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Bangladesh Bank preparing legal grounds to sue the Federal Reserve Bank of New York


03/23/2016

With Carolyn Maloney, a NY democrat raising questions over the perceived missteps of the NY Fed Bank, the issue is slowly gathering political traction.



In the wake of hackers stealing $81 million from Bangladesh's central bank, as per an internal report from Bangladesh Bank, it has hired a U.S. lawyer to file a potential lawsuit against the Federal Reserve Bank of New York.
 
With this new spreading in the Dhaka, the capital of Bangladesh, Carolyn Maloney, a U.S. Representative called for a probe on last month’s cyber-attack on Bangladesh’s central bank.
 
In what has been attributed as one of the largest cyber heists in history, black hat hackers managed to transfer $81 million from Bangladesh Bank’s account in the New York Fed Bank to accounts in the Philippines.
 
“This brazen heist from the Bangladesh central bank’s account at the New York Fed threatens to undermine the confidence that foreign central banks have in the Federal Reserve, and in the safety and soundness of international monetary transactions,” said Maloney, a New York Democrat, in a statement.
 
The FBI is helping in the investigation of the heist which led to the sacking of the bank’s governor.
 
Maloney has also sent a letter to William Dudley, president of the New York Fed, requesting a private meeting with bank staff in order to know more details of the heist.
 
She has disclosed her intentions of raising several questions including one revolving around whether it is appropriate to rely solely on the SWIFT global bank messaging system to authenticate outgoing payments from foreign central bank accounts.
 
Her comments are the first signs that the incident could potentially gain political traction back home in the U.S. Being the top regulator for Wall Street, the New York Fed has started to face a volley of political criticism for its missteps and perceived conflict of interest for its role.
 
“We fully intend to reach out to the congresswoman and will endeavor to address her questions," said a spokeswoman from New York Fed.
 
Before this statement, the New York Fed, which is custodian of some 250 accounts belonging to governments and foreign central banks, had said very little publicly. On March 9 it had stated that the payments were made in the usual way and there was no evidence in its system to show that they were compromised.
 
On its part, the Bangladesh Bank has heavily criticized the New York Fed in its incident report, which surfaced on Tuesday but was dated March 13. As per its report, the New York Fed had allowed 5 of the 35 fraudulent payment instructions to go through.
 
"We view this as a major lapse," read the report from the Bangladesh Bank. The report said it is in the process of "preparing the ground to make a legitimate claim for the loss of funds" against the New York Fed "through a legal process."
 
Maloney in her letter now wants to know why the New York Fed treated the 30 transfers differently from the other five.
 
Forensic experts and the Bangladesh police are in the process of collecting information from the compromised computer systems to determine what exactly happened.