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Bangladesh's Central Bank Accuses NY Federal Reserve of Losing $100 Million

Bangladesh Bank officials say the Federal Reserve Bank of New York failed to stop hackers from stealing $100 million that it deposited with the bank — but the Fed says there's no evidence of a hack.

by John Dyer
Mar 9 2016, 9:50pm

Photo by Michael Daddino

The central bank of Bangladesh is locked in a he-said-she-said dispute with a branch of the central bank of the United States over $100 million that's gone missing.

Bangladesh Bank officials are accusing the Federal Reserve Bank of New York of failing to stop hackers from absconding last month with $100 million that it had deposited with the bank, which holds US Treasury bonds, gold bullion, and other assets for roughly 250 foreign governments and institutions.

"The Fed had the responsibility to keep the money safe," Shamim Ahamad, press minister at the Bangladesh Embassy in Washington, told VICE News. "We are suspecting that Chinese hackers have done it."

On Tuesday, Bangladeshi Finance Minister AMA Muhith said he would file a lawsuit against the Fed in an international court to recoup the money, the Dhaka Tribune reported.

"The fault that caused the hacking was in the Federal Reserve of United States, so we will file a case in the international court against the US Fed," he said.

Hackers have broken into Federal Reserve computers before. But the Fed denied Bangladesh's accusation, countering that it does not appear that cybercriminals withdrew the money.

"To date, there is no evidence of any attempt to penetrate Federal Reserve systems in connection with the payments in question," said a New York Fed spokesperson in a statement released to VICE News and other media. "There is no evidence that any Fed systems were compromised."

The bank nevertheless acknowledged that someone moved the money.

"The payment instructions in question were fully authenticated by the SWIFT messaging system in accordance with standard authentication protocols," the Fed statement said, referring to the Society for Worldwide Interbank Financial Telecommunication codes that banks use when transferring cash internationally.

So one side is accusing the other of losing money to hackers. The bank admits to having paid out the money, but insists there is no evidence of corresponding hacking.

Columbia University economist Charles Calomiris said that the two sides appeared to be talking past each other.

"It's so bizarre," he remarked. "They're not agreeing even about the facts."

Meanwhile, other developments in Asia could complicate the issue.

Bangladeshi newspaper the Daily Dinkel reported on Tuesday that authorities had seized the passports of a handful of Bangladesh Bank officials. The reports didn't say why the passports were seized, but Dhaka Tribune suggested on Wednesday that the $100 million "hack" might have been an inside job.

"Bangladesh Bank is carrying out an internal investigation to find out whether any loophole in its own system had allowed the hacking of money from its foreign exchange reserve in the US," Dhaka Tribune reported. "Those who had access to the bank's SWIFT codes — used for transferring money overseas — are now being considered as suspects."

Also on Wednesday, the paper reported that hackers almost stole another $870 million from the Bangladesh Bank's account at the Fed before the international banking system detected something fishy and blocked the transfer.

Fittingly, a statement from Bangladeshi press minister Ahamad provided after his interview with VICE News acknowledged that the poor country — whose annual income per capita is less than $1,100, according to the World Bank — has a problem with cybersecurity.

"With increasing digitization and automation, Bangladesh ICT [information and communications technology] sector remains vulnerable to cyber-attacks from crime syndicates," the statement said. "Although the incidence of cyber-attack in developed countries is a regular phenomenon, it is entirely new to Bangladesh."

Bangladeshi authorities claim that the stolen funds were wired through the Fed to banks in the Philippines. From there, the cash was transferred to at least three Filipino casinos: Solaire Resort and Casino, City of Dreams, and Midas. At the casinos, someone converted the cash into chips for betting and then reconverted the chips into cash that was sent to bank accounts in Hong Kong, reported Filipino newspaper the Inquirer.

Bangladeshi, American, and Filipino officials are now working closely to get to the bottom of the mystery. Bangladesh has reportedly already retrieved around $20 million that was laundered in Sri Lanka. The country might have to look to China to retrieve the rest of the money, however.

"The matter is being investigated," Ahamad said. "Let's see what happens."

Follow John Dyer on Twitter: @johnjdyerjr

Photo via Flickr

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