Digital fraudulence: Discrepancies involving Tk 23.56b found in Nagad

Mobile financial service provider (MFS) Nagada Limited allegedly involved in fraudulences, as well as in creating additional electronic money (e-money) by showing fake distributers and agents, thus, discrepancy surfaced over a large chunk of money worth about Tk 23.56 billion, an inspection has found.

The administrator and management committee of the Nagad appointed by the interim government conducted the inspection. They have finalised a list of six officials responsible for creating unapproved distributors and forwarded it to the Directorate of Posts seeking legal action.

Besides, Nagad administrator Muhommad Badiuzzaman Dider sent a letter to the Directorate of Posts seeking legal actions against the individuals who were in the management of the company. Previously, the MFS company suspended its five senior officials.

When these discrepancies were rampant at Nagad, several lawmakers of former governing party, the Bangladesh Awami League, and influential individuals were on the management board. On top of that, irregularities had taken place in front of everyone but the Bangladesh Bank and the Directorate of Posts kept mum.

According to officials, when it comes to the amount of money, the discrepancies that took place in Nagad have been the largest “digital fraudulence” in the country so far. That is why a decision has been taken to run forensic audits on the MSF. It is possible to dig deeper into the details of the financial transitions of a company, as well as to find out fraudulences, discrepancies and its beneficiaries through forensic audits.

However, the Directorate of Posts bears the liabilities caused by these fraudulences because they issued a temporary permission letter for Nagad to avail of mobile financial services. Nagad Limited, former Third Wave Limited, operates the service on behalf of the Directorate of Posts.

When contacted SM Shahab Uddin, director general of the Directorate of Posts, told Porhtom Alo in a written statement on 15 December, “Process is underway to take legal actions on the matter.”

The administrator, appointed after the fall of the Awami League government, started looking into the financial irregularities in the company along with running its operation. Then large-scale digital fraudulences surfaced.

According to documents, e-money will be issued against the same amount of money to be deposited in banks as per the agreements signed between the Directorate of Posts and the Third Wave Technology in 2017, but the administrator team found Nagad issued e-money against an additional amount of 6.45 billion.

The administrator team also informed the Directorate of Posts that Tk 17.11 billion had been withdrawn from Nagad by opening 41 distributors without approvals, and these distributors were responsible for distributing various government allowances.

It has been learned that the then government picked up Nagad to distribute allowances as leaders of the Awami League held ownership in the MFS.

But people concerned took advantage of it and committed the fraud over a portion of the government allowances. In particular, Nagad withdrew the money that the allowance beneficiaries had not collected within three days of the distribution.

Documents showed distributors in Cumilla disbursed the money of allowance beneficiaries from Rangpur. As a result, fraudulence took place in this case, according to an official at Nagad.

The Nagad administrator team think this fraudulence took place using the distributors appointed without approval. A list of six people suspected to be involved was finalised and sent to the Directorate of Posts.

The list includes Nagad’s executive director Safayet Alam, additional managing director Mohammad Aminul Haque, deputy managing director Golam Mortuza Chowdhury, chief technology officer Abu Raihan, head of financial administration and management department Rakibul Islam, and first vice president of the solution design department Nazmus Shakib Aqib.

Regarding the matter, Nagad administrator Muhammad Badiuzzaman Dider sent a letter to the director general of the Directorate of Posts informing the latter that the administrator team thinks the Directorate of Posts as the party facing losses, and making the deal holds the right to take legal action for these discrepancies/violations of terms of agreement/losses. The administrator holds no authority to take legal action.

Then chief executive officer (CEO) Tanvir Ahmed, executive directors Niaz Morshed alias Elite and Maruful Islam alias Jhalak, deputy chief marketing officer Khandaker Mohammad Solaiman (Solaiman Sukhan) and human resources officer Anik Barua no longer joined the officer after 5 August.

The central bank appointed an administrator on 21 August, which followed the suspension of these officials, and many of these officials also hold ownership in Nagad.

Former CEO Tanvir Ahmed told Prothom Alo, “These allegations are not correct. There was a deficit of Tk 3.45 billion during my time, and that fell to Tk 600 million later. No other irregularity happened during my time in office.”

An official at Nagad told Prothom Alo on condition of anonymity that the issuance of additional e-money of Tk 6.45 billion happened because of adjusting a bank loan.

The matter was being adjusted in installments after holding talks with the central banks. But the administrator halted it after amusing the office.

Some e-money was issued to meet operating costs. “Operation of Nagad somewhat stopped. No new offer is being launched; campaigns are nearly closed. The management committee and the administrator continue to find out the previous mistakes,” the official added.

A review of documents from the Directorate of Posts showed the directorate called for open tender on the introduction of postal cash cards in 2017.

The tender also included digital financial services. The Directorate of Posts and the Third Wave Technology signed a deal on 4 December on this matter.

The deal stated the Directorate of Posts and the Third Wave Technology would respectively share 51 per cent and 49 per cent of the revenue earned from customer commissions after meeting distribution and other expenditures.

Later, the Directorate of Posts applied to Bangladesh Bank on 8 August 2018 seeking an approval to launch the mobile financial service ‘Nagad.’

However, the Directorate of Posts launched the mobile financial service ‘Nagad’ on 26 March 2019 by changing their law. Then-prime minister Sheikh Hasina inaugurated the service.

As Nagad did not meet the requirements, the central bank sent letters to the Directorate of Posts on 15 March 2020.

At that time, a condition was given to open the trust cum settlement account (TCSA) at banks using the name of the Directorate of Posts, but the Third Wave did not follow it. Bangladesh Bank did no monitoring either.

Despite this, the central bank increased the approval time in phases. Meanwhile, Third Wave Technology changed its name to Nagad Limited. Nagad became the second largest mobile financial service provider in the country due to becoming the sole MFS for distributing government allowances, as well as easier ways to open accounts without conditions.

Currently, the company has about 90 million subscribers and conducts transactions of over 10 billion per day. Though Nagad did not receive the final approval on mobile financial services, Bangladesh Bank first allowed the MFS to become a financial institution and later gave initial permission to launch a digital bank.

Founded in 2016, Tanvir Ahmed, Kazi Monirul Kabir, Syed Mohammad Kamal, Syed Arshad Reza and Mizanur Rahman were involved in establishing the Third Wave Technology.

Several shareholders left the firm before Nagad started its operation. As Kazi Monirul Kabir left his shares, then two MPs of the Awami League - Nahim Razzaq and Razee Mohammad Fakhrul - joined the ownership.

Rezwana Nupur, wife of deputy press secretary to former prime minister Ashraful Alam Khokan, also joined the company, but she left the ownership later.

Though campaigns had been run showing Nagad as a service of the Directorate of Posts since 2018, the Directorate of Posts never held its ownership and they still do so.

Data from Nagad and various sources showed currently, Nagad Limited has nine directors who are the representatives of various companies registered in Bangladesh and other countries. Six of them are Bangladeshis and the remaining three directors are from the UK, Canada and Singapore.

According to data from the Registrar of Joint Stock Companies and Firms (RJSC), Nahim Razzaq and Razee Mohammad Fakhrul held ownership in a firm having shares in Nagad.

Chief executive officer (CEO) Tanvir Ahmed, Junior Chamber president Niaz Morshed and former junior chamber Dhaka president Maruful Islam hold ownership in various firms that have stakes in Nagad.

Niaz Morshed is a central committee member of Jubo League, the youth front of Awami League. As a result, Nagad became known as a club of the then-ruling party leaders.

Regarding this, former chairman of the Association of Bankers, Bangladesh (ABB) Anis A Khan told Prothom Alo that a very influenctial hand had always played a role for Nagad from behind. That is why the company got the opportunity to become this large.

He further said though the company did not receive the license for mobile financial services, it got approval to become financial institution and digital bank. Everyone knows who the beneficiaries were.

Now the government must take steps so that they recover the money stanched away from the poor, Anis A Khan added.

* The report, originally published in the print and online editions of Prothom Alo, has been rewritten in English by Hasanul Banna