Prominent mobile financial service provider Nagad has dismissed 41 distributors and 24,097 agents as part of a crackdown on digital financial fraud.
Additionally, the company’s appointed administrator, under the supervision of the central bank, has terminated the services of 643 sales officers.
In a related development, the Department of Posts has been urged to take action against six senior officials within the organisation.
The scandal came to light after Nagad was found to have artificially inflated its e-money issuance by creating Tk645 crore in electronic currency, in excess of the actual funds deposited in the bank.
Furthermore, it was discovered that the company withdrew a staggering 1,711 crore through unauthorised distributors.
These actions led to the immediate dismissal of the implicated distributors, agents, and officers.
Launched on 26 March 2019, under the tenure of the previous Awami League government, Nagad began its operations without the required approval from the central bank.
The company’s operations were closely linked with several ruling party members, which granted it extensive privileges in opening accounts and distributing government allowances.
This enabled Nagad to engage in large-scale financial misconduct.
Following the collapse of the Awami League government on 5 August, Bangladesh Bank appointed an administrator to oversee the company on 21 August.
During a subsequent inspection, significant digital financial fraud was uncovered.
As a result, the administrator formally requested legal action from the Department of Posts and Bangladesh Bank on 18 November.
However, no definitive decision has been made despite multiple meetings on the matter.
Husne Ara Shikha, the spokesperson for Bangladesh Bank, confirmed the bank's awareness of the Nagad issue, stating that discussions are ongoing between the central bank and the Department of Posts to decide who will file a case, with legal opinions being sought before a decision is reached.
In accordance with a 2017 agreement between the Department of Posts and Third Wave Technologies, which operated Nagad, the company was allowed to issue e-money equivalent to the amount of money deposited in the bank.
However, during the investigation, it was revealed that Nagad issued 645 crore more in e-money than was deposited in the bank.
Moreover, the company had withdrawn 1,711 crore through unauthorised distributors, who were responsible for disbursing government benefits.
The issue further escalated as the administrator uncovered that 41 distributors, along with 24,097 agents, were involved in these fraudulent activities.
As a result, the administrator has dismissed them from their roles.
Additionally, 3,831 merchant accounts have been cancelled, and 643 sales officers have been terminated from their positions at Nagad.
Meanwhile, Nagad is in the process of updating the accounts of customers who had opened them without following the proper procedures.
Many accounts have been suspended due to the lack of compliance with the required regulations.
This financial scandal is being described as the largest ‘digital financial fraud’ in the country’s history.
As part of the ongoing investigation, a forensic audit has been ordered to thoroughly examine Nagad’s financial transactions, enabling the identification of fraudsters and beneficiaries of the misconduct.
The mismanagement at Nagad is further complicated by the fact that the company’s ownership includes several influential Awami League figures.
This led to the government’s preference for Nagad in distributing various allowances, with some funds allegedly being embezzled, particularly after beneficiaries failed to withdraw their allocated amounts within three days.
In such cases, Nagad is said to have withdrawn the unclaimed funds.
The financial liabilities arising from the fraud now rest with the Department of Posts, as it was the one that granted Nagad temporary authorisation to provide mobile financial services.
At the time, Nagad operated under the name Third Wave Technologies.
Following the emergence of this scandal, Nagad, which ranks second to bKash in the country’s mobile financial services sector, has witnessed a steady increase in transactions.
Since the appointment of the administrator by Bangladesh Bank, the company’s daily transactions have soared.
Nagad in August processed 743 crore in transactions, which increased to 806 crore in September and 871 crore in October.
In November, transactions surpassed 1,000 crore, and the current month continues to see similar trends.
