CGSR Final 1
CGSR Final 1
CGSR Final 1
Date: 31-08-2023
We tried our level best to preparing this report and all the information of this report
are based on the different cases and we tried to gather as much knowledge as we can
also we include relevant issues.
We are grateful for your kindness towards us. Please feel free for any query and
clarification that you would like us to explain again. Hope you will appreciate our
hard work and if there have any error please excuse. Thanks for your support.
Sincerely yours,
“The Research Hive” group
Department: Bachelors of Business Administration (BBA)
American International University-Bangladesh (AIUB)
Acknowledgement
At first, we would like to thank almighty ALLAH for helping us and giving us the
strength to complete this report within time. Of course, we are extremely grateful to
our course instructor, MD. Noyon Islam; our mentor and our INSPIRATION who was
always very supportive and helpful throughout the report. He has always tried to
widen our imagination and take it to another level where there is no boundary of
creativity. Thank you, sir, for mentoring us in such a nice way so that we can see
everything in a new perspective. It was a new experience for all of us. We have made
a lot of mistakes during the whole process, but mistake is the key to success we
assume. It was a wonderful journey for all of us to do this course and gather so many
practical experiences and we are sincerely THANKFUL to our respected faculty MD.
Noyon Islam for helping us and encouraging us to challenge our limits. Our all group
member’s efforts also have made the assignment so informative and resourceful. We
are very delighted to present this report.
Executive Summary
This comprehensive report examines several high-profile corporate scandals and
governance failures spanning national and international events. The focus areas
include the Meta-verse Foreign Exchange (MTFE) scandal, the Habib Group scandal,
the Rupali Bank scam, the BASIC Bank scandal, the Rana Plaza disaster, the
Wirecard scandal, the First Republic Bank scandal, the Bank of Punjab crisis, and the
European Public Prosecutor’s Office (EPPO) tax scandal.
The Habib Group scandal exposed financial mismanagement, employee disputes, and
closure of subsidiaries, impacting various industries and markets. Corporate
governance failures included defaulting on loans, conflicts of interest, and lack of
transparency, resulting in job losses and economic instability.
The Rupali Bank scam highlighted deep-seated corruption within the banking sector,
with managerial and ethical lapses leading to fraudulent loan allocation and cronyism.
The scandal undermined public confidence, caused heavy financial losses, and
hindered economic growth.
The Rana Plaza disaster illustrated severe corporate governance failure, as unsafe
working conditions and disregard for employee safety led to a tragic collapse, causing
loss of life and injury. Lack of oversight, failure to address warnings, and supply
chain responsibility issues contributed to the catastrophe.
The First Republic Bank scandal, characterized by high uninsured deposits, lack of
liquidity, and credit ratings downgrades, impacted stakeholders through financial
instability, job losses, and consolidation in the banking industry.
The Bank of Punjab crisis exposed poor risk management, corruption, and
government oversight failures, leading to bankruptcy and loss of public trust.
Regulatory reforms and improved governance measures are needed to rebuild
confidence in the banking sector.
The EPPO tax scandal highlighted corporate governance failures in supervising and
preventing fraudulent activities, resulting in financial losses, economic instability, and
legal consequences for those involved.
The Danske Bank money laundering scandal, spanning from 2007 to 2015, revealed
significant failures in anti-money laundering controls and corporate governance,
particularly in its Estonian branch. The scandal involved laundering billions of dollars
primarily from Russia, leading to severe reputational damage, regulatory fines, and
management changes. Despite subsequent reforms, it underscores the critical need for
robust compliance measures and effective oversight to prevent illicit financial
activities and maintain trust in the banking sector.
National Events
Meta-verse Foreign Exchange (MTFE) Scandal
Overview
Starting from 2016 to the end of 2021 MTFE an example of ethical breach has been
the unrevealed villain in Bangladesh who played with innocent people’s emotion and
robbed around USD 1 billion by that time. MTFE (short for Meta-verse Foreign
Exchange Group) was a Dubai-based app that positioned itself as a Shariah-compliant
platform for cryptocurrency, forex, commodities, and stocks. It enticed individuals in
Nigeria, Sri Lanka, and Bangladesh by promising unusually high returns on
investments. The app gained popularity through a referral program, functioning
essentially as a “Ponzi scheme” which means paying old investors from the money
generated from new investors. Thousands of people, including those at the upazila or
village level in Bangladesh, invested crores of taka into MTFE and became destitute.
Insufficient User Protection Measures: MTFE app did not have any identity
verification protocols or monitoring process suspicious transactions. With no
knowledge of identifying and avoiding scams users were thrown to the
uncertainty of falling the fraudulent schemes that eventually happened.
1. The board of directors charged with supervising the bank’s activities and
guaranteeing compliance with legal requirements, did not take adequate care when
granting loans. They take large amount of loans which is above 1.5 crore taka. And it
is required board approval. And the board sanctioned almost 95% fraudulent loans.
This means board has lack of scrutiny and oversight
2. Before approval the loans paper basic bank cannot identify the actual reason behind
this. They are failed to manage the proper risk assessment and due diligence process.
They pass the loans without checking the or verifying the ownership of the mortgaged
properties, they also failed to collecting proper documents. This lack of assessment
drag the bank into financial risk and doing fraudulent activities.
5. BASIC bank failed to comply with regulatory requirements and standard which is
set the Bangladesh central bank. The management of the bank disregarded rules
pertaining to internal controls, risk management, and loan approval procedures, which
helped to keep fraudulent activity going.
1. Financial loss: there are some who are faces financial loss badly like depositors,
shareholders, investors in BASIC Bank. And the banks fraudulently activities also
affect the bank’s financial performance that can result the company share values
decrease, dividend reduce for shareholders.
4. losses trust and confident: The loss of faith and confidence in public institutions
and the banking industry may be the biggest long-term effect. The public's confidence
in the honesty and dependability of financial institutions is weakened when corporate
governance shortcomings are exposed. It will take a lot of work to put reforms into
place, increase transparency, and hold those accountable for the wrongdoing
accountable in order to rebuild this trust.
Rana Plaza
Overview
Rana Plaza was constructed on the swampy ground without proper building permits or
adherence to safety regulations. The building's owner, Sohel Rana, added extra floors
without obtaining proper authorization, leading to structural weaknesses.
On the morning of April 24, 2013, cracks were noticed in the building's walls,
prompting an evacuation of the shops and bank on the lower floors. However, the
garment factory workers were ordered to return to work, as their employers feared
financial penalties for missed orders. Tragically, the building collapsed later that
morning, killing over 1,100 people and injuring thousands more.
How they worked
Rana Plaza consisted of several floors housing multiple garment factories, each
producing clothing for various international brands. The complex was built hastily,
without proper permits or adherence to safety regulations, and it was structurally
unsound.
inside the factories, workers, predominantly women, were engaged in the production
of clothing items such as shirts, pants, and jackets. These garments were made for
well-known global brands and retailers, catering to the demand for fast fashion.
Workers in Rana Plaza faced appalling labor conditions, including long hours, low
wages, and lack of adequate breaks. Health and safety standards were routinely
ignored, with reports of overcrowded workspace, insufficient ventilation, and unsafe
machinery.
Prior to the collapse, cracks had been noticed in the building's structure, prompting an
evacuation of some businesses. However, factory owners pressured workers to return
to their jobs, dismissing concerns about the building's safety. The tragic collapse
occurred just days later, leading to the deaths of over 1,100 people and injuring
thousands more.
Inappropriate Audit: The audit committee of Wirecad and the external auditors
of the company also committed crime as they preferred self interest over the
reliability of their opinion in the market. Their false report provoked a lot of
investors to invest in Wirecard as they thought it is a profitable company with no
unethical activities. This is also a breach of ethics.
Bank of Punjab
Overview
By 2023, Bank of Punjab, one of the banking giants in Pakistan, had been involved
closely in a badly managed affair. The bank faced problems, such as deviations from
its loan policy, embezzlement and inefficient risk management that led to the
exposure of within the organization’s systemic weakness. The weak loan
management, inclusion of compliance issues and lack of internal rules that were all
attributed to failure of the bank gave rise to doubts about the integrity of the banking
sector in Pakistan.
Overview
On February 28, a major crackdown led by the European Public Prosecutor’s Office
(EPPO) in Munich and Cologne, with support from Europol, resulted in the arrest of
14 individuals allegedly involved in a EUR 195 million VAT fraud scheme spanning
17 countries. Over 180 searches were conducted simultaneously across multiple
countries, leading to the seizure of assets worth millions, including smartphones, a
yacht, cash, cryptocurrency, luxury vehicles, jewelry, and gold.
The organizers created fraud scheme which is very complex network, dishonest
network of missing traders, taking advantage of jurisdictional and legal loopholes to
avoid paying taxes. This is basically point out corporate governance failure to set
established transparent and accountable business practices. This company are doing
fraudulent activities, particularly they have lack of integrity and ethical responsibility.
They violated moral and legal obligation by engaging in deliberate schemes to evade
paying VAT, eroding public confidence in corporate governance principles.
Impact of the scam
After corporate governance failure people faces different types of impact:
1. Financial losses: some people faces fraud like government, some customers
shareholders, business people and they faces financial losses. In the VAT scheme 195
million EUR is reduced and the result completely impact in the government tax
revenue and also reduced the public services.
2. Economic instability: corporate governance failure are impact by the economic
instability by eroding trust in the financial system. That can effect through job losses,
reduce shareholder investment returns and also impacting overall economic growth.
3. Legal and regulatory consequences: The people accountable for the corporate
governance breach could be subject to fines, legal action, and even criminal
prosecution. Legal actions can be expensive and time-consuming, with consequences
for both the offenders and innocent parties involved.
4.Reputation Damage: Companies involved in corporate governance failures may
suffer irreparable damage to their reputation. This damage can impact their ability
attract customers, investors, and business partners, leading to long-term financial
consequences.
The Danske Bank money laundering scandal is one of the largest financial scandals in
history. It involves the Estonian branch of Danske Bank, which allegedly facilitated
the laundering of billions of dollars, primarily from Russia, through its accounts
between 2007 and 2015. The scandal brought to light significant shortcomings in
Danske Bank's anti-money laundering controls and raised questions about the
effectiveness of regulatory oversight. Numerous investigations and legal proceedings
have followed, resulting in significant financial penalties for Danske Bank and
reputational damage to the institution.
Poor Risk Management: Danske Bank failed to adequately assess and manage
the risks associated with its operations, particularly in its Estonian branch. This
allowed illicit funds, primarily from Russia and other ex-Soviet states, to flow
through the bank unnoticed for years.
Weak Compliance Culture: There was a lack of emphasis on compliance and
regulatory adherence within the organization. Employees and management either
turned a blind eye to suspicious activities or were unaware of the extent of the
problem, indicating a systemic failure in the compliance culture.
Ineffective Oversight: The bank's board of directors and senior management
failed to provide effective oversight and challenge the decisions made by lower-
level staff. There were shortcomings in monitoring and reporting mechanisms,
which allowed the illicit activities to continue unchecked.
Regulatory Failures: Regulatory authorities, both in Estonia and Denmark, also
failed to adequately supervise Danske Bank's activities. There were lapses in
regulatory enforcement and coordination, which allowed the situation to escalate
to the extent it did before being uncovered.
Reputational Damage: The scandal resulted in significant reputational damage
to Danske Bank, leading to loss of customer trust, investor confidence, and
substantial financial penalties. It also triggered investigations and legal actions
from authorities in multiple jurisdictions.
Management Accountability: Ultimately, the responsibility for the failure rests
with the bank's senior management and board of directors. They are accountable
for the oversight and governance of the organization, and their inability to prevent
or detect the money laundering activities reflects a profound failure in their
duties.
Reforms and Remediation: In response to the scandal, Danske Bank
implemented various reforms and remediation measures to improve its
compliance culture, risk management practices, and governance structure.
However, rebuilding trust and restoring its reputation will be a long and
challenging process for the bank.