Financial Crime World

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Bank Fraud Scandal Rocks Bhutan: Over a Dozen Bank Officials Charged

Bhutan’s banking community has been rocked by a major fraud scandal after more than a dozen bank officials from the Bank of Bhutan, DrukPNB, and Bhutan National Bank were charged with allowing Phajo Nidup to amass over Nu 800 million in non-performing loans.

Investigation Ongoing

The Office of the Attorney General (OAG) has charged several officials, including former and current bank employees, some of whom had left the country but were later called back for questioning. The number of officials implicated in the investigation could increase as the Anti-Corruption Commission (ACC) continues its probe into the case, which is reportedly complex due to the extensive collusion uncovered.

Charges Filed

  • ACC has already charged several BoB officials, including the former credit head, who is associated with the Phuentsholing main branch and the Gedu branch.
  • Some officials from Phuentsholing’s Sabzi Bazar branch are also expected to face charges soon. BoB officials who had resigned and moved to Australia have been contacted by the ACC.
  • The OAG is expected to charge DrukPNB and Bhutan National Bank officials in the coming days, with several individuals already in detention, including the Deputy CEO of DrukPNB and a credit officer.

Non-Performing Loans

The largest non-performing loans for Phajo were in the BoB and DrukPNB, amounting to over Nu 300 million each. The total non-performing loans for Phajo are believed to surpass Nu 600 million. In Phajo’s case with DrukPNB, a single loan account totaled Nu 250 million.

Fraudulent Activities

  • Bank officials are suspected of allowing Phajo to bypass banking rules and even engage in outright fraud to secure the loans.
  • The fraudulent activities involved double and triple mortgages, and some bank officials are believed to have accepted money and in-kind gifts from Phajo to facilitate the loans.

Audit Reports

Both the ACC and OAG have remained tight-lipped about the investigation, but several findings from the Royal Audit Authority (RAA) have been made public. RAA reports from BoB, BNB, and BDBL have identified concerns with Phajo’s loans.

Cases Sent to OAG

ACC has reportedly sent around 10 cases to the OAG, of which five have already resulted in charge sheets. These cases include:

  • Three National Land Commission officials who were bribed to print duplicate lagthrams
  • RSTA officials who accepted fake bluebooks
  • Phuentsholing Thromde land record officials who failed to disclose Phajo’s double and triple mortgaged lands
  • Two cases involving BoB officials

Bank Officials Charged

Most of the officials being charged are believed to be involved in assessing and disbursing loans to Phajo. ACC is also investigating RICBL, BDBL, and T-Bank to see if there are any irregularities.

Findings from Royal Audit Authority Reports

The BoB findings include 41 loans totaling Nu 303.63 million for Phajo or those guaranteed by him. The majority of the loans were from the Phuentsholing Main Branch, followed by the Gedu branch and the Phuentsholing Sabzi Bazar branch.

Court Proceedings

BoB and DrukPNB have filed recovery suits in court against Phajo and related borrowers, while a criminal complaint has been lodged with the ACC. There are around 60 civil cases against Phajo, with approximately 28 cases involving banks and the rest with private parties over land and money transactions.