BANGLADESH 1Leena Afroz Mostofa Chowdhury 2Sharmin Akter 3Farhana Sultana ACA P112 Financial...

January - March 2018

Bangladesh Moving A

head

January - March 2018

MOVING AHEAD BANGLADESH ]]

2018

2021

2024

2041

Membership Scheme of The Institute of Chartered Accountants of England and Wales (ICAEW) allows the members of ICAB to apply for ICAEW membership based on their experience.

Eligibility criteria of this membership scheme are a series of questions which assess ICAB Member’s experience, achievements, skills and expertise. Each application must be supported by an eligible sponsor. Applicants need to complete an Examination of Experience.

Details of ICAEW Membership Scheme is available at http://www.icaew.com/membership/becoming-a-member/ members-of-other-bodies/campaigns/pathways-to-membership.

It is noted that ICAB signed a Memorandum of Understanding (MoU) with the Institute of Chartered Accountants in England and Wales (ICAEW) in 2009 and in continuation and successful implementation of the said MoU, the follow up phase of the same MoU was signed with the ICAEW in 2014 and in London in 2017. ICAB has been working with ICAEW as the learning and professional development partner, and also recognized as an approved tuition provider of ICAEW.

As per MoU ICAB Members can be the members of ICAEW after successful completion of 04 papers out of 15. These members have the opportunity to apply for UK Practicing Certificate (PC) subject to meeting the standard ICAEW PC requirement.

Recognition of ICAB membership by ICAEW

Members of the Institute of Chartered Accountants of Bangladesh (ICAB) are eligible to apply for membership of the Chartered Institute of Public Finance and Accountancy (CIPFA), a globally recognised membership body for the public sector.

An MoU between ICAB and CIPFA, UK was signed on 28 January 2017.Under this MoU ICAB member can be the member of CIPFA upon fulfilling some criteria.

ICABMembers in good standing having five or more years post-qualification public sector experience are eligible for Full Membership of CIPFA as Chartered Public Finance Accountant (CPFA) and the members having fewer than five years post-qualification public sector experience are eligible for A�liate member of CIPFA (CIPFA A�liat).

ICAB members having CIPFA A�liate membership, or having no working experience in public sector can gain CPFA status by successfully completing exams of only two papers i.e. Public Sector Financial Reporting and Strategic Public Finance from the CIPFA qualification.

Recognition of ICAB Membership by CIPFA, UK

The Institute of Chartered Accountants of Bangladesh (ICAB) signed an agreement with the International Financial Reporting Standards (IFRS) Foundation which empowers only ICAB in Bangladesh for development and publication of Bangladesh Financial Reporting Standards (BFRS), Bangladesh Accounting Standards (BAS) and BFRS for SMEs.

Under this agreement, ICAB has got the copyright license to publish both in print and online electronic editions of BFRS, BAS and BFRS for SMEs using IFRS, IAS and IFRS for SMEs as issued by the International Accounting Standards Boards (IASB) and to distribute English language version of these standards in Bangladesh. In accordance with the terms of agreement ICAB has entered into formal collaboration with the IFRS Foundation and committed to a convergence path towards the full adoption of IFRS.

IFRS Agreement

ICAB is an active member of International Federation of Accountants (IFAC), Confederation of Asian and Pacific Accountants(CAPA) and South Asian Federation of Accountants(SAFA). ICAB is very proactive in SAFA and CAPA. Current SAFA President has been elected from ICAB and the Executive Secretary appointed from the same Institute. In the year 2012, 2013 and 2014 ICAB has been highly appreciated by IFAC for its continued commitment and compliance with Statement of Membership Obligations (SMOs), which cover the requirements of quality assurance, education in line with international education standards, auditing, financial reporting and public sector accounting standards, auditing, investigation and disciplinary matters.

Other Memberships

ICAB has signed a Mutual Recognition Agreement (MRA) with the Institute of Certified Public Accountants in Ireland (CPA Ireland) on December 2012.

According to the signed MRA to attain the CPA Ireland membership, ICAB members have to complete and pass only 01 paper out of 17 papers of CPA Ireland examination.

ICAB members need to pass CPA Ireland’s only one examination from the Professional Stage 2, “Strategy and Leadership” and an On-line “Overview of Irish Tax and law”.

CPA-Ireland Membership is open to ICAB Members

GLOBALRECOGNITIONOF ICAB

www.icab.org.bd

1JANUARY - MARCH 2018 | The Bangladesh Accountant

ISSN 1993-3649

EDITORIAL BOARD CONTACT US

ChairmanDr. Jamshed S A Choudhury FCA

Co-ChairmanHarun Mahmud FCA

MembersAkhtar Sohel Kasem FCAA F Nesaruddin FCANasir Uddin Ahmed FCAMd. Shahadat Hossain FCAGopal Chandra Ghosh FCAModdassar Ahmed Siddique FCAAmanullah Khan FCAM Idris Ali FCAMasih Malik Chowdhury FCADr. Md. Abu Sayed Khan FCAMd Abdus Salam FCAMohammad Zahid Hossain FCAS. M. Rafiqul Islam FCADr. ASM Hossain Tayiab FCAMohammad Redwanur Rahman FCAMuhammad Aminul Hoque FCAMd. Zahidul Islam Khan FCASk. Md. Tarikul Islam ACADhali Tanvir Ahmad Siddiqui FCAAnika Sultana FCABidhan Chandra Mandal ACAMd Anwar Hossain ACAIsmat Jahan ACAAfratul Kawsar ACAMustaq Ahmed ACASazib Kumar Saha ACAMd. Faruk Hossain ACAZoinul Abedin Sakil ACAKhosnur Jahan ACAMd. Abdul Wahab Akanda ACAAtaur Rahman ACAFarhad Hussain ACAMd. Muktadir Hossain ACAMomena Hossain Rupa ACAChairman DRC-ICAB

Member SecretaryMohammed Emdadul Haque FCATechnical Adviser, ICAB

Published by the Editorial Board of the Council

The Institute of CharteredAccountants of Bangladesh (ICAB)

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The Bangladesh Accountant

"The opinions expressed in this publication are those of the respective authors themselves and do not necessarily reflect the views of the Editorial Board of the Institute of Chartered Accountants of Bangladesh (ICAB) or ICAB itself."

DISCLAIMER

2 JANUARY - MARCH 2018 | The Bangladesh Accountant

ICAB PUBLICATIONS

ContentsJanuary - March 2018

P6

for more details, please visit

www.icab.org.bd

P6 A Ringing Bell: Alarm for the Audit Professionals Md. Rokonuzzaman FCA

P11 Cyber Security in Banks and Financial Institutions: A Highbrow Exegesis M Jalal Hussain FCA

P17 Arbitrary and Unlawful Attachment of Bank Accounts of Assessees Not in Default by Tax Authorities K M Hasan FCA

P23 Human Resources (HR) Disclosure Practices Evidence from Commercial Banks of Bangladesh 1Imtiaz Alam FCA 2Fahmida Akhter 3Mohammad Rokibul Hossain

P32 Factors Determining Glass Ceiling That Influences Women Career Development: A Study On Selected Private Commercial Banks in Dhaka City 1Sheikh Emran Shirage 2Md. Shawfiqul Islam 3K.A.M. Rifat Hasan

P4 Editorial

P5 President’s Desk

ICAB publications include, inter alia, a quarterly journal titled 'The Bangladesh Accountant' and a monthly mouthpiece 'ICAB News Bulletin'. In the quarterly journal articles of ICAB Members, Members from other Accountancy bodies, Academics and Business Leaders from home and abroad are published. These articles cover a wide area of our profession, i.e, Auditing, Accounting, Financial and Economic. The monthly news bulletin publishes latest ICAB events mostly of the month it is published. This bulletin also acts as an information hub for the Members to keep up to date what is happening in and around ICAB. In addition to these two regular publications, ICAB also publishes books, monographs, booklets and Students’ Study Manuals regularly.



P41 Pitfalls of Existing Rules on Investment Abroad by Bangladeshis M Idris Ali FCA

P45 Proposed CGG, Criticism and Recommendations Muhammed Omar Faruk Ripon FCA

P53 Wellsprings of Government's Revenue and Propositions for Improving Revenue Accumulation S M Ashfaqur Rahman ACA

P65 Corporate Environmental Reporting: An Immanent Critique 1Dewan Mahboob Hossain 2Amirus Salat

P73 Blockchain Technology and Bitcoin Currency: The Features and Potentiality M S Siddiqui

P77 Prospects and Challenges of Financing through Capital Market M. Shaifur Rahman Mazumdar FCA

P84 Yoon Model and Modified Jones Model in Detecting Earnings Management: An Empirical Study on Cement Industry of Bangladesh 1Mohammad Saif Uddin Bhuiyah 2Mohammad Alam Shikdar 3Sabina Yesmine

P94 Solar Energy: Silent Revolution in Power Sector of Bangladesh Mohammad Zahid Hossain FCA

P98 So You Aspire to be a CFO? Muallem A Choudhury

P102 Intellectual Capital Disclosures: In Bangladeshi Ready-made Garments Sector Status and Trends 1Leena Afroz Mostofa Chowdhury 2Sharmin Akter 3Farhana Sultana ACA

P112 Financial Determinants of Stock Price in Banking Sector: Evidence from Listed Banks in the Dhaka Stock Exchange (DSE) Ltd. 1Arif Ahammed 2Amirus Salat

P122 Role of CFOs in Technological Transformation Dewan Nurul Islam FCA

P126 Bangladesh as Neo-MIC: Opportunities and Challenges Shahidul Islam ACA

P130 Some Thoughts on Performing Dynamics in SoCBs Masih Malik Chowdhury FCA

News & Events

News Bulletin

Journal

Circular & Notice

Digital Highlightswww.icab.org.bd

Dear valued readers, this is the consecutive two years I have been heading the Editorial Board under which the ICAB quarterly journal ‘The Bangladesh Accountant’ is being published. I hope we shall bring the publication in more innovative manner in coming days. This issue of the journal would come out when Bangladesh has attained the status of developing country. UN committee for development policy declared Bangladesh as Developing Country in March 2018.

Our economy is gradually expanding and it will be 30th largest economy of the world in terms of purchasing power parity (PPP) and Gross Domestic Products(GDP) in next few years. To assess this eligibility, Bangladesh has already achieved the benchmark of three specially designed indices; income, human assets and economic vulnerability that means Gross National Income (GNI) per capita. It has already crossed the income criterion

threshold US $1,026 per capita income for trashing the line of least developed countries.

However, Bangladesh has to maintain its ongoing development trend until 2024 to get the developing status permanently. At present it has been ranked 99th as the most competitive economy in the world, up seven notches from the last year’s ranking which is encouraging for us. We hope government would initiate pragmatic policies to expedite development wheels of the country as our land has enormous opportunities to grow up. ICAB is maintaining strong liaison with the Ministries and other regulatory bodies to help the government in formulating policies including proposed Companies Act, Trade Organization Act, etc.

Government has envisaged a plan to attain status of developed country by 2041. To achieve this long-expected dream, development of infrastructure, power, energy, technology, knowledge and skilled manpower are ardent necessary. Regrettably still our education system requires to match with the need of our industry which is sine qua non. Coalition between the education, profession and skills are highly needed for ensuring sustainable development.

The Bangladesh Accountant specially focuses on the macro and micro economy, trade and commerce, capital Market, investment, international economy, etc. This January-March issue contains articles depict the current economic scenario, problems and prospect. Readers would find profound information on the direction of economy going through towards getting permanent status of developing country.

My warmest greetings to you all.


“This January- March issue contains articles depict the current economic scenario, problems and prospect. Readers would find profound information on the direction of economy going through towards getting permanent status of developing country.”

Editorial

Dr. Jamshed SanyiathAhmed Choudhury FCAChairman – Editorial BoardCouncil Member - ICAB



President’s Desk“I am confident that the readers of The Bangladesh Accountant must have observed that over the years, the journal has progressed and maintained its standard as authority on finance and accounting for the academicians and professionals acceptable to society and other economic field.”

Needless to say, it is a mammoth task to bring a new issue of a Journal on Accounting, especially when that Journal aims to publish high quality manuscripts. This responsibility has been shouldered by a very e�cient editorial board led by its Chairman. Papers that have been contributed by intellectuals deserve special appreciation.

I would like to take this opportunity to extend my heartfelt gratitude to all the members of the editorial board, reviewers and contributors for their talented work. I believe that this issue will be a giant leap towards a more insightful look at our professional milieu.

The current issue contains a number of articles written by some of our learned external accounting professionals, academics and other intelligentsia. We are proud to bring this issue for our esteemed readers.

Dear members, as you read through the January-March 2018 Issue, I would like to recap that the success of our Quarterly Journal largely depends on your active involvement and those of the contribution of your colleagues and friends. We hope you will keep supporting our endeavour tirelessly.

Finally, I appreciate support from our members as we strive to make our Journal an authoritative journal on finance and accountancy profession.

Dewan Nurul Islam FCAPresident-ICAB

following the standards and methodologies adopted by the ICAB (Institute of Chartered Accountants of Bangladesh). As the general shareholders cannot involve themselves in the day to day operations of the company, they believe that auditors would examine the accounts and related other financial information and give them a credible report for their knowledge and information. Like all other professions it has so many challenges too. Despite all challenges, people tend to see auditors as a critical filter sitting in between working management and the investors. Audit is an organized profession run by professional accountants governed by the rules and guidelines of IFAC (International Federation of Accountants) and various laws within the country a firm operates in.

International Standards on Auditing (ISA) promulgated by the IFAC/IAASB delineate numerous guidelines for the audit professionals to apply in their audit and similar other engagements. Apart from it, individual country within its own jurisdiction makes various laws and regulations to regulate the professionals and their activities. In addition, one of the units of IFAC known as International Ethics Standard Board for Accountants (IESBA) has documented Code of Ethics applicable for the professional accountants.

The core of all these is to make sure that accountants, while discharging their duties and

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Over last couple of decades, few incidences including dissolution of Arthur Andersen (the then one of the big 5 global accounting firms) from the globe in 2001 and recently declared two years ban on audits of listed entities by Price water house Coopers (popularly known as PwC) with substantial amount of financial penalty in India have given intensive jolt over the profession of audit. In Bangladesh, we have also examples of failure of di�erent magnitude! In the wake of such great shocks, we, the audit professionals, must critically look into our own practice models and methodologies with clear objectives to reposition ourselves, wherever needed, so that potential disaster can be avoided!

Audit, by its nature, is a noble profession across the globe for the sensitivity and value of the services it delivers to society but in particular, trade and commerce communities! Functional part of the management is responsible for reporting of financial information under the respective legal jurisdiction the company operates in. On the other hand, as required by law, auditors (Chartered Accountants who are licensed to carry on the profession of audits), an independent party being appointed by the shareholders in the Annual General Meeting (AGM), perform audit functions

entities, and poor financial reporting – were able to hide billions of dollars in debt from failed deals and projects. Chief Financial O�cer Andrew Fastow and other executives not only misled Enron's board of directors and audit committee on high-risk accounting practices, but also pressured Arthur Andersen (the auditor of Enron) to ignore the issues.

By the unusual e�ect of the engineered financial information the market price of Enron soared up to $90.75 in mid-2000 which again dropped to less than $1 by end of November 2001. The US Securities and Exchange Commission started probing into the fact and the Houston based Dynegy wished to purchase Enron at that extreme low price, but the deal naturally failed. Many executives at Enron were indicted for a variety of charges and some were later sentenced to prison. Enron's auditor, Arthur Andersen, was found guilty in a United States District Court of illegally destroying documents relevant to the SEC investigation which voided its license to audit public companies, e�ectively closing the business.

We as audit professionals would pay focus on what termed as auditor’s failure with respect to such unprecedented corporate damage. Big picture-wise auditors were blamed for their failure to identify fake and inflated financial information which eventually resulted in millions of dollars loss in the hands of shareholders. On the other hand, while SEC approached to investigate into the matters, the respective partner of Arthur Anderson was found to have instructed his o�ce to shred all documents related to Enron audit! So, whatever else the audit firm wished to say supporting their logic, methodologies etc. really did not work saving them. The ruling against Arthur Anderson was however

The Author is aChartered Accountant and

a Fellow Member of theInstitute of Chartered Accountants

of Bangladesh-ICAB

P developments until the world recession hit them putting them awestruck. In 2009 a scam came out where it was mentioned that Mr. Ramalinga Raju, the Chairman had manipulated the accounts in several ways leading to a disaster which he admitted later. This incident brought about a cyclone of concern and confusion across corporate world in India in particular and the rest of the globe at large. As instant consequences legal actions followed including arresting of Raju brothers, CFO of Satyam and so on.

But as audit professionals our attention got locked elsewhere seeing that PwC, the respective audit firm who were their auditors over the years failed to detect the fraudulent treatments in the financial statements they audited! Sometime in 2015 the special CBI court held Raju and nine other o�cials guilty of cheating. Among those held guilty were two former partners at PwC who were engaged dealing with audits of Satyam financials.

Satyam being a listed company, the case naturally came into the attention of the Security and Exchange Board of India (SEBI). They took several actions including barring Raju brothers from Capital markets. After having due process of investigation and related other actions, SEBI had recently declared their verdict against PwC, the audit firm recording five charges as follows:

• Evolving a new law codifying corporate governance rules and many related regulations in the US (one of the fastest enacted laws in the history of US);

• Almost concremation of Enron and their auditor Arthur Andersen (the then one of the Big 5s);

Satyam Incident and Consequences

Satyam Computer Services Ltd. was incorporated in 1987 as a private limited company in India for providing software development and consultancy services to large corporations. The company was promoted by B Rama Raju and B Ramalinga Raju.

The company over the years became one of the largest technology industries in India and thereafter there was no looking back on its way to next level expansions and

overturned at the US Supreme Court later, but by that time Arthur Anderson had lost majority of their customers and had ceased operating. The Arthur Anderson had to die a sad death in 2002 putting thousands of white collar people workless across the globe! Unfortunately, except for few directly guilty of o�ence, thousands of professionals faced the consequence which was not due to their fault!

This unprecedented disaster brought about some discernable changes in the market which were thought to be inevitable consequences and were visible in terms of:

• Bankruptcy of one of the largest companies in the US;

• Elimination of an accounting firm Arthur Anderson with working people of about 100 thousand across the globe;

responsibilities, would act and deliver with utmost diligence applying their competence and appropriate skills. Despite having all these regulations in force, we often come across information on the failure of the auditors to conduct their duties as diligently as they are expected to.

Enron Incidence and Consequences

The Enron scandal, publicized in October 2001, eventually led to the bankruptcy of the Enron

A Ringing BellAlarm for the Audit Professionals

Md. Rokonuzzaman FCA

they generated from this engagement and a penal interest.

The PwC is naturally disappointed and may prefer a stay order from the higher

The SEBI on charges of the points stated in the table above has barred PwC from audits for two years across India. It has also asked two partners and the firm to disgorge about Rs. 13 crore that includes the revenue

9. Engagement partner/ manager should remain a bit more careful building relationship with the client management. Close friendship/relationship with functional management has noteworthy influence on the independent behavior of an auditor;

10. Dissemination of concurrent success and failure stories to the sta� members should be a regular practice with a view to helping them repositioning their mindsets;

11. Creating a culture that encourages respective audit team members building innovative minds in terms of skepticism/finding new ways to think while performing an audit engagement;

12. Introducing reward and punishment against appropriate successes and failures respectively;

13. Last but not the least, building a good governance structure where issues and uncertainties can be professionally escalated, discussed and resolved.

Sources

Some information in the write up are picked up verbatim from various sources including internet-based reports while some are crafted as the writer thought fit for the context.

4. Create an environment where adequate scope is prevalent to o�er regular training on fast changing information technology that are extremely useful in accomplishing a credible audit;

5. To ensure regular monitoring on the quality of the work, there should be one independent quality assurance team functional at all times;

6. To ensure a culture that proper documentation of work papers, correspondences and related evidential matters becomes an embedded habit into the professional sta� members;

7. There should be demonstrated culture prevalent in the firm with respect to ethical practice across all activities in the firm. To have ready reference on ethical codes, firms may consult with the handbook on IESBA Code of Ethics which ICAB has circulated to its members. Examples may be picked up from our daily lives to help sta� members understand how to implement those in their work life;

8. Deliveries should be cross checked by the partners, where firm is proprietorship, a senior manager having adequate knowledge may be entrusted to deal with the objective of this point;

our finger towards the unscrupulous management, it may be worth repositioning our mindsets while staying the audit profession. We may consider a few things, which are not very di�cult practicing, would in turn save us from severe disaster!

Recommendations

As an active professional in the current market, I may o�er few points which I feel very pertinent with respect to setting precaution on the part of sensitive audit professionals. Request to the readers, not to consider my suggestions as conclusive ones nor would consider me as an authoritative writer on the subject matter. Suggestions are:

1. Recruitment and deployment of the audit professionals should be very objective and sensible keeping in mind that their performance would have substantial impact on image of the firm and the profession at large;

2. Regular training program on topical matters for the audit professionals and related sta� members should be part and parcel of the regular activities in an audit firm;

3. Introducing a culture that encourages sta� members to study the relevant professional matters from published books and booklets, journals, legislative circulars/ directives, internets, etc;

Corporation, an American energy company based in Houston, Texas, and the de facto dissolution of Arthur Andersen (AA), which was one of the Big 5 audit and accountancy firms in the world. In addition, being the largest bankruptcy reorganization in American history at that time, Enron was cited as the biggest audit failure.

Enron was formed in 1985 by Kenneth Lay after merging Houston Natural Gas and Inter North. Several years later, when Je�rey Skilling was hired, he developed a sta� of executives who – by the use of accounting loopholes, special purpose





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We all know that we have manylimitations while auditing thefinancial statements of a company.The methodologies that areprescribed as standards for the auditprofessionals hardly allow detectingintentional frauds and forgery thatmight be built into the financialstatement under review. In fact, therespective legislation does notnecessarily wish auditors to unveil allthese intentional fraudulent treatmentsin the financial information!

developments until the world recession hit them putting them awestruck. In 2009 a scam came out where it was mentioned that Mr. Ramalinga Raju, the Chairman had manipulated the accounts in several ways leading to a disaster which he admitted later. This incident brought about a cyclone of concern and confusion across corporate world in India in particular and the rest of the globe at large. As instant consequences legal actions followed including arresting of Raju brothers, CFO of Satyam and so on.























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court, but by the time they get a favorable order, if at all, a substantial damage would take place in the image of the audit profession. Moreover, PwC being one of the big 4s in audit firm network in the globe, the expected sense of disgrace would go even more on the face of the audit profession.

Ringing Bell Awakening Audit Professionals

We all know that we have many limitations while auditing the financial statements of a company. The methodologies that are prescribed as standards for the audit professionals hardly allow detecting intentional frauds and forgery that might be built into the financial statement under review. In fact, the respective legislation does not necessarily wish auditors to unveil all these intentional fraudulent treatments in the financial information! However, a sensible audit may act as critical deterrent factor for the fraudulent practices/intentions of the functional managements.

From the cases we discussed so far, to me it was not just a case of deficiency in knowledge and methodologies. These were more of ethical issues on the part of the functional management of the company and Engagement partners of the audit firms. It is natural that functional management would try to take the advantage of their tricky/engineered accounting practices. So, it may not be of any value if we point









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Recommendations







Sl. no.

What wentwrong

Observation by SEBI Quantification

1. Non-existent cash/bank balances

The auditors ignored first set of confirmations received directly from the banks and relied conclusively only on those received from the company, showing deposit balances, which were tallying with what was shown in the books.

Rs. 5,040crore

2. Inflated sales revenues

The auditors failed to do the walk-through tests in respect of the invoices; feigned ignorance of the internal control mechanism including XL porting in IMS and OF stages; chose to ignore internal audit reports; relied on the ledger entries prepared by the company and did not conduct the audit as mandated by the AS or the guidance note with bonafide intention of doing an actual audit.

7,588 fake invoices

3. Overstated debtors’ positions

PwC failed to perform the basic audit function of ensuring adequate external confirmations of debtor balances from the debtors in question, which in turn resulted in it failing to notice the inflated and false figures concerning SCSL.

Several 100 crores

4. TDS benefits claimed at variance with TDS shown in books

Not quantified

5. Failed to detect receipts

Rs. 1,425crore


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accounts, frauds, cyber-crimes and cyber-terrorism. Cyber attacks are really big threats to economic and financial security, better way of life and the whole national security. The recent cyber-crimes that are happening every day in high-income. middle-income and low-income economies, make the stakeholders, policy-makers and state leaders appallingly worried. The news media, newspapers, TV, Radio- all media are always covered up with news of cyber-crimes, hacking of bank accounts and creating innumerable problems in the computer systems, computer networks. The technology and systems for combating cyber-attacks have been precocious. The notorious but talented cyber-criminals have also upgraded their knowledge, techniques and devices. These criminals are imperceptible; we don’t see them, we don’t hear them and we can’t latch them but they can fusillade the computer systems, networks of any bank or any FI to draw and illegally transfer money beyond borders globally.

What’s Cyber Security?

Cyber security is the form of technologies and progression which practices safety and protection of network, computers, data and programs from illegal access, cyber threats, attacks or damages. It deals with monitoring physical entrée to hardware alongside protecting smudge coming via network access and code

ntroduction

The industrial transmogrification in the present globalized world has moved the modern civilization to a wonderful digital compass where digital rhythms wake up people from sleep at the early hours of the day. Peoples’ personal, professional and other lives have gone digital; they work, live, and move in the cyberspace. They use computers, internets, online, mobile phones with eclectic devices every day and night, morning and evening; to talk, email, text, chat and twitter with friends, o�ce colleagues, bosses and with family members. People do businesses online, on cell phones and other digital niceties; from banking to shopping, from government services to private services, from manufacturing to distribution. Cyber world and digital infrastructure make all these happenings smoothly, moving at the fastest speed than the non-digital world. Cyber technologies are widely and comprehensively used in banks and financial institutions (FIs) in high-income, middle-income and low-income economies.

The increasing reliance on cyber technologies like, internet, online payments from banks and Financial Institutions (FIs), computerized software, e-commerce, mobile banking, banking through ATM booths and many more, make the people frangible to cyber-attacks, hacking of

committed and red the least. (Source: ITU). The International Telecommunications Union (ITU) is the United Nations’ specialized agency for information and communication technologies.

Targets of Cyber Attackers

Cyber-attackers, cyber-thieves, fraudsters and hacktivists always go where money flows, where financial transactions take place. Banks and financial institutions’ main business is to deal with money-received from their stakeholders and deposit-holders. These sectors of industries have become the archetypal target of all the hacktivists. In the year 2017, cyber-attacks on banks and FIs covered 31% of the cyber-attacks that took place globally and ranked as number one vulnerable sector. The banks and FIs rank third in the number of data breaches, behind the leader, public organizations, and the information industry, according to Verizon’s Data Breach Investigations Report. The banks and FIs have been adopting most sophisticated and latest designed equipment and software to combat cyber-attacks in every year. But the cyber-fraudsters are found to be adroit and smarter enough to come with more advanced and sophisticated technologies to interrupt, intercept, whittle and hack the banks’ and FIs’ networks for personal gains.

The 2016-17 cyber-attacks to banks and FIs were di�erent and forward-thinking than that of year 2015-16. A Ponemon Institute survey release found that 43% of US companies had experienced a security breach in the past year. Big names were impacted, including eBay, American Express, JPMorgan Chase, and the Home Depot. And with the big names came big headlines. The rhythm of fissures, headlines, and feedbacks was

The Author is aChartered Accountant and

a Fellow Member of theInstitute of Chartered Accountants

of Bangladesh-ICAB

I institutions were targeted by a new malware attack aimed at stealing passwords. This followed the discovery in January of attack aimed at the Bank of Montreal (BMO), Royal Bank of Canada (RBC) and National Bank of Canada and a number of other institutions around the world that included ensnaring customers to fake bank Web sites.

Financial institutions have always been in the sights of hackers for palpable reasons. Recently the world’s greatest ever heist took place in Bangladesh in which the cyber-criminals figured out how to cheat $101 million from the record of Central Bank of Bangladesh (Bangladesh Bank) with the Federal Reserve Bank of New York. The hacktivists/ digital-o�enders supposedly broke the PC frameworks of Bangladesh Bank, stole its installments exchange secret word and accreditations.

How to Protect Banks and FIs from Cyber Attacks?

Aegis is better than healing is the oldest and universally accepted adage, all-time-fit to shield banks and FIs from the looming cyber-attacks. The five core cybersecurity functions of the National Institute of Standards and Technology (NIST)’s Cybersecurity Framework are well known preventive measures that the banking industry and FIs may implement. These five functions provide organization and

heist is an age-old crime, the methods deployed were wholly from the 21st century. Bangladesh, an emerging economy, recently faced cyber-attacks on ATM and many consumers lost huge amount of money from many ATM booths because of enfeebled and etiolated protection systems.

With the revolution in computer technologies, the evolution of methods to deliver banking services to various customers at national and international levels has been changed. The banking industry has gone from wide spread use of Automated Teller Machine (ATM) in the 1980s, to modern points of sale (PoS) terminals in 1990s, to internet and on-line banking in 2000s and mobile banking in 2015. the new and evolving ways of meeting consumers’ demand, however, come with new cyber-fraud patterns and evolving risks of cyber-attacks from 360 degree angles.

In 2015-16, 15 Canadian financial

inexorable and unabated. It’s hard to imagine that how many organizations in this sector will be able to reinforce, gird and inspissate their defense tools and technologies over the upcoming years and future years to minimize and curtail the cyber-attacks. Banks and FIs need to implement new security measures, tactics and technologies keeping in mind that fraudsters and hacktivists would surely respond by changing their operational techniques and methods.

Cyber-criminals are constantly developing new methods and technologies to attack traditional channels used by banks and FIs like ATM, Mobile Banking. In a highly coordinated attack involving people across some 50 countries, cybercriminals worked with local groups to finagle and knead the financial systems and magnetic strips on debit and credit cards to shear millions of dollars from thousands of ATMs around the world during two separate attacks. While an ATM

injection. The sole purpose of cyber security is to defend, prevent, protect or alleviate infliction to or destruction of the integrity of computing assets belonging to or connecting to an organization’s network, applications, devices and data. Components of cyber security include:

• Application security

• Data security

• System security

• Fiasco recuperation/business coherence arranging

• Operational security

• End-client training

Cyber Security in Banks and Financial InstitutionsA Highbrow Exegesis

M Jalal Hussain FCA

attacks, Corporate Account Take Over (CATO) attacks, Automated Teller Machine (ATM cash-out) attacks and Crypto Locker attacks. Leadership teams at financial services organizations (banks/FIs) need to understand

structure to help the bank navigate its way to better protection against cyber threats. The five core functions of cybersecurity include: identify internal and external cyber risk; protect organization systems, assets and data; detect systems in intrusions, data breaches and unauthorized access; response to potential cybersecurity events and recover from cyber security events by restoring normal operations and services.

The National Institute of Standards and Technology (NIST), an agency of the U.S. Department of Commerce recommended that the MD/CEO of banks and FIs need to know and understand clearly the four basics about cyber-attacks on banking industries are: Distributed Denials of Services (DDoS)

In his research report titled “Review of IT Operations of Banks in Bangladesh 2016,” Shihab Uddin Khan, associate professor at BIBM, said: “Some 16% banks mentioned that the current situation of cyber security is not enough to prevent any virtual or physical damage to information management system, perceiving the highest risk.” He said: “around 36% of the surveyed banks believe that they are at high risk of information loss at any moment. 32% banks reported that they are under moderate risks, whereas 12% and 4% banks are low and very low risks respectively.”

In many countries in South-East Asia and Africa, corruption is pandemic and the donors and the economists term the position as catastrophic and vacillating. Corruption is a serious threat that stunts economic development, make the cyber security system ine�ective, demoralizes the political system, the public and private o�cials, and the general

by banking industry. In order to understand their adversaries, banks must anticipate new, sophisticated forms of attack, or new versions of old tricks. At the same time, they must also work to ensure that their partners and stakeholders are secure, as part of strengthening the entire supply chain of information to minimize attacks against the weakest links. They must do all this while simultaneously rolling out services across emerging channels, such as mobile. It is a challenging task, but it’s a vital task to maintain customer trust.

Cyber Security of Banks and FIs in Bangladesh

A total of 52% banks i

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