01. The Hallmark Group scam involved illegally obtaining over 36 billion taka in loans from Sonali Bank between 2010-2012, with most (26.86 billion taka) going to Hallmark Group. 02. Hallmark Group established fake supplier companies to submit falsified paperwork for fabric deliveries, receiving payments from letters of credit opened against Sonali Bank. 03. Investigations found serious oversight failures by Sonali Bank's board and management, and regulatory agencies. Most of the loaned amount could not be recovered, significantly hurting Sonali Bank's financial position.

1. Presenter
Hallmark Sonali
Bank Scandal
Prepared By
Labiba Salsabil Yashna
B1405009

2. Sonali Bank
It also operates the Sonali Exchange Company Inc. in USA and Sonali Bank
(UK) Ltd., United Kingdom, to facilitate foreign exchange remittances.
1207 branches. 343 are located in urban areas, 862 in rural areas, and 2
located overseas.
Sonali Bank was established in 1972

3. Hallmark group Bangladesh
Established in
1992
Manufacturer
company
Main Products
are Clothing line
They claimed to have more than 70 companies but according to Anti
corporation commission Bangladesh hallmark has only 17 registered companies
and in Share market 6 are registered

4. What Happened?
In May 2012, a report from the Bangladesh Bank
revealed that the Ruposhi Bangla Hotel Branch of the
state-owned Sonali Bank, illegally distributed Tk 36.48
billion (US$460 million) in loans between 2010 and
2012. The largest share, of Tk 26.86 billion (US$340
million), went to Hallmark Group.

5. Main people in charge
Manager of Sonali
Bank’s Ruposhi Bangla
branch
Azuzur Rahman
Managing
Director of
Hallmark Group
Tanvir Mahmud
Chairman of
Hallmark Group
Jesmin Islam

6. Letter of Credit L/C
A letter issued by a bank to serve as a guarantee for
payments made to a specified person under specified
conditions.
Inland bill
The documentation containing information related to
the transportation of good overseas. It identifies the
information of the carrier and shipper and acts as a
carriage contract agreement.

7. Why do they need L/C?
o First, garment producers are often unable to pay
for their inputs, such as the textile fabric that they
need for making garments, until after they have
produced and sold their final products.
o Second, even when garments producers can pay
on time, textile companies might be anxious about
delivering fabric without some guarantee of
payment.

8. How did they do it?
Hallmark had established fictitious companies, such as Anwara
Spinning Mills, Max Spinning Mills, and Star Spinning Mills, which were
shown as recipients of the LCs. These companies submitted falsified
paperwork reporting deliveries of fabric to Hallmark, which were then
paid for by the LCs from Sonali Bank’s Ruposhi Bangla branch.
Because the fictitious companies and Hallmark had their accounts at
the Ruposhi Bangla branch, on paper it looked like the branch’s
assets and liabilities were balanced out.
Hallmark
Shonali
bank
Fictitious
supplier
Opens LC Fake documents
Guarantee of payment
Partial payment

9. 01
02 03
Three Important Keys in our Success
Members of the bank’s board of directors claim to have had no knowledge of the
malfeasance.
o The loans to Hallmark exceeded by a large margin that limits how much Sonali Bank
can lend to any single client.
o No justification for these large loans
o Exceeded its loan quota by almost 500%.
Internal Audit
The first line of defense to detect
the scam should have been
internal audits at Sonali Bank
and supervision by the top
management.
Regulatory agencies
The ministry failed to provide
proper oversight & rejected calls
from Bangladesh Bank to
reconstitute Sonali Bank’s board
following the detection of
irregularities.
Why wasn’t the malpractice
prevented or discovered sooner?
Board of directors

10. What has been the fall out?
Investigations Anti-Corruption Commission filed 11 cases against 27 Sonali and
Hallmark officials in October 2012
26 cases against 35 officials in December 2012.
14 Among the accused are all the heads of companies that
benefited from the loan scam including Tanvir Mahmud
19 Sonali Bank officials have been charged, including the former
managing director, two deputy managing directors, the general
manager, and the leadership of the Ruposhi Bangla branch,
including the branch head Azizur Rahman.

11. What has been the fall out?
Of the Tk 26.86 billion
loaned to Hallmark,
only about Tk 4 billion
was actually invested
and the remaining
amount could not be
traced.
Recovery:
Sonali bank now
confronts serious
financial and
leadership challenges.
It had to cancel a Tk.
800 million loan in Fall
due to financial
shortfalls, and it has
had to borrow heavily
from other banks to
stay afloat.
Sonali
Bank:

12. What has been the fall out?
The
Banking
Industry
Non-performing loans in
the banking system as of
September 2012 were
already at a high 8.75% of
total outstanding loans,
and interest rates were up
to 19%.
Government borrowing
had already created a
liquidity crisis, with state-
owned commercial banks
only distributing 37% of their
targets to small and
medium sized enterprises.
Small and medium business
owners are frequently
denied access to credit.

13. Changes in regulations due to
Hallmark scam
Tax implied over local L/C
Commercial banks are
maintaining a “cautious policy” in
purchasing inland bills.
Internal auditors has been
increased
Transferring each employees after
a certain period
Inspection of Bangladesh Bank
has been increased
Inspect the inventory of the
applicant company

14. What now?
Steps to remove political influence from the banking sector.
Changes to the way that board members and bank leadership are
appointed.
Upgraded automation and management information systems.
Improved internal control mechanisms and the development of a
comprehensive risk management strategy within all banks.
And the creation of a fully independent Bangladesh Bank with full
regulatory authority over all of the nation’s banks

15. “Thank you