The central bank has considerably shored up its precautionary measures to contain fraudulent activities in response to the recent banking scams, its governor said yesterday.

A Bangladesh Bank (BB) study on the scams -- titled Material Loss Review (MLR) -- found that bank managers failed to adhere to simple review methods like know your customer (KYC), credit risk grading (CRG), anti-money laundering provisions, among others.

They also demonstrated major lapses and deficiencies in their credit administration, risk management and internal control and compliance functions.

“As per the recommendations of MLR, BB has considerably tightened its onsite and offsite vigilance on risk management, corporate governance, internal controls and internal audit functions in banks,” said BB Governor Atiur Rahman.

The central bank has also reconstituted the state-owned banks' boards of directors with “fit and proper” persons, he added.

An online electronic supervision dashboard bringing together a range of live transactions data from banks and provide warning signs of potentially fraudulent transactions, has been put in place, too.

“The foreign exchange transactions modules of the supervision dashboard are already operational and in use by BB and the banks,” said Rahman.

He urged the top management to monitor all letters of credit (L/C) transactions by their respective branches so that they can immediately track any suspected fraud and take preventive measures.

The central bank governor advised all banks to open L/Cs (both foreign and local) through SWIFT [Society for Worldwide Interbank Financial Telecommunication] to prevent fraud.

“I hope these disciplines will be adhered to in right earnest and the banks succeed in keeping themselves largely free of insider abuses and frauds.”

Rahman's comments came at an interactive session on international trade fraud, organised by the International Chamber of Commerce, Bangladesh (ICCB) at MCCI in Dhaka yesterday.

“We have arranged this session with the higher-ups of banks and the BB governor to discuss the modalities for detection and prevention of such fraud,” said ICCB President Mahbubur Rahman.

“International trade has been a major driver of growth, and the world today is significantly more dependent on it. But commercial crime is growing faster than international trade. Frauds are more complex and involve larger sums than ever before."

Mamun Rashid, chairman of ICCB's standing committee on banking, techniques and practices, urged all bank executives, specially the trade professionals, to further review the existing trade undertaking, processing and settlement model.

P Mukundan, director and chief of ICC-Commercial Crime Services, said International Maritime Bureau can work closely with BB and commercial banks to develop a system for detection and prevention of fraud.

He urged banks to check the balance sheet and have collateral before opening of any account of its clients as well as for opening of L/Cs.