When one applies for a loan from any financial institution, the lender has to make sure that the loan application goes through at least five layers of scrutiny.
But Uttara Finance and Investment Ltd (UFIL), a non-bank financial institution, has not followed any of the procedures in disbursing a huge amount of loans.
For instance, it gave Tk 336 crore loans to Uttara Motors and other concerns of Uttara Group without any credit proposals, breaching the banking rules.
The loans were not shown in the UFIL's annual report and the financial balance sheet to dodge both its stakeholders and Bangladesh Bank, a central bank probe has found.
The BB also detected that the UFIL management created two sections in its electronic ledger -- "short-term loan repayment" and "long-term loan" -- without proper authorisation to disburse the loans to Uttara Group.
This is just one of the examples of its violation of the banking rules.
Irregularities involving Tk 5,100 crore were committed by the board and management of UFIL in disbursement of loans and mobilisation of deposits, the BB found in its probe carried out between October 7 and November 25 last year.
Most of the amount was not even shown in the UFIL's financial statement made public in 2019.
"The central bank is yet to find out the actual amount of money embezzled from the non-bank financial institution as its management did not cooperate with the probe teams, ignoring the banking rules," the BB report said.
The lender even shut down its servers to prevent the investigators from gathering information, according to the report.
On December 1 last year, the central bank asked UFIL to give explanations for the irregularities.
In response, UFIL sent two letters to the BB -- one on December 15 last year and the other on January 5 this year, admitting that irregularities took place at the financial institution.
In the first letter, UFIL Managing Director SM Shamsul Arefin sought 30 working days to give the BB explanations for the irregularities.
Around three weeks later, he again wrote to the BB, and said, "No explanation is sufficient in response to the queries about the irregularities found by the central bank investigation and audit. We are offering you apology with folded hands and state that such types of mistakes will not happen in the future.
"We want your cooperation so that we can run our institution efficiently and smoothly."
The bulk of the loans was given to different concerns of Uttara Group. The majority of directors of the Group also hold directorship at UFIL.
The BB found that Mujibur Rahman, a director of UFIL and deputy managing director of different concerns of Uttara Group, is the key person behind the financial scam. UFIL Chairman Rashidul Hasan and its MD Shamsul Arefin have largely been involved in the scam, according to the report.
The lender also gave Tk 248.68 crore in the form of margin loan to its subsidiary company Uttara Finance and Capital Management.
The fund was supposed to be disbursed to clients to help them buy shares from the capital market, but UFIL failed to provide the BB with any document, raising questions whether the loans were used to do so.
LOAN DISBURSED SANS CREDIT APPLICATION
UFIL disbursed Tk 521 crore to a number of its directors to purchase shares from the stock market.
But the loans were given without credit applications and any discussions at UFIL board meetings, which "jeopardised the interests of the depositors to a great extent", mentioned the report.
Typically, upon receipt of a credit proposal from an individual or a company, the branch manager of a lender has to verify whether the potential borrower has the capacity to repay the loan. The branch then submits the proposal to the credit committee.
If the fund is larger than the manager's approval limit set by the board, the proposal must be placed before the board of directors or the managing director.
But UFIL did not follow any of the procedures while giving money to the borrowers who happen to be its directors, said the BB report.
Both the board and the UFIL management collectively committed the irregularities consistently since 2013, it added.
QUESTION OVER TK 890CR
UFIL, which has been operating since 1995, gave Tk 1,201 crore to different companies of its directors, but the management did it without UFIL board's approval.
The UFIL management created two sections in its ledger -- advance and prepayment, and investment in shares -- without proper authorisation to show the loan disbursements in its register.
The BB found that UFIL showed only Tk 311 crore in its 2019 financial statement without explaining the whereabouts of the remaining Tk 890 crore.
Sources said some UFIL directors, who hold directorships of both UFIL and Uttara Motors, were found involved in the unethical practice.
Though the banking rules don't allow a non-bank financial institution like UFIL to make cash transactions, a large amount of funds was given to Rashidul in cash under the two unauthorised sections in the ledger, the BB report said.
"UFIL also did not show in its financial statement the funds disbursed to Rashidul," it said.
Contacted, Rashidul said he has been unwell for the last 10 months and has not attended office during the period.
"I am unaware of the central bank report on UFIL… I am not in a position to comment," he said.
FAKE TERM DEPOSITS
In August last year, the lender provided vouchers of term-deposit receipts (TDRs) of Tk 236 crore to Bluechip Securities Ltd. UFIL Director Mujibur is the managing director of Bluechip.
But the vouchers of TDRs were forged. In reality, the firm did not deposit any money with UFIL, said the BB report.
The BB inspection teams were unable to find out how many fake TDRs have so far been provided as the UFIL management declined to provide information.
Besides, the teams are yet to know whether BlueChip took loans from other non-bank financial institutions or any banks through such forged TDRs.
UFIL will find itself in a precarious situation if BlueChip fails to repay the loan, the report pointed out.
EMBEZZLEMENT THRU' CALL MONEY MARKET
UFIL also misused the funds it borrowed from the call money market.
Though UFIL borrowed a total of Tk 397.59 crore from the market till December 2019, it mentioned in its financial statement that the loan amount was Tk 16 crore.
The interbank call money market is a short-term money market, which allows banks and non-bank financial institutions, to borrow and lend money at interbank rates.
Such loans are provided for a very short period, usually lasting no longer than a week, and are often used to help banks and non-bank financial institutions meet reserve requirement.
"Mujibur used the funds for personal purposes in gross violation of the banking rules," the report said.
UFIL MD'S INVOLVEMENT
UFIL Managing Director Shamsul Arefin has been involved in siphoning off funds, eroding the interest of depositors and other stakeholders of the financial institution, according to the BB report.
He took Tk 24.22 crore from UFIL without approval from the management or the board. The amount was not even mentioned in the UFIL's financial statement, and he does not have any loan account with the lender, it mentioned.
He informed a BB inspection team that he had taken the funds from UFIL for his son's treatment and returned a good amount from time to time.
In its document, UFIL showed that Shamsul took Tk 6.24 crore from it as of December 2019.
Contacted, Shamsul told The Daily Star that UFIL failed to provide information to the BB audit team in time as he was diagnosed with Covid-19 in September, and Uttam Kumar Saha, the then chief financial officer of UFIL, died from the virus the same month.
"I have adjusted almost all the funds I had taken between 2004 and 2019 from UFIL."
The outstanding amount is now a maximum of Tk 58 lakh, he claimed.
He, however, declined to comment on the forged TDRs and other relevant issues.
CONCEALMENT OF CREDIT, DEPOSIT
UFIL also concealed the actual amount of term deposits mobilised from its clients.
Its financial statement mentioned that the total amount of term deposits was Tk 1,877 crore as of December 2019. But the BB discovered that the actual amount was Tk 2,603.20 crore.
The undisclosed funds of the term deposits to the tune of Tk 726 crore was diverted to other sectors as part of its effort to help scamsters plunder the money, said the probe report.
The lender also employed the same tactic in the calculation of the disbursed loans in its financial statement.
For instance, the total loan or lease given by UFIL was Tk 1,877 crore till December 2019 as per its financial balance sheet. But the BB found that the actual amount was Tk 3,802 crore.
The inspection teams failed to detect the destination of the undisclosed loans of Tk 1,998 crore as the UFIL management refused to provide information.
Md Serajul Islam, spokesperson and an executive director of the BB, said the central bank is still carrying out investigation.
If proof of involvement of any UFIL official or board member in the scam is found, punitive measures will be taken, he said.
Asked what measures would be taken against the scamsters, Md Shah Alam, another BB executive director responsible for monitoring and making policies for non-bank financial institutions, declined to comment.
WHAT UFIL, UTTARA SAY
Contacted, Matiur Rahman, vice president of UFIL and also MD of Uttara Group, claimed that the irregularities detected by the BB are "one-sided information".
"Irregularities of such magnitude can never happen in a financial institution. My younger brother Mujibur has already paid back Tk 308 crore to adjust his previous loans in compliance with the central bank's instructions," he told The Daily Star.
Matiur also claimed that Uttara Group had not taken Tk 336 crore loans from UFIL as mentioned by the BB in its report.
"This is not a loan. Uttara Motors received the amount from UFIL upon the maturity of its term deposits with the financial institution."
The BB should crosscheck its findings once again, and UFIL will certainly follow all the instructions from the banking regulator, he said.
Asked why UFIL offered apology to the BB, he said the lender would run into further trouble if it did not use such words.
The Daily Star contacted Uttara Group several times to communicate with Mujibur, but he did not respond.