Hacker Heist Brings Down Bangladesh's ‘Poor Man's Economist’

Cyber Experts Blame Bangladesh for $101M Fed Theft
  • Atiur Rahman resigns as Bangladesh's central bank governor
  • Malware used to defraud $101 million from foreign reserves

The gifted son of a landless farmer, Atiur Rahman was known as the “poor man’s economist,” using his seven years as Bangladesh’s central bank governor to extend finance to the downtrodden through mobile and electronic banking. Ultimately, technology cost him his job.

QuickTake Cybersecurity

Rahman, 64, resigned Tuesday, four and a half months before his planned retirement, after Bangladesh became one of the latest victims of hackers, who defrauded its central bank of $101 million in foreign reserves. The failure to immediately inform the government of the breach hastened his downfall.

The scandal has ensnared a man feted as Asia’s central banker of the year whose policies helped make Bangladesh one of the world’s fastest growing emerging markets. It also shows the vulnerability of banking systems to cyber-criminals malevolently using digital technology relied on to speed much-needed finance to the world’s poor.

“It’s a wake-up call to everyone,” Arjuna Mahendran, Sri Lanka’s central bank governor, said in an interview with Bloomberg Television. “My counterpart in Bangladesh is devastated by what happened. Vigilance is necessary, our systems need to be constantly scrutinized. Digitization makes the systems vulnerable.”

‘Moral Responsibility’

Rahman told reporters he resigned “out of my moral responsibility" for waiting too long to tell the government of the theft. The delay outraged Finance Minister Abul Maal Abdul Muhith, who earlier this week called the central bank’s handling of the situation “very incompetent."

“I am not a technical person,” Rahman told Bloomberg on Tuesday before he resigned. “If it’s my fault, they can take action against me, against Bangladesh Bank, but they cannot insult me in public.”

The heist is reverberating around the globe. Central banks are probing internal systems, Sri Lanka’s Mahendran said, adding that even the messaging system within the U.S. Federal Reserve is under scrutiny. A Bank of England letter made public after a Freedom of Information request by Bloomberg further underscored the global nature of the risk, with the U.K. central bank saying it faced “advanced, persistent" cyber threats.

Carbanak Gang

The cyberattack on Bangladesh Bank used malicious software code, known as malware, and is similar to recent attacks carried out by the Carbanak gang, which stole as much as $1 billion from financial institutions worldwide. The Bangladesh hackers routed most of the stolen funds to accounts in the Philippines, and nearly swiped another $850 million before they were stopped -- in part because of a spelling error.

Pressure had begun to mount on Rahman in recent weeks. Ruling party lawmakers started to criticize him, and the Finance Minister’s attack made his position untenable.

In the end, it was an uncomfortable position for a man known more for his intellectual prowess than his ability to maneuver through the corridors of power in Dhaka.

Growing up poor in north central Bangladesh, Rahman worked his way from village school to college to the University of Dhaka. He eventually won a Commonwealth Scholarship to attend the University of London, where he wrote a doctoral thesis, “Peasants and Classes,” that was published by Oxford University Press. He spent roughly the next three decades in academia before joining Bangladesh Bank in 2009.

‘Redesign Finance’

“I came from out of the box,” he told Emerging Markets, which profiled him in October. “I could not think like a conventional central banker. I said, ‘My job is to redesign finance’. ”

Geof Wood, emeritus professor of international development at the University of Bath, who has known Rahman for more than 30 years, said his appointment to the central bank came as a surprise.

“Being governor of the Bangladesh Bank is a highly political position," Wood said. “He was a public intellectual doing activist work. We hadn’t seen him as a classic banker."

A member of the national task force on the eradication of poverty established by Muhammad Yunus, founder of Grameen Bank, Rahman believed that supporting agriculture and small businesses could avert financial crises, the Banker wrote in January 2015.

13 Cents

Under one of his programs, Bangladesh Bank lent 5 billion takas ($64 million) to a non-governmental organization that arranged loans to 1 million tenant farmers, the majority of whom were women. The recovery rate for the project was 99 percent. In June 2014, the bank set up a project to assist street children, establishing a refinancing fund that worked with NGOs, including Save the Children, to open savings accounts for children for as little as 10 takas (13 cents).

“Initially it was not easy,” Rahman told the Banker. “Central bankers are a bit of a conservative, skeptical bunch. They thought it was going to be a disaster.”

While Bangladesh has long enjoyed a history of financial innovation to reach its unbanked population, Rahman increased the pace of inclusion. He boosted the number of rural bank branches and oversaw the rise of the world’s second-biggest mobile banking operation in BKash, a subsidiary of BRAC Bank Ltd. More of Bangladesh’s 157 million people use mobile phones to transfer money than bank accounts.

Banker of the Year

Rahman has been lauded throughout the world for his efforts.

In January last year, he was named Asia-Pacific’s Central Banker of the Year by the Financial Times’ The Banker and commended by Caroline Spelman, a U.K. lawmaker and former environment secretary, in the House of Commons two months later. In October, Euromoney Group’s Emerging Markets newspaper named him Asia’s Central Banker of the Year.

Frequently in the the public eye, Rahman was a regular keynote speaker and guest of honor at conferences and meetings, and didn’t shy away from appearing on television. He was more personable than his predecessors, who would typically make journalists wait hours in hallways for tidbits of information.

At an IMF conference in New Delhi last weekend, Managing Director Christine Lagarde invited Rahman from the audience to speak about financial inclusion during a panel discussion in which Melinda Gates was participating. “Your country has done really extraordinary things in the field of inclusion,” Lagarde said.

‘Good Work’

Rahman said “the Bangladesh story has been one of women’s empowerment” and collaboration with NGOs to improve health, education, sanitation and micro-credit. “We’ve made it a point that 15 percent of the re-finance that we give to any bank, that must go first to women entrepreneurs,” he told the meeting.

Yet while Rahman was promoting Bangladesh’s accomplishments abroad, at home he was under increased criticism over the bank heist. Nuh-Ul-Alam Lenin, a senior leader of Prime Minister Sheikh Hasina’s Awami League, called for his resignation, accusing him of covering up the theft.

“Even after knowing about such a huge scam, how could Atiur remain so indifferent as to go on a tour to Delhi?” Lenin said. “Atiur was more busy serving his own interest than the bank’s.”

Rahman sought to defend himself on Tuesday, saying he was in constant touch with intelligence authorities and informed the Finance Ministry when the situation was under control. For a man who takes great pride in his work, however, the public insults seemed to weigh on him most.

“My family says I’ve done so much good work,” Rahman said. “Now this is what I am getting.”

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