Essay on Good

6697 Words Nov 20th, 2015 27 Pages
Objective:
The most recent financial sector crisis of Bangladesh is the “Hallmark-Sonali Bank Loan Scandal “. This crisis identified in the year 2012 and it has been took place from the year 2010 and finally disclosed in 2012. To learn lesson from this incident and prevent further recurrence, study in depth of this crisis is very important.
Background:
A central bank probe found that Sonali Bank high-ups, including a deputy managing director, a general manager and the branch manager, were directly involved in the scam. The amount embezzled by the six entities is equivalent to almost 15 percent of the total estimated cost of the $2.9 billion Padma bridge project. Of Tk. 3,547 crore, Hallmark Group alone took away Tk. 2,686.14 crore, T
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Nakshi Knit, Tk 660 million
4. DN Sports, Tk 330 million
5. Khanjahan Ali, Tk 50 million
This is considered to be the country’s largest banking scandal. It dwarfs previous fraud cases, such as a Tk 6.2 billion Letter of Credit fraud in Chittagong in 2007, a Tk 5.96 billion fraudulent withdrawal from Oriental Bank in 2006, and a Tk 3 billion forgery scandal in 2002.
Second question is: How did it happen?
It is alleged that, the scandal resulted from collusion between officials of Hallmark and Sonali Bank, in particular between Tanvir Mahmud, Managing Director of Hallmark Group, and Azuzur Rahman, Manager of Sonali Bank’s Ruposhi Bangla branch. The alleged scam exploited the Letter of Credit (LC) system of financing trade. The Letter of Credit system is an important tool that addresses two problems:
. First, garment producers are often unable to pay for their inputs, such as the textile fabric that they need for making garments, until after they have produced and sold their final products.
. Second, even when garments producers can pay on time, textile companies might be anxious about delivering fabric without some guarantee of payment.
The solution to these problems is a Letter of Credit (LC). At the behest of a garments producer, a bank provides a fabric supplier with a LC that guarantees payment either at the time of delivery or at some later date. As shown in the figure below, Hallmark is accused of establishing fictitious

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