Ahsanullah University Of Science & Technology

Hallmark scam and its impact on export trade of Bangladesh Course Name: Course Code: Submitted To: Export Import Management BBA 413 Mr. Shak Forid Assistant Professor School Of Business Submitted By:

Name
Md. Olidur Rahman

Id. No
10.01.02.003

Date Of Submission: 17 July, 2013

Letter of Transmittal
17 July, 2013 To Mr. Shak Forid Assistant Professor School of business Ahsanullah University of Science & Technology Subject: Report on Hallmark scam and its impact on export trade of Bangladesh

Sir, I am a student of Ahsanullah University of Science & Technology. Here I am submitting herewith my report entitled Hallmark scam and its impact on export trade of Bangladesh and would like to thank you for your guidance and supervision in its completion. I found this report to be truly challenging in many aspects, indeed very interesting in relation to the various interpretational and engrossing exercises. Writing this report itself was truly comprehensive learning experience. The main purpose of this report is Hallmark scam and its impact on export trade of Bangladesh. The report shows a detail scope of works, methodologies, limitations, work plan.

I Hope you will assess my report considering the limitation of the study. I shall be highly encouraged if you are kind enough to receive this report.

Thanking you. Sincerely yours, Md. Olidur Rahman ID: 10.01.02.003 Section: A, BBA: 4/1 School of Business Ahsanullah University of Science & Technology

Preface
The report being submitted today is a result of collective effort. Although the report has been prepared by me with the purpose of fulfilling the requirements of the course of Export Import Management(BBA 413), there are innumerous helping hands behind it who have guided us on our way. First I thank my honorable course teacher Mr. Md. Shak Forid for creating such an opportunity for the students to broaden their frame of skills. I am also grateful to the librarian of AUST for providing several documents, papers, data, figures and services as well as sharing his experience with us. Finally, if i have mistakenly omitted to giving credits, i want to accept the humble apology and i want them to know that without their support there will have differences in this task.

Executive Summary
Tk.3,547 crore loan scam in a branch of the Sonali Bank where a little-known company named Hallmark had alone siphoned off Tk.2,500 crore. This is unprecedented in the history of our banking sector because the borrower is neither a well-known nor a well-established company. It is in the air that this huge amount of money has been given to the company by Sonali Bank, Ruposhi Bangla branch, in completely irregular way which has been misused by the company. This is alarming news for our banking as well as the export trade sector as a whole.
Objectives regarding some study like

description of Hallmark scam, background skills, knowledge and experiences, ensure optimum utilization resources, learn export trade What economic conditions affect export business, What obstacles have. My necessary information has been collected from the secondary source. The details of the Hallmark scam and its impact on export trade are collected from newspaper, web pages and other published documents. Although it has been tried on the level best to make this report based on facts and complete information available, there are some limitations that are inevitable. They are, Information is not available in any organization, Sufficient records, publications were not available as per my requirement, True reflection of my opinion may not have showed up,Time limitation. Hallmark has embezzled an awesome amount of TK 300-400 billion through fake and fictious documents from a particular branch of Sonali Bank at Ruposhi Bangla Hotel. Ruposhi Bangla Hotel branch of Sonali Bank responsible for illegally disbursing a loan of Tk 2,686.14 crore to Hallmark Group .Shonali Banks Ruposhi Bangla Hotels branch showing fake documents from the bank. The forgery of the Hall Mark Group in the Ruposhi Bangla Branch of Sonali Bank was going on for two years now and the illegalities were first detected in three branches by a GM in January 2012. Hallmark scam mainly occurred due to fake documentation and influence of the higher authorities of the Shonali bank Ruposhi Bnagla Branch. Generally an Importer( applicant) opens a L/C against a Proforma invoice, than importer collect document from the exporter and submit it to the bank. After receiving document bank issue an acceptances to the exporters bank. On the other hand exporter submit this master L/C to the bank and open an back to back L/C. Hall-Mark started off in the readymade garments industry in 2007 and loans and guarantees from Sonali helped it to grow in the past two years to the extent of having 80 "factories" - although half of these are now known to have existed only on paper. The total loans that Hall-Mark allegedly embezzled in collusion with Sonali Bank officials since 2010 amount to 26.86 billion takas. That amount was found by the central Bangladesh Bank to be outstanding after Hall-Mark paid off 4 billion takas. An additional 9 billion takas were disbursed to five other companies. Changes in Regulation due to hallmark scam like : Tax is implied over local L/c after hallmarks
scams, most of the commercial banks are now maintaining a cautious policy in purchasing inland bills,

they are putting emphasis on the enforced regulation , now a days one banking staff must inspect the inventory of the applicant company, internal audit has been increased, documentation has been increased, regulation has been made to transfer each employee after a certain period, inspection of Bangladesh bank has been increased

A relevant recommendation with conclusion is provided on the report the most important fact behind The Hallmark Group corruption case in Bangladesh is being just an example of prevalent fraudulent cases that happen nowadays in the banking and finance industry in every part of the world due to supervisory lapses from the law enforcement and policy regulators inside and outside the organization. More often, those culprits have been encouraged by the concerned officials and employees in one organization to commit wrongdoings because they know very well that there are certain individuals in the organization who can back them up with their fraud activities.

Table of Contents
No. 1. Topics Introduction: Background of the report Objective Methodology Limitation & Report preview 2. 3. 4. 5. 6. Literature Review Findings & Analysis Recommendation Conclusion References Page No. 1-2 3 4 5 6 7-8 9-15 16 17 18

INTRODUCTION
For the last few days we have been witnessing a furore caused by Tk.3,547 crore loan scam in a branch of the Sonali Bank where a little-known company named Hallmark had alone siphoned off Tk.2,500 crore. This is unprecedented in the history of our banking sector because the borrower is neither a well-known nor a well-established company. It is in the air that this huge amount of money has been given to the company by Sonali Bank, Ruposhi Bangla branch, in completely irregular way which has been misused by the company. This is alarming news for our banking as well as the financial sector as a whole. Usually, banks collect money from depositors and provide loan to business entities and other borrowers. After this huge Sonali Bank scam common people might lose their trust in the banks. They will not find it secure to keep their money in the banks. Many of them may even be tempted to withdraw their deposits in fear of a collapse of the banking sector like the share market collapse. If common people shy away from the banks this may cause shortfall of money in our banking sector as well as other financial sectors like investment, trade and commerce. If people withdraw money from banks then entrepreneurs would not get money from banks to invest in productive sectors. Since banks are very important institutions in financial intermediation in economic activities, the lack of trust in banks has a pervasive effect on the whole economy. Now, let us see as to how a scam of this magnitude could be possible. I think this has been possible because of weakness in the management of the bank, weakness in internal oversight and control and, most of all, due to collusion of some insiders in the bank and outsiders. I see the situation also reflects the lack of governance and overall control of the Banks Board of Directors, because they should have exercised their supervision and control over such a huge amount of loan. Usually, banks conduct audit of a branch once a year, sometimes twice. So here it is important to look into how the Board of Directors as well as the management led by the managing director supervised the process of providing such a huge amount to a single company. Generally, the monitoring and control by the bank's Board of Directors and its Audit Committee and the Asset Liability Management Committee (ALCO) are imperative in such a big transaction. If proper audit had been conducted in this case why did the management (managing director and the staff below that) and the Board of Directors not examine the audit report? And if they did, then why had they not expressed their opinion or take action against the perpetrators? If audit reports were not placed before the Board, why the Board did not take action at the right time? This is an instance of an amazing combination of abject lack of supervision, control, unwillingness to take action, failure of policy direction, greed, forgery and corruption.

Bangladesh Bank has recommended reconstituting the Board of the Sonali Bank. As a former governor of the Bangladesh Bank I welcome this step. On the other hand, I do not think that the finance minister's initial comment on Bangladesh Bank's authority to recommend the change is

justified. Though, later, he accepted Bangladesh Bank's step, but we are yet to see quick and firm action from the government. According to the Articles 45 and 46 of the Bank Company Act, Bangladesh Bank is well within its rights to make such recommendation. But in a sub-clause of Article 46 this power has been curtailed in the case of the state owned banks. This is not good for regulating and supervising the banks by the central bank. I think that this law should be changed to remove the limitation of the central bank. Then the central bank would be fully responsible for the monitoring, control and discipline of all the banks. People who have experiences in finance, economics, management of financial institutions and people who are not involved directly in politics, not loan defaulters, and people with honesty and integrity, should be nominated to the Boards of all the state owned banks as well as in the private banks. In some cases directors are appointed under political consideration disregarding these requirements. Due to such political appointments such scams may occur in the future too. However, this scam should be investigated immediately and the culprits should be brought to book. Suspension of officials from their jobs and dissolution of the Board will not be enough for the perpetrators; they should be given exemplary punishment so that no one will dare to do it again in the future. In many countries exemplary punishment was given to the perpetrators, even the accused politicians were not spared. The regular audit teams, special audit teams, and supervision teams of all the government, nongovernment and specialised banks should be trained to be better skilled. Banks should hire independent external auditors to get better insights into the state of affairs of all the banks in Bangladesh. We have to carry out these steps at the earliest possible time so that perpetrators cannot escape and others can learn a lesson. The control and monitoring system of the Bangladesh Bank should be further strengthened and coordinated, and timely action without fear of any political and external influence should be taken. The Ministry of Finance, specifically the Banking Division, must take proper action immediately in tandem with the actions of the Bangladesh Bank. If these measures are taken at the earliest possible time the banking sector could be protected from any future disaster.

Background of the Report

As the curriculum of Export Import Management BBA-41 I am given a report work related to the elementary course with practical orientation. My course instructor, Mr. Md. Shak Forid has given me this task to find the practical implication of the theoretical knowledge of Export & its impact of Bangladesh. This report will help to increase my knowledge about the Hallmark scam and its impact on export trade of Bangladesh.

Objectives

Objectives regarding this study are as follows:

To know description of Hallmark scam. To background skills, knowledge and experiences. To ensure optimum utilization resources. To learn export trade What economic conditions affect business What obstacles have.

Methodology

My necessary information has been collected from the secondary source. The details of the Hallmark scam and its impact on export trade are collected from newspaper, web pages and other published documents.

Limitations
Although it has been tried on the level best to make this report based on facts and complete information available, there are some limitations that are inevitable. They are following:

Information is not available in any organization. Sufficient records, publications were not available as per my requirement. True reflection of my opinion may not have showed up. Time limitation.

Report Preview
In preparing the report i have got much information from the website. I derived and decided the way of research my project works in the convenience of my time and cost. Like all kinds of Export business submit their information after a certain period of time. So i try to get original and practical data to find the operation of this report.

Literature Review
What is Hallmark scam?
Hallmark is the recent largest banking scam in Bangladesh, which occurred due to regulatory inefficiency of commercial banking sectors. It is a pointer to the fact that if you do not tighten the regulatory belt of the banks, serious problems could creep in. Source suggests, this particular business house is assumed to have resorted to fraudulent loan. A fraudulent loan is one in which the borrower is a business entity controlled by a dishonest bank officer or an accomplice; the borrower then declares bankruptcy or vanishes and the money is gone. The borrower may even be a non-existent entity and the loan merely an artifice to conceal a theft of a large sum of money from the bank. This can also be seen as a component within mortgage fraud. However, it is being assumed that Hallmark has embezzled an awesome amount of TK 300-400 billion through fake and fictious documents from a particular branch of Sonali Bank at Ruposhi Bangla Hotel. Ruposhi Bangla Hotel branch of Sonali Bank responsible for illegally disbursing a loan of Tk 2,686.14 crore to Hallmark Group .Shonali Banks Ruposhi Bangla Hotels branch showing fake documents from the bank. The forgery of the Hall Mark Group in the Ruposhi Bangla Branch of Sonali Bank was going on for two years now and the illegalities were first detected in three branches by a GM in January 2012. The recommended inspection although orally approved by the MD in January could not be started until April allegedly due to resistance of a DMD. The manager of Ruposhi Bangla branch was to be transferred in the normal process two years ago but stayed on until recently to perhaps facilitate the Hall-Mark Group forgery; his extension could not have been without the explicit consent of the top management of Sonali Bank. Whatever plea may be cited, top management of Sonali Bank is primarily and mainly responsible for the HallMark Fraud. If it was under duress from its Board or the powerful politicians, an MD or DMD worth her / his salt should have handled it firmly within the framework of law unless she / he was a party to the loot. On paper, the Board of the bank is responsible for policy formulation and the management headed by the MD is responsible for managing the affairs of the bank under the law, rules, regulations and policy decided upon by the Board. Thus the Board's liability is of secondary order.

How hallmark scam occurred

Hallmark scam mainly occurred due to fake documentation and influence of the higher authorities of the Shonali bank Ruposhi Bnagla Branch. Generally an Importer( applicant) opens a L/C against a Proforma invoice, than importer collect document from the exporter and submit it to the bank. After receiving document bank issue an acceptances to the exporters bank. On the other hand exporter submit this master L/C to the bank and open an back to back L/C. It is a type of pre shipment finance by way of opening L/C in favor of a local or foreign supplier for purchase of raw materials or the finished merchandise to execute export order. The benefit of a L/C (the Master L/C) may be made available to a third party where the primary beneficiary uses the master L/C as security collateral to obtain another L/C (the secondary credit) in favor of the actual supplier. The first beneficiary of the Master L/C becomes the applicant for the back-to back L/C. On the basis of acceptances and proper document advising bank of back to back LC provide 50% to 80% loan to its beneficiary. The Bank issuing Back to Back LC will obtain repayment through the master credit which is deposited to the issuing Bank of the Back to Back LC. In the case of Hallmark scam, Hallmark group created fake companies as an applicant and open Back to Back LC in Sonali Bank by not submitting any master LC through the influence of the higher authorities. They also submitted fake documents of 47acers of land as mortgage. Beneficiary of back to back LC took loan from his bank against this LC. But as Sonali Bank didnt have any master LC or any other security they could not repa y their loan, even though they gave acceptance. In this way they took a loan of Tk 2,686.14 core from Shonali Bank, Ruposhi Bangla Branch. This fraud was identified by Bangladesh Bank audit. Then it came to our media on July 2012.

Findings & Analysis

The implications of the efficient bank supervisory and strong regulatory implementation strategies in Bangladesh Bank will be needed in order to overcome the continued crisis in the banking system. This should be a wakeup call to everyone in the banking industry in the country to further develop and strengthen the strict monitoring of the banking mechanism strategies. At the same time, in order to investigate the numerous misalignments in the supervision of both banking institutions and Central Bank of Bangladesh as well as to integrate the appropriate linkages between proper implementation of the bank regulatory and supervisory structures. The result of this study suggests that there is a strong need for focusing on the dual banking system, as well as a need to increase the efficiency in the technical areas, as well as a tooth for a tooth law in order for the Central Bank of Bangladesh to beat numerous fraud activities in the banking sector. Proper growth and profitability and transparency in the entire banking sector will be achieved through a strict implementation of banking policies and regulations with a strong emphasis on the firm litigation to reduce the unlawful acts of those individuals. The banking sector has received most intense condemnation and examination over the years due to lack of proper regulations and supervisory structures which led the banking sector into severe financial depression. With the banking conditions now of Sonali Bank Limited & Bangladesh Bank (Central Bank) with all those issues that have been thrown into them due to the deregulation in the banking sector in the country. According to Alam (2012), if there is a proper implementation of banking regulations and supervision structures, definitely, banking efficiency and profitability would follow. The efficient and effective banking regulations serve as a unified power to control the creation, operation and liquidation of the banking sector as well as a proper control in the stability of the economy of the country. Hence, BB as the Central Bank of the country should put into appropriate places all the specialized banking supervisory regulations and policies that can protect the depositors from higher risks of losing their deposited money in the banks. The core objective of the banking sector is to provide total protection to the investors with their money and funds. Both businesses and individuals have the rights to be ensured with certainty and safety about their funds in the banks. A smooth and acceptable public confidence and trust should be sustained and continually developed into more trusted banking system environment that can provide a high level of banking services all throughout the economy. In addition, to attain total efficiency and competitiveness that can project a positive impact on the entire banking sector in the Bangladesh. The purpose of this paper is to engage in a critical examination of the banking regulatory framework in Bangladesh. Second, to assess the operational efficacy of banking regulations and supervisory mechanisms. Third, to provide an in- depth legal analysis of the role of the Bangladesh Bank (BB) as the countrys central bank and the principal supervisory authority.

This research has used comparative case study analysis through various scholarly written articles from academic journals, and other related articles from the online publications and news reports about the topic. This helped a lot in order to explore the legal examination of the supervisory lapses, fraud on the preparation of the Letter of Credit (LC) of the customers, and the rest of the deregulations inside the Central Bank of Bangladesh. Additionally, the comparative case study has chosen by the researcher in order to find the most appropriate recommendations of the previous researches about the most efficient and effective ways to prevent many companies or individuals from fraud activities of transacting Letter of Credit (LC) with Banks in Bangladesh. .

Any company can purchase a Letter of Credit with complete required documents. However, if the bankers are not keen in distinguishing original from fake documents, that is the chance of these fraudulent clients to take advantage of the situation. Plus, if the scammers have acquired the help of the insiders. It is very easy to manipulate fake documents if the higher officials in the organization have the power to control the ordinary employees. Like what happened in the Hallmark Group of Bangladesh. The group purchased an LC with forged documents with the help of some banking official in Sonali Bank Ltd. Based on the investigation; most of the scammed loans were paid out to the illegal recipients started from December 2011 until March 2012. It was very suspicious that this particular loan did not even pass through the management and the banks board of trustees. The loans that Sonali gave Hall-Mark were not within the power of the management. It is very unusual that the bank's board did not know it. The most surprising part of this case, the audit team seems had not practiced their vested power of asking the higher level of management about the abnormalities of those transactions.

Banking Regulatory Framework In Bangladesh An article entitled Regulators of the Financial System (n. d.) has reported that Bangladesh Bank has served as the Central Bank of Bangladesh since its introduction in 1972 by the virtue of the enactment of BB Order 1972. Preside nts Order No. 127 of 1972 which eventually amended in 2003. The banking structure of the business of BB has been entrusted to a 9 members Board of Directors headed by the Governor which is also the Chief Executive Officer of the Bank of Bangladesh.BB has 40 departments with 9 branches. Incorporated in the strategic plan of BB for 2010 to 2014 is the vision to develop continually as a forward looking central bank with competent and committed professionals of high ethical standards, conducting monetary management and financial sector supervision to maintain price stability and financial system robustness, supporting rapid broad based inclusive economic growth, employment generation and poverty eradication in Bangladesh.

The report further discusses about the BB functions as formulating and implementing monetary policy, intervening policies in the foreign exchange market. At the same time, it is giving advice to the Bangladesh government on the interaction of monetary policy with fiscal and exchange rate policy. This is about the impact of various policy measures on the economy. Similarly, BB proposes legislative measures in attaining its objectives and performs its important functions. First, BB is holding and managing the official foreign reserves of the country. Second, it promotes, regulates and ensures an efficient and secured payment system that includes the issuance of bank notes. Lastly, BB also regulates and supervises banking firms and financial establishments. The major objectives of the BB monetary polices include the price stability of basic commodities, sustainability, growth, & development, high employment rate in the country. Efficient utilization of economic resources, and stability of the financial system of Bangladesh.

Hallmark Group Bangladesh Case Manik, J. A. (2012) in his August 30 issue in The Daily Star recounts that the Anti-Corruption Commission (ACC) has informed the adviser to the prime minister of Bangladesh, Syed Modasser Ali, has allegedly something to do with the controversial illegal Hallmark Groups loan in Sonali Bank at the RuposhiBangla Hotel branch. It was allegedly reported that the Prime Minister's adviser has influenced Sonali Banks higher officials in granting a huge amount of loan to the Hallmark Group with a total amount of Tk 3,547crore. The Hallmark Group alone had availed Tk 2,686.14 crore alone. While T and Brothers Tk took 609.69 crore, Paragon Group got Tk 146.60 crore, Nakshi Knit acquired Tk 66.36 crore, DN Sports Tk received 33.25 crore and Khanjahan Ali obtained Tk 4.96 crore. Bangladesh Bank has found out that theHallmark Group along with five other companies was able to apply and eventually has able to get the approvalfor their loans with forged documents with the Sonali Bank.Further

report says that ACC received information that Modasser Ali has been trying to stop theBangladesh Bank together with an audit team to conduct an investigation on the loan scam. Based on the Bangladesh Banks probe team, there are 32 Sonali Bank officials who are responsible for the loan scam andstill under interrogation.

Comparative Case Study: The Ketan Parekh Fraud and Supervisory Lapses of the ReserveBank of India (RBI) If there is another case which is similar to what happened to Sonali Bank Limited, it is no other than themost controversial case of the Ketan Parekh supervisory lapses in the RBI. Moreover, Ghosh & Bagheri (2006)have recommended that a critical examination of the banking regulatory framework should be done in India.The overall assessment of the operational effectiveness of the banking regulations and supervision shouldrequire a deep legal scrutiny in order to determine the causes of the lapses within the financial institution.Ghosh (2006) has agreed that the Ketan Parekh fraud has the most controversial series of banking fraudissues in the Indian banking industry in the latter part of 1990s. The series of fraud activities happened in the banking system of India only presented the gradual deterioration of the several cooperative banks as well as thelargest mutual fund establishments in India. The involvement of Harshard Mehta in 1991 that exposed the largecapital market fraud that obviously crossing the boundaries of the law and regulations in the banking sector.Another thing, the Reserve Bank of India also showed laxity and numerous lapses in their supervisionand bank regulations and bank policy implementation for a high-level of banking system and services that can be provided to the clients. As a result, it had impacted on the entire domestic banking system of the country andeven led to the total bankruptcy of the Indian banking system because the foreign investors have started to doubtthe integrity and credibility of the local banks as well as the entire economy due to the negative issues in the banking sector.

Bangladesh Bank told Sonali Bank to take action against 31 of its officials, which led to an audit of the Ruposhi Bangla branch. The audit found utter negligence in the provision of unauthorized loans on the part of the manager and assistant general manager. News of the central bank's report was broken by Prothom Alo, a leading newspaper, the same month. When other dailies and television channels began digging, information surfaced that the Ruposhi Bangla branch officials had colluded with Hall-Mark to provide the funds. The values of assets owned by Hall- Mark were intentionally inflated, the reports said. Some alleged the involvement of Prime Minister Sheikh Hasina's health affairs adviser, Syed Modasser Ali, in influencing the loan sanctions.

The Anti-Corruption Commission joined the fray in July, forming a six-member committee that questioned 78 people, including Hall-Mark executives, Sonali bank officials and others whose names had surfaced including the PM's adviser. Hall-Mark started off in the readymade garments industry in 2007 and loans and guarantees from Sonali helped it to grow in the past two years to the extent of having 80 "factories" - although half of these are now known to have existed only on paper. The total loans that Hall-Mark allegedly embezzled in collusion with Sonali Bank officials since 2010 amount to 26.86 billion takas. That amount was found by the central Bangladesh Bank to be outstanding after Hall-Mark paid off 4 billion takas. An additional 9 billion takas were disbursed to five other companies. ACC deputy director Mir Mohammad Zainul Abedin Shibli, describing the scandal as the "biggest misappropriation" in the country's banking history, said part of the scam involved credit facilities known as inland bill purchases "fraudulently showing some of the Hall-Mark officials as owners of various businesses". Hall-Mark allegedly obtained short-term cash loans, backed by fraudulent collateral in the form of factories and land, and non-funded loans, which involve guarantees, letters of credit and other documents which can be sold on. A company taking a non-funded loan is supposed to pay back the money involved after the related import of machinery and products once these are sold or used in production. Hall-Mark group general manager (commercial) Tushar Mahmud, admitted to the Daily Star newspaper that the company diverted 15.68 billion takas in short-term loans into long-term investments, said, "It takes a long time to get a project loan. We know the way we've utilised the working capital for long-term investments is not proper." His company owes Sonali Bank around 7.01 billion takas in non-funded loans, mostly in the form of guarantees against letter of credits. Hall-Mark managing director Tanvir Mahmud initially told the media while visiting the ACC office that he had "20 times more wealth than the loan that was taken". By September he had toned down his boast of wealth to request that the authorities give him 20 to 30 years to repay the outstanding amount owed.

It is unlikely that the entire amount will be recovered, Salehuddin Ahmed, a former Bangladesh Bank governor told Asia Times Online, as "Sonali bank cannot even recover money through

collateral as most of the documents provided by Hall-Mark were forged. As such, most of this money is already out of the banking system." He believed some of the loans may become a "bad debt" for Sonali bank, as has been the fate of most cash fraud in Bangladesh over the past few decades, including the Omprakash Agarwal loan scandal of 2002. That year, Omprakash Agarwal, an Indian national engaged in yarn and textiles dyes imports in Bangladesh since 1977, disappeared after taking loans worth 3 billion takas from five private banks. Other incidents include misappropriation of 6 billion takas by a man named Nurunnabi in Chittagong in 2007 through a false local letter of credit and the embezzlement of 6 billion takas withdrawn without cheque from Oriental Bank in 2006. That case remains unsolved. Salehuddin said funds in such fraudulent loans are usually siphoned out of the country. This money cannot be traced and recovered as "during such situations, the attorney general from Bangladesh would need to write to the attorney general of the country to which the money may have been siphoned to. In Bangladesh, this process has not been effective due to the lack of coordination between the central bank, the anti-corruption commission, the attorney general's office and the foreign affairs ministry. So money laundered has not been recovered much." Meanwhile, Bangladesh Bank on Sunday relaxed restrictions it had made on the issuance of letters of credit that it had imposed after the Sonali Bank scandal broke, but it will continue to require local branches to obtain prior approval from head offices on issuing inland bill purchases, the financial device allegedly involved for much of the Hall-Mark scam.

Impact on our Export Trade

Usually, banks collect money from depositors and provide loan to business entities and other borrowers. After this huge Sonali Bank scam common people might lose their trust in the banks. They will not find it secure to keep their money in the banks. Many of them may even be tempted to withdraw their deposits in fear of a collapse of the banking sector like the share market collapse. If common people shy away from the banks this may cause shortfall of money in our banking sector as well as other financial sectors like investment, trade and commerce. If people withdraw money from banks then entrepreneurs would not get money from banks to invest in productive sectors. Since banks are very important institutions in financial intermediation in economic activities, the lack of trust in banks has a pervasive effect on the whole economy. Confidence of the International Institution is decreasing. As a result we are suffering from insufficient investment. Thousands of workers of hallmark group have lost their jobs and passing hard time for their livings .(14th nov, newage)

Changes in Regulation due to hallmark scam

1. Tax is implied over local L/c after hallmarks scams. 2. Most of the commercial banks are now maintaining a cautious policy in purchasing inland bills. 3. They are putting emphasis on the enforced regulation 4. Now a days one banking staff must inspect the inventory of the applicant company 5. Internal audit has been increased 6. Documentation has been increased 7. Regulation has been made to transfer each employee after a certain period 8. Inspection of Bangladesh bank has been increased

Recommendation
In the backdrop of one of the worst banking scandals, the following steps may be considered: 1. Those who are in charge of economic management may adopt the golden rule of "speak less do more" and "if talk do it in one voice;" 3. The monitoring system of Bangladesh Bank should be strengthened further and its audit and inspection teams should be empowered to work independently 4. People who have experiences in finance, economics, management of financial institutions and people who are not involved directly in politics, not loan defaulters, and people with honesty and integrity, should be nominated to the Boards of all the state owned banks as well as in the private banks. 5. The regular audit teams, special audit teams, and supervision teams of all the government, non-government and specialized banks should be trained to be better skilled. Banks should hire independent external auditors to get better insights into the state of affairs of all the banks in Bangladesh. 6. Significant reforms are necessary in financial and banking management which, have been long overdue. Finance and banking reforms commission may be set up; 7. Duties, responsibilities and powers of the Board and the management of a bank must be clearly delineated and enforced

Conclusion
The Hallmark Group corruption case in Bangladesh is being just an example of prevalent fraudulent cases that happen nowadays in the banking and finance industry in every part of the world due to supervisory lapses from the law enforcement and policy regulators inside and outside the organization. More often, those culprits have been encouraged by the concerned officials and employees in one organization to commit wrongdoings because they know very well that there are certain individuals in the organization who can back them up with their fraud activities.

References
Alam, N. (2012). 'The impact of regulatory and supervisory structures on bank risk and efficiency: evidence from Dual bankingsystem.' Asian Journal of Finance & Accounting. Vol. 4, No, pp. 1- 29. 1. doi:10.5296/ajfa.v4i1.150, [Online] Available at:http://www.macrothink.org/journal/index.php/ajfa/article/download/1507/1437 [Retrieved 29 October 2012][2] Ahad, A. (2012). A Hall Mark Group Story.' Bangla News. [Online] Available at:http://www.banglanews.com/2012/10/13/how-to-rob-a-a-government-controlled-banka-hallmark-group-story/. [Retrieved 31October 2012][3] Regulators of the financial system. (n. d.). Bangladesh Bank. Central Bank of Bangladesh. Online] Availableat:http://www.bangladesh-bank.org/fnansys/regulator.php[Retrieved 30 October 2012][4] Manik, J. A. (2012) Adviser's shadow in Hallmark scam. The Daily Star. Online] Available at:http://www.thedailystar.net/newDesign/news-details.php? nid=247643[Retrieved 29 October 2012][5] Ghosh, S. & Bagheri, M. (2006).'The Ketan Parekh fraud and supervisory lapses of the Reserve Bank of India (RBI): a case study', Journal of Financial Crime 124. DOI: 10.1108/13590790610641279. Emerald Group Publishing Limited.[Online] Available at: http://www.emeraldinsight.com/journals.htm?articleid=1534008[Retrieved 29 October 2012][6] Ghosh, S. (2006). 'The Ketan Parekh fraud and supervisory lapses of the Reserve Bank of India (RBI): a case study.' Vol. 13, No.1. Journal of Financial Crime. http://international.vlex.com/vid/ketan-parekh-supervisory-lapses-reserve-rbi-354513422. [Retrieved 30 October 2012][7] Jahangir, N, Dr. & Ali, M. M. (2010). 'Perceptions of power: a cognitive perspective of nationalised commercial banks of Bangladesh.' Book Review African Journal of Business Management