2 months ago

Regulator to sue UFS MD, associates for money laundering

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The securities regulator has decided to file money laundering cases against the managing director of scam-hit Universal Financial Solutions (UFS) and his associates for embezzlement of Tk 2.35 billion from four open-end mutual funds.

At a meeting on Thursday, the Bangladesh Securities and Exchange Commission (BSEC) also decided to cancel the licence of asset manager UFS for law violations as it received a probe report of the committee it had formed to examine the funds.

The BSEC banned audit firms -- Ahmed Zaker and Co. and Rahman Mostafa Alam & Co - from conducting any audit of any listed companies or mutual funds as it found them to have collaborated with the UFS in the fund misappropriation.

UFS managing director Syed Hamza Alamgir left for Dubai on October 13 last year with the money. He is currently staying in Singapore.

The unit funds involved in the embezzlement are UFS Popular Life Unit Fund, UFS-Padma Life Islamic Unit Fund, UFS-IBBL Shariah Unit Fund, and UFS-Bank Asia Unit Fund.

Earlier, the state-run Investment Corporation of Bangladesh (ICB), which is the trustee of the unit funds, scrutinized the assets following the news of the embezzlement and reported that Tk 2.07 billion were taken from the unit funds managed by the UFS.

An investigation by the stock market regulator found that the amount was even higher. The enquiry committee also got evidence of unprofessional activities committed by the audit firms.

Following the news, the BSEC had summoned the audit firm, Ahmed Zaker & Co. Chartered Accountants, to hear an inquiry but the firm disobeyed the order.

Then the securities regulator banned the firm on January 18 from auditing listed securities.

The trustee had already filed a case against the UFS directors, including Mr Alamgir, with Paltan Police Station on January 1, and the case is being dealt by the Criminal Investigation Department (CID).

The BSEC has a plan to involve the Financial Reporting Council for further actions against the audit firms.

It is considering issuing a notice asking why punitive actions were not taken against the trustee and custodian of the funds and the then officials of the ICB for their failures.

The embezzlement of the funds started in 2018. The money was misappropriated by showing fake fixed deposit receipts (FDRs) and assets.

Auditors for three of these four funds were Ahmed Zaker and Co. Another fund's auditor was Rahman Mostafa Alam and Co. The audit firms validated the fake assets and FDRs for four years.

The asset management company got its licence from the BSEC in 2010 and changed ownership in 2013. The company currently manages five open-end funds. Two more funds have been approved.

ICB's role to protect unit holders

Officials of the ICB earlier told the FE that they were not aware of the UFS's bad intention. As trustee, they had made sure whether dividends had been distributed as per the rules and regulations.

An ICB official said that before the scam the unit funds had distributed 70 per cent dividend from the income realised.

The funds also maintained 60:40 ratio of investments in the capital market and money market, he said requesting for anonymity.

Usually, the auditor gives qualified opinion if there is any deviation or abnormalities in the management of the funds.

"But the auditor's report had no matter of emphasis or qualified opinion, and consequently no alarm was raised about any fund misappropriation," the official said.

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