Media reports indicate that National Development Bank (NDB) is preparing to engage a foreign specialist firm to recover funds and digital assets identified through a forensic audit into the massive internal financial fraud amounting to Rs. 13.69 billion at NDB.
Meanwhile, it is also reported that the final forensic audit report prepared by Deloitte Touche Tohmatsu India LLP is scheduled to be submitted to the bank this week.
However, the bank is yet to disclose the amount spent on preparing the relevant report by Deloitte Touche Tohmatsu India LLP, leading to rumours that a substantial amount has been spent on it.
Meanwhile, financial sector experts are of the view that recovering the missing funds based on a forensic audit report would be a highly difficult task for which a foreign company would charge a substantial fee.
Recovering funds is a major challenge for any organisation, and it is reported that any private company attempting to recover such funds would face the following challenges:
– Inability of an organisation to seize the funds on its own : Intervention by courts or government authorities in the relevant countries would be required to freeze foreign bank accounts or cryptocurrency accounts.)
– No guarantee of recovering the funds : Recovery could be difficult if the funds have been converted into other assets.
– The process could take longer if the funds have passed through several countries
– Legal and international cooperation-related issues : Recovery could be limited if assistance is not received from foreign countries and institutions.
Financial experts are also of the view that this is an attempt by the directors to cover up the relevant fraud.
According to the audit report, a large portion of the Rs. 13.69 billion had been transferred overseas through banking channels, while around Rs. 390 million had been retained in Sri Lanka and directed towards digital assets.
The audit is also reported to have identified a cryptocurrency digital platform known as ‘Buy Today’.
It is reported that the platform had been used to convert the defrauded funds into digital assets, which were subsequently transferred through sub-accounts automatically created or controlled on major cryptocurrency exchanges.
The audit report has reportedly revealed that both foreign banking networks and digital asset systems had been used in this process.
Meanwhile, questions have also reportedly arisen regarding the bank’s governance and accountability structures in connection with the incident.
Several bank officials were recently arrested by the police in connection with the alleged fraud, and have since been released on bail.
Analysts have also pointed out that investors at the Colombo Stock Exchange are adopting a cautious approach towards NDB shares due to the impact of the incident.
In addition, it is reported that retail investors have been affected by the suspension of cash dividend payments imposed by the Central Bank of Sri Lanka (CBSL), while the bank has the capacity to pay stock dividends.
More than 25% of NDB Bank’s shares are held by State institutions such as the Employees’ Provident Fund (EPF), Employees’ Trust Fund (ETF), the Government, and the Sri Lanka Insurance Corporation.
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