Malaysia’s Exim Bank in Probe

malay-centbank

Bank Negara Malaysia

Malaysia’s Exim Bank, launched in 1995 as part of former Prime Minister Mahathir Mohamad’s expansive industrial policy, appears to be under investigation by the country’s Anti-Corruption agency after charges were lodged last week by a former bank employee who alleged that Bank Negara, the country’s central bank, had declined to act against two officials of the establishment.

The story was first carried on the Malaysian news website Malaysiakini, although the website did not name the bank. Ezam Mohd Nor, chairperson of the Movement for Democracy and Anti-Corruption in Malaysia, told Asia Sentinel that his organization was declining to name the bank to allow the Anti-Corruption Agency the opportunity to examine the case. He did say that there were allegations of fraud, bribery and abuse of power, however.

Asia Sentinel confirmed through other sources that Exim Bank is the target of the charges, however. An Exim Bank official said the matter is being handled inside the bank by the head of the human resources department. A call to the department was not returned by press time. Lim Fin Ying, a spokesperson for Bank Negara Malaysia, said the person who is handling the issue for the central bank is on Lunar New Year holiday and was unable to comment. Musa Hassan, the Inspector General of Police, said he was not aware of the issue.

As with other export-import banks around the world, the Malaysia Export-Import Bank was created to provide credit risk for overseas investment to open overseas doors for Malaysian companies in such fields as infrastructure, shipping and others. The bank’s role was projected as part of Mahathir’s industrial policy to diversify and increase the country’s export capacity and to “expand our export market to other socialist and developing countries.”

Headed by Board Chairman Othman Mohd Rija, the bank is wholly owned by the Malaysian government. In an effort to expand its scope to export credit insurance and lending activities, the government merged Exim bank with Malaysia Export Credit Insurance Bhd in 2005. The bank’s authorized capital, according to its 2006 annual report, was Rm3 billion (US$925.2 million) with paid-up capital of RM730 million. 2006 profit was RM74.2 million, with total loans approved of RM3.3 billion. Insurance premiums reached RM10.2 million for Malaysian exporters. Export credit insurance protects exporters from buyer default payment as well as allowing exporters to extend credit to overseas buyers.

Malaysiakini quoted Norhayati Abdullah, who had worked at the bank for 12 years, as saying one of the two top officials under question had retired while the second remains employed there. Norhayati last week lodged a complaint with Malaysia’s Anti-Corruption Agency and told Malaysiakini she had also informed the National Audit Department as well as the Public Accounts Committee of the Dewan Rakyat, Malaysia’s parliament of the charges.

According to Norhayati, Bank Negara investigated one of the two officials for abusing his powers for personal gain in 2004 over misuse of credit cards and personal telephone calls. A second probe was launched in 2005 involving the other official, who remains head of one of the bank's departments. She told the website that the second fraud related to kickbacks to an advertising agency for the bank's newspaper advertisements. The rates quoted by the agency for payment were much higher than usual, she said.

"It was a false quotation that was submitted, but it was paid for although the officer knew the bank was being overcharged," she told the website. Although the bank's internal audit department was alerted about the alleged fraud, she charged, its instructions to withhold payment to the advertising agency pending investigations were ignored.

Instead, the woman told the publication, she herself was charged by bank officials with having demanded and received a kickback from the ad agency.

"The owner of the agency was asked to — and eventually did — write to the chief executive officer of the bank stating that I had demanded and received a commission," said Norhayati, who was then an officer in the advertising section of the bank's corporate communications department. Despite the fact that she came up clean in the probe, she said, she was dismissed for criminal breach of trust.

"A domestic inquiry was held against me. In the letter, they said they found me guilty of CBT, but no police report was made against me. I was, in fact, unfairly dismissed and made a scapegoat because they wanted to cover up this thing," she said.

Norhayati said she later lodged police reports against the bank and the advertising agency head and has also filed a legal suit for defamation against the advertising agency owner.