PK Halder and the incredible landscape of our economic climate

Prashanta Kumar Halder's financial misadventures and subsequent escape from the country with Tk 3500 crore, which made the headlines recently, has brought in to the fore Bangladesh's struggles with systemic irregularities in its financial sector.

While the case of PK Haldar has exposed the loopholes in the financial sector, it isn't the first time any such thing has happened. Actually, bad debt and money laundering remain a few of the persistent ills rotting the financial sector at its core. According to a report published by Transparency International Bangladesh (TIB) earlier this year, around USD 3.1 billion (Tk 26,400 crore) is laundered from the country every year.

And perhaps the higher problem is that while we talk about these individual cases and have for justice to be delivered by bringing the financial criminals to book, we mostly disregard the problems within the machine that permit such frauds and criminals to escape the web of justice.

That one man, in a Bollywood style manoeuvre, exploited not one or two, but at least four non-banking lender (NBFI), namely: People's Leasing and Financial Services, International Leasing and Financial Services Ltd, Reliance Finance Limited and FAS Finance and Investment Ltd. He also exploited various other banks, or at least exploited his friends working in senior management positions in those banks, to siphon money to various companies that existed only in writing, which eventually ended up abroad.

PK Halder and his relatives and associates, employed in management positions at various NBFI and others, dry out these leasing companies and razed them to the bottom. And all of this happened not in a single night, but over an extended time frame, and regardless of the stringent regulations that govern the financial sector. Or simply beneath the very noses of the regulators?

One might be pardoned for wondering why it took the regulators and many financial crime units of the country almost ten years, and why it took a drive against unlawful casino operators, to discover a financial scam of the scale.

"The total amount and the crudeness of the procedure that is exposed could be shocking to many, however the reality is that is just the end of the iceberg. He benefited from a cancerous dysfunctionality of the system the effect of a two-way malignancy. One, by those who have pushed the financial sector to the brink of collapse-the big shots who've captured the state to an even that among those that dictate terms for the banking and financial sector will be the swindlers, launderers and defaulters, not the laws, rules or regulations. Second, such grand corruption is never a one-way street. The hero involved could have never done this without inefficiency, real or manipulated, and even a win-win game involving those whose job it really is to avoid and control it. It is the latter's collusion, protection and promotion that brought the sector to the state it really is in today," said Dr Iftekharuzzaman, Executive Director of TIB, with regards to the curious case of PK Halder.

Similar thoughts were echoed by Zahid Hussain, former lead economist for World Bank, who suggested that without patronage, it is not possible to evade the stringent laws we've in place to stop such exploits.

Terming PK Halder's exploitations as fraud, Zahid Hussain further suggested that within an environment where people will get away after committing such crimes by making use of patrons, criminals start "buying building networks in order that they can end up on the proper side of the inequality." And perhaps this relationship building mechanism fuels the system that permits exploitation and financial fraud.

According to Zahid Hussain, there is another aspect that leads to such crimes: "selective application of the existing regulations". He says that the practice of selectively applying the rules and regulations in the event of certain individuals while others walk away scot free for the same crimes, emboldens criminals with the assurance that with the proper sort of patronage, they too can escape the hands of regulations. Since we've set a precedence of bringing to account big shot criminals who have in the past committed such crimes, why can we not do it uniformly for all?

This concern in addition has been shared by Dr Iftekharuzzaman, who said "Unscrupulous law breakers including the corrupt, swindlers and money launderers escape for many reasons, not least as a result of the incompetency, procedural delays and complexities in the investigative and prosecution processes, but because of the culture of precedence granted to the identity-especially political affiliation, status and connection-of the individuals. Hence, types of big fish being taken to the web are rare. Not that it didn't happen in Bangladesh. It did at least in a single case when stolen assets were repatriated from Singapore, though it was a relatively small amount. Be that as it might, if one swindler could be taken to justice, the relevant authorities should face the mirror and make an effort to seek a remedy to the question-why few more?"

Although some of the regulations in place may need amendments to modernise them and make them additional time relevant, appropriate and regular application of the prevailing laws and regulations may also address the ills of the financial sector, believes Zahid Hussain.

One might add here that to make the Banking Companies Act more time relevant, amendments have already been proposed, as suggested by documents on the website of the lender and FINANCE INSTITUTIONS Division beneath the Ministry of Finance. The amendments suggested in these documents propose constructive reforms, especially in aspects that can cause more transparent corporate governance practices. Although this amendment proposition appears to have taken a backseat in policy level dialogue because of the sudden outbreak of the ongoing global health emergency, you might only hope that the policymakers would soon turn their focus on these essential reforms in the financial sector.

That PK Halder-or his associates for that matter- aren't alone in this grand scheme of things, is clear to all. Former managing director of at least one local bank and director of another had received crores of Taka in payments from various shadow companies managed by PK Halder in many instalments. PK Haldar was himself the managing director of NRB Global Bank. Though it remains a mystery how such a fraudster escaped the stringent scrutiny of the regulators when he was cleared to get appointed as MD of NRB Global Bank, it is merely a tiny little bit of the puzzle.

Politicians owned by different prominent political parties, industrialists and nobodies like PK Halder, have all from time to time been found guilty of committing financial malpractices. But it has not stopped them or others from committing such crimes. Perhaps the financial criminals have found magical powers to evade the long arms of the regulators and law enforcers, as has happened in the case of PK Halder, who now sits on a bed of profit the safety of Canada, while helpless, innocent persons of the nation are struggling to create ends meet, especially through the pandemic. When the federal government itself is grappling with the global health crisis.

It is about time the regulators and policymakers took this issue of financial crimes seriously and rooted out the people and the loopholes that permit such crimes. The financial sector of the country has been under stress for some time now, and the pandemic has only made the situation worse. The administration cannot afford to permit such fraudulent activities and exploitations to go on for long. With the persons and the country succumbing to the monetary challenges posed by the pandemic, the regulators and the policymakers should do all they are able to to dismantle this technique of exploiting public resources. Otherwise, the financial sector, already crumbing under external pressure, is doomed to collapse. The financial sector is stuck between a rock and a difficult place in this man-made disaster, and looking for emergency evacuation.