The Bhutan Development Bank Limited’s (BDBL) board has decided to take administrative action against 15 executives and senior officials following a letter from Anti-Corruption Commission (ACC).

“As directed by the commission, the board will submit the action taken report to the relevant authority today,” BDBL’s board chairman Choiten Wangchuk said.

The commission wrote to the BDBL Board of Directors on July 17 to take appropriate administrative actions against the executives in operations, banking, legal and compliance division, IT unit, human resource unit and internal audit unit in connection with the oversight accountability on fraud and embezzlement of Nu 576.469 million (M) at BDBL in Thimphu.

Choiten Wangchuk said that the board had tasked a board level internal audit to review the supervisory and monitoring lapses pointed out by the ACC after he received the commission’s letter.  The internal audit on August 15 presented their review findings to the board.

ACC’s letter stated that on reviewing these incidences of corruption and lapses in the institutional control systems, the commission concluded that various divisions had collectively failed to shoulder their respective responsibilities with the expected level of care, due diligence and commitment.

“The frequency with which public funds are being siphoned off by officials at various levels not only highlights the extents of systemic laxity and complacency in BDBL but also points to the absence of clear cut oversight accountability mechanism to date,” the letter stated. “Unless stern administrative actions are imposed on the executives and other senior management for oversight failures, the embezzlement of public funds is very likely to continue into the foreseeable future.”

This practice threatens the liquidity, profitability and sustainability of the company, the letter stated.

Choiten Wangchuk said that the board based on the seriousness of the lapses, withheld promotion and trainings for concerned officials from six months to three years. “The board has taken an appropriate action as the ACC clearly mentioned that in the event the commission is not satisfied with administrative sanctions taken, ACC may take necessary action on its own as required by the Anti-Corruption Act of Bhutan 2011,” he said.

The board also directed the BDBL management to come up with measures and other mechanism to prevent such lapses in future and streamline the existing system.

The commission’s investigation revealed that the BDBL’s project officer Pema Nidup, has allegedly enhanced the loan amount of 55 clients holding 67 loan accounts in 139 transactions amounting to more than Nu 576M between 2013 and 2016. The project officer was accused of fiddling with the system to enhance the loan and collateral mortgage without the knowledge of credit and legal divisions.

The letter stated that BDBL had been informed of some of the factors that contributed to such fraud and embezzlement during the course of investigation as well as in a number of meetings convened with senior management.

“When Pema Nidup carried out 139 fraudulent transactions in 67 loan accounts, his immediate supervisor, chief manager, who had oversight responsibility unfortunately had not detected even a single transaction,” the commission stated in the letter. “The chief manager could have prevented these fraudulent transactions at some stage or the other through regular monitoring and cross-checking of the legality and status of loans disbursed and enhanced.”

The letter also stated that after Pema Nidup was transferred to the Bank Guarantee (BG) section on May 25, 2016, his user login password should have been deactivated but was not and he continued to have access to the system. “As a result, he was able to circumvent the competent committees and enhanced the loan amount by more than Nu 233M after his transfer. This could have been prevented.”

The human resource section did not make it clear as to who had to take over Pema Nidup’s responsibility of disbursing loans after his transfer to BG section. “Thus, he continued to disburse loans with impunity,” the letter stated.

The internal auditors, according to ACC letter, also failed to carry out due diligence exercises to check conformity of loan disbursements as per the standard protocol and detect any of such fraudulent transactions.

The court in 2013, in a ruling on a similar fraudulent conduct by one of BDBL’s employees, had directed the management to study and institute measures to avoid recurrence of similar corrupt practices. “It appears that the management either did not take full cognizance of the directive to implement mitigating measures and tighten control weaknesses or that the measures put in place were not robust enough,” the letter stated.

As demonstrated by the case of Pema Nidup, the letter stated that ample avenues had been provided for him to carryout fraudulent transactions one after another unabatedly for more than three years.

The letter stated that in a criminal justice system, there is a long gestation period from the process of investigation and prosecution to the final delivery of justice and actual restitution of funds embezzled. “Therefore, it is incumbent upon the management to put in place a foolproof control system that is continuously assessed for reliability, safety and accountability and any lapses detected there to be addressed immediately so as to safeguard the interests of the company and its clients at all times.”

The commission has charged Pema Nidup with 85 counts of commission amounting to abuse of functions, 59 counts of omission amounting to abuse of functions, 11 counts of passive bribery, 53 counts of forgery, three counts of deceptive practice and possession of unexplained wealth. The Office of the Attorney General is reviewing the charges recommended by the ACC for probable criminal prosecution.

Rinzin Wangchuk