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Clarification of Islami Bank Bangladesh Limited on the issues raised in the recent report of US Senate Permanent Subcommittee on Investigations “U.S. Vulnerabilities to Money Laundering, Drugs, and Terrorist Financing: HSBC Case History”
Clarification of Islami Bank Bangladesh Limited on the issues raised in the recent report of US Senate Permanent Subcommittee on Investigations “U.S. Vulnerabilities to Money Laundering, Drugs, and Terrorist Financing: HSBC Case History”
 
1.1 (i) Several of the bank’s most senior officials were politically important figures within the country or in Saudi Arabia leading to their designations at Politically Exposed Persons in the world check database.

The senior officials of the bank are professional bankers who are serving the banking industry for the last 25 to 30 years in different capacities and none of them are involved in politics. Moreover, the Human Resource Policy of the Bank prohibits involvement of any official in politics. Further, policy makers/board members are elected by the ordinary shareholders in the Annual General Meeting of the Bank in compliance with the law of the land. During the last 30 years we have not received any complaint against any one of the policy makers from the regulatory authorities of Bangladesh or any other country. So far our knowledge goes; the World Check Database is a compilation of media reports which requires further verification and scrutiny.

1.1(ii)Account held by Mr. Abdur Rahman, the chief of the Jamaatul Mujahideen of Bangladesh (“JMB”) at the Bank.

1. This is an incorrect allegation against the Bank. Mr. Abdur Rahman of the JMB never held any account with the Bank. The report of FIG of HSBC in this regard was unfortunate and misleading. Had FIG followed up on the allegation and carried out an investigation, it would have been discovered that the allegation was false.

1.1 (iii)A report by FIG referring to news articles that the Bank was fined for the third time ‘for covering up militant transactions’.

1. Once again this allegation is false and it is unfortunate that HSBC chose not to investigate the allegation. Had the allegation been investigated it would also have been found to be false.

2. There was not a single allegation of covering up ‘militant transactions’. The fines are related to procedural lapses in failing to report and delay in reporting of suspicious transactions.

3. If HSBC had requested for information as to the number of times the Bank had been fined and the nature of allegations which had led to the fines being imposed, the Bank would have provided such information. Such information would also have been available from the Central Bank.

1.1(iv) The Bank maintained two accounts of International Islamic Relief Organization (IIRO).

1. The Bank froze the accounts of IIRO when the organization was added to the United Nations sanction list in 2006. The funds in these accounts were transferred on the instructions of the Central Bank to a state-owned Bank in 2010. As such the Bank has been vigilant as to suspicious accounts and transactions and has taken necessary measures so that suspicious transactions do not take place.

1.1.(v) The Bank has links with the Al Rajhi Group, resulting in its designation as a Special Category Client (“SCC”) by HSBC in 2010.

1. 2 (two) Institutions viz. M/S Arabsas Travel and Tourist Agency and M/S Al Rajhi Co. for Industry and Trade and 3 (three) individuals having Al Rajhi title hold about 28.72% of the shares in the Bank. According to the Articles of Association of the Bank, the management control of the company shall remain with local Bangladeshi Directors of the bank. Further, decision making in the board has always been on an unanimous basis and the identity of major shareholders has not been a factor in the decision-making of the Board.

2. Further, the operations of the Bank is regulated and supervised by the Central Bank. Hence, there is no scope for undue influence by the Al Rajhi shareholders or any other shareholders to carry out unlawful transactions.

3. In fact the Bank is a publicly traded company and most of the information relating to the Bank is available in the public domain. In fact, the Bank has at all times in the past provided its banking partners with information in relation to its operations, whenever such information was sought.

2. Other Information noted in the Report

2.1 The Report states that the Bank has accounts with HSBC in 24 locations. This is not correct. In fact, the Bank has correspondent arrangement through SWIFT with 24 HSBC locations worldwide. The Bank only has 3 (three) USD clearing accounts with HSBC; in New York, Mumbai and Karachi. The accounts in Mumbai and Karachi are regional accounts to settle the trade transactions under ACU (Asian Clearing Union) mechanism.

2.2 The Bank never approached HSBC Singapore to open an account either for physical US Dollar transaction or for transaction settlement which was opened unilaterally by HSBC Singapore without our knowledge in 2007 and kept alive up to 2010 having not a single transaction. The issue has come to our knowledge for the first time through the captioned report.

Most of the observations of the US Senate Report have been based on the internal report of HSBC prepared by themselves without making any query on those issues with IBBL or with the Central Bank of Bangladesh (Bangladesh Bank). Had it been done by HSBC on time, it could be cleared at that time.

The Bank requested the U.S. Senate Permanent Subcommittee on investigations to reconsider the inclusion of the name of Islami Bank Bangladesh Limited in the Report on U.S. Vulnerabilities to Money Laundering, Drugs, and Terrorist Financing: HSBC Case History.
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