Shareholders of the Guyana Bank for Trade and Industry (GBTI) were last evening assured that the bank would recover the $941 million lost in a fraudulent transaction allegedly conducted by gold dealer Saddiqi Rasul.
“We will recover the money, we will have justice. This board is committed to making good the loss,” Chairman of the Board of Directors Robin Stoby SC told those gathered at the bank’s Annual General Meeting (AGM).
Stoby used the occasion to explain the situation, which he said was a cause for concern for both board members and shareholders alike.
According to Stoby, on or around March 24, 2017, a customer of the GBTI Bartica branch—Rasul—was allowed access to a large sum representing the un-cleared deposit of $941 million emanating from several cheques he purported to deposit to the Bartica branch that were drawn from Citizens Bank accounts he held.
He explained that the branch manager, without the approval of the Chief Executive Officer of the bank or any senior manager, allowed the transaction to take place and that the customer, knowing that his Citizens Bank account was frozen and that he had no funds, still presented the cheques.
“The action by the customer constituted a fraud on the bank facilitated by the actions of the branch manager, who neither had the authority or the right to facilitate the customer in that manner,” Stoby stressed.
‘Uncooperative’
He noted that when former Chief Executive Officer (CEO) John Tracey learned of the transaction, he tried to resolve the matter by getting the customer to pay back the bulk of the money and secure the balance. This effort failed since “the customer was uncooperative and appear-ed unwilling to take any reasonable steps to recover the money.”
Consequently, on the direction of the board, the matter was reported to the police and the customer was investigated by the fraud squad and subsequently charged with several offences of the section. The manager has been dismissed and the customer, Rasul, is before the courts.
Stoby explained that while in the short term the bank will have to make provisions for the loss, which will affect earnings for the year, it is the board’s intention to make an insurance claim for the monies, even as it has authorized local law firm Cameron and Shepherd to institute civil proceedings in an attempt to recover as much of the funds as possible. This case is expected to be heard before the end of this month.
He further noted that former Chief Justice, Senior Counsel Ian Chang has been contracted as a special prosecutor in the case as the board was “not satisfied with progress on the matter.”
Chang has been authorized to pursue the bank’s interest in an urgent manner and prosecute the case to finality with the help of the Guyana Police Force and the Director of Public Prosecutions.
According to Stoby, Chang’s involvement has already “resulted in a new set of charges being laid,” while the gathering of evidence for a trial has commenced.
‘No-hold’
In explaining how an alleged fraud of this magnitude could’ve occurred, Stoby explained that since colonial times all banks in Guyana have used a “no-hold” system of cheque clearance.
Under this system, if a cheque is deposited to an account and the manager believes for good reason that a customer is good for the amount, then the manager will allow processing before the period of clearance has expired on the basis of no-hold. As a result, the funds can be accessed by the customer in the interim.
He stressed that this system requires structural authority to be vested in the manager even as a limit to such authority exists, along with a reasonable and defensible basis on which such a decision can be made in the exercise of utmost faith.
In this case, all of those factors were not in place. The Manager acted contrary to specific direction and concealed her actions by manipulating the computer system, in what the auditors have found to be “cheque kiting,” shareholders were told.
Stoby later explained that GBTI has since put new systems in place in a serious effort to prevent a recurrence.
Additionally, a system of branch management that will have more of a day-to-day involvement and control of the branches as well as allow impromptu inspections of branches by the auditor is being developed.
Having explained the situation, Stoby then told those gathered that Tracey, who since 1991 held senior positions at the bank, retired with effect from May 1, 2017.
Asked if Tracy’s retirement had anything to do with the fraud, he said only that Tracey had reached an advanced age of 67 and he deserved a rest.
Shaleeza Shaw, Head of Credit and Secretary to the board, has been acting CEO since Tracey’s retirement.
Rasul, the owner of SSS Minerals Trading, was on April 3 charged with six counts of fraud.
It was alleged that between March 21 and March 22, at Bartica, with intent to defraud, he obtained from GBTI $96 million, $290 million, $89 million, $45 million, $298 million and $138 million by falsely pretending that he had cash in a Citizens Bank account to honour cheques that he wrote.
He has denied the charges and is free on a total of $3M bail.
Rasul is currently under investigation by the Special Organised Crime Unit (SOCU).
