned the fitness and qualifications of some of BDBL’s board members but no action was taken by either the board or the Ministry of Finance which is the parent agency of BDBL.

In the last round of annual bonuses, despite the fraud, bonuses of up to three months of 80 percent of the pay were given to members of the senior management.

The BDBL over the years had a string of fraud and embezzlement cases but things do not seem to have improved. The board which was under question from RMA for its membership has also not been able to bring about better accountability within BDBL.

The Deputy MD of Operations Sonam Rigyel clarifying on the office order with relation to the OD said, “The matter was discussed in a committee and approved. The intention was to facilitate better and faster services to the customers at the main branch. The office order would not have contributed to the misuse of loans as the misuse had to do with the loan enhancement and sanction, and a lot of the issues happened with the term loans. “

He said verifying OD withdrawals would have lead to a kind of harassment for customers and he reasserted that the order in no way contributed to the fraud.

The Deputy MD stuck only to the office order signed by him and said he was not authorized to talk about the other aspects above.

Repeated attempts to get a response from the BDBL management on other aspects  could not elicit any response.

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