Fed goes defensive, now talks to Bangladesh Bank via lawyer

The Federal Reserve Bank of New York is acting defensively, distancing itself from any of the blame over the heist of $101 million from the Bangladesh Bank’s (BB) account with it by cyber thieves.

‘Now the Federal Reserve is talking to us through its lawyer instead of direct communication that it used to do,’ said a BB official, citing the last two weeks’ conversations between the two parties.

The NY Fed’s stance has also compelled the BB last week to appoint a lawyer, Ajmalul Hossain QC, to review the overall situation before it files a case against the US central bank.

On February 4, a band of hackers broke into the BB’s systems and generated a total of 35 transfer orders, worth about $1 billion, for the NY Fed on the Bangladesh central bank’s behalf.

The NY Fed released funds, amounting to $101 million, against five of the payment orders, while putting the other 30 on hold.

‘We want to know why the payments were given against the five orders and not the other 30. What was wrong with those 30 orders? Did the Fed follow the right procedures?’ Subhankar Saha, spokesman of the BB, told The Daily Star yesterday.

The lawyer will examine the issues, including the procedures followed by the NY Fed in releasing the funds from the BB account, he said.

In the first week of March, when the issue came to the fore, Andrea Priest, and NY Fed spokesperson, said the payment instructions were fully authenticated by the SWIFT messaging system in accordance with standard protocols.

Of the $101 million that was stolen, $81 million was wired to the Philippines and $20 million to Sri Lanka.

The $20 million that was directed to Sri Lanka could be retrieved but the $81 million channeled to the Philippines is at large.

Another BB official hinted that the central bank has no intention of entering into a legal battle with the NY Fed.

‘We want to put pressure on the Fed so that they help us recover the funds,’ he added.

Early this week, the newly appointed BB Governor Fazle Kabir has written a letter to the Fed chair seeking help to recover the stolen funds.

Meanwhile, The Daily Star on March 16 emailed a set of questions to the New York Fed but the bank declined to reply.