Premier Bank scandal: Exporters may not even be aware of LCs opened in their names, says BKMEA chief
Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers and Exporters Association, whose two firms appear in Bangladesh Bank's findings, says exporters were effectively used as cover.
For many garment exporters linked to the Tk10,500 crore Premier Bank scandal, the shock may not be the fraud itself, but the discovery that it was carried out in their name, without their knowledge.
Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), whose two firms appear in Bangladesh Bank's findings, says exporters were effectively used as cover.
Back-to-back letters of credit (LCs) were opened against their export orders, far beyond actual export volumes, often without their full understanding of what was happening, he adds.
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How did it work?
A back-to-back LC is a standard trade finance tool. When an exporter receives an export order, they open a secondary LC to import the raw materials needed to fulfil it. Banks finance this process based on the value of the export order.
The manipulation, according to Bangladesh Bank's probe, began at the export order stage. Branch officials at Premier Bank's Narayanganj branch allegedly accepted inflated export orders – in some cases 100% to 375% above permissible limits – and opened back-to-back LCs accordingly.
The imported goods, brought in under bonded warehouse licences and duty drawback facilities, were then allegedly sold in the local market rather than used for export production.
Where did exporters come in?
Hatem says exporters were pressured into signing documents they did not fully understand, with bank officials reportedly threatening to withhold payments against export documents if they did not comply.
When exporters asked for paperwork related to the LC transactions, the bank allegedly did not provide it.
"Even when we asked for documents, the bank did not provide them," Hatem said.
In some cases, he claims, exporters may have had no idea that LCs were being opened in their names at all.
The bank, he alleges, used what appeared to be fake export orders to initiate the transactions and obtained signatures by creating financial pressure on exporters.
