Saad Musa Group’s colossal financial fraud shakes Bangladesh banking sector

Bangladesh, Saad Musa Group

Saad Musa Group, an industrial conglomerate based in the port city of Chittagong, Bangladesh, has gained notoriety in recent years due to its involvement in a large-scale financial scandal. Under the leadership of Muhammad Mohsin, the group has managed to secure loans amounting to Tk 5,668 crore (approximately $670 million) from various banks by presenting fraudulent documentation of raw material purchases for exports. Over the past decade, all of these loans have defaulted, resulting in severe financial distress for 24 banks and financial institutions in the country.

Muhammad Mohsin, often described as a master manipulator, has a history of evading repercussions from financial scandals similar to those involving Crescent, Hallmark, and Bismillah groups. He has earned the dubious title of the “new king” of voluntary defaulters in Bangladesh. His financial maneuvers have left a trail of devastation, particularly impacting the National Bank Limited (NBL), which has been significantly defrauded by the Saad Musa Group.

NBL’s Agrabad branch alone holds defaulted loans of BDT 11.78 billion from four Saad Musa Group companies. Among the fraudulent activities, Mohsin established a paper company named ‘Radium Composite Textile Mill,’ appointing his cousin Moin Uddin Ahmed Chowdhury as the Managing Director. This company secured BDT 7.55 billion from NBL. Furthermore, accounts under the name of ESM Corporation, opened by Radium Composites and Saad Musa Group employee Mohammed Shawkat Ali, were extensively used to sell fake bills across various banks. Additionally, Mohsin withdrew BDT 1.88 billion in government incentive loans, intended to mitigate the impact of the COVID-19 pandemic, without investing it back into his business.

The investigation revealed that Mohsin obtained most of these loans between 2012 and 2021. Despite acquiring substantial funds purportedly for export-related raw materials, actual exports amounted to only BDT 1.92 billion, conducted solely through Al-Arafah Islami Bank. Currently, all factories for which these loans were arranged are non-operational.

In 2021, the Bangladesh Financial Intelligence Unit (BFIU) submitted a report to the Anti-Corruption Commission (ACC) highlighting the group’s numerous irregularities and recommending legal action. Although the BFIU directed banks to recover their loans, Mohsin continued to siphon off funds, shutting down his businesses when under scrutiny. By mid-2022, he attempted to secure additional loans by falsely claiming to have significant loans from banks in China, Belgium, and Germany, but these claims were soon debunked, leading to lawsuits in the credit court.

Muhammad Mohsin, originally a resident of Anwara in Chittagong, started his business career in 1982, transitioning from supplying goods to local shops to opening a grocery store in 1986, and eventually entering the garment industry. In 1994, he co-founded the Saad Musa Group with his father and uncle. Mohsin is also an entrepreneurial director of South Bengal Agriculture and Commerce Bank, operational since 2013, while his wife, Shamima Nargis, formerly served as a director of Meridian Finance and Investment until her resignation in February.

On April 23, 2021, the Finance Court of Chittagong banned Mohsin and his wife from leaving the country due to a case involving BDT 30.00 billion. Numerous arrest warrants have also been issued against him in other bank-related cases.

Despite these allegations, Mohsin claims he is a victim of vendetta, asserting his bank loans total BDT 35.00 billion against his assets worth BDT 90.00 billion. He denies having any benami (undeclared) loans or assets. When confronted with BFIU’s investigation into loan fraud through fake accepted bills, he admitted to some fund diversion but maintained that all money was invested back into his business.

Recently, Bangladesh Bank issued guidelines on identifying and taking action against voluntary defaulters. Officials from the Central Bank have indicated that Mohsin’s activities align with these guidelines, categorizing him as a willful defaulter.

Saad Musa Industrial Park, located near Barkal Road before entering Anwara Upazila Sadar, stands as a testament to the group’s fraudulent activities. On March 31, a security guard, concealing his identity, discovered that all factories within the industrial park were locked, and a rusting five-story steel structure building bore the signboard “Proposed Saad Musa Economic Zone.” Locals recounted that the group employed 1,700 workers in five factories, but production halted years ago, with factories fully closing in November 2020 and employee wages remaining unpaid.

Opposite the industrial park, a once-thriving restaurant named ‘Allahhar Daan,’ primarily serving Saad Musa Group’s officers and employees, closed in 2022 due to the factory’s decline. The restaurant owner now sells old furniture from ships.

Muhammad Mohsin’s land acquisitions, particularly around 2012, sparked curiosity and suspicion among locals. Initially, they assumed the assets were purchased with legitimate business funds, only to later realize that the acquisitions were made using bank loans.

NBL’s entanglement with the Saad Musa Group began in 2011 with a BDT 1.20 billion composite loan, which eventually escalated to BDT 9.59 billion under the bank’s former management. By 2016, NBL had approved BDT 4.15 billion in working capital loans for Saad Musa Hometex and Clothing. However, significant amounts were misappropriated to settle unrelated debts, such as transferring BDT 1.05 billion to Mahim Real Estate, owned by the late MP Aslamul Haque, to clear his Maisha Property’s debt.

Further investigations by Bangladesh Bank in 2017 revealed irregularities in the sale of land belonging to the National Bank Foundation, indicating possible personal gains for some bank owners. The BFIU’s 2021 report to the ACC documented misuse of government incentive loans and other financial malpractices, recommending legal actions against those involved.

Muhammad Mohsin denied allegations of transferring funds to settle Aslamul Haque’s debts, citing business relationships instead. However, his responses were evasive when probed further on specific transactions.

In 2018, despite Saad Musa Group’s default status with NBL, Mohsin managed to secure a BDT 4.10 billion loan for his cousin’s company, Radium Composite Textile Mill. This loan, along with several others, was fraudulently manipulated using fake local LCs, resulting in substantial misappropriation of funds.

Premier Bank and Exim Bank have also fallen victim to the Saad Musa Group’s fraudulent schemes, with Premier Bank defaulting on BDT 4.64 billion and Exim Bank on BDT 4.98 billion. These loans were obtained through deceptive means, including creating fake accepted bills and misusing funds intended for capital equipment and spare parts imports.

Prime Bank, too, suffered from fraudulent loans, with BDT 1.22 billion defaulted. In 2012, Prime Bank disbursed BDT 800 million for constructing a factory building for Saima-Samirah Textile Mill without verifying the construction progress, resulting in misappropriation of funds for other purposes.

The list of banks and financial institutions impacted by the Saad Musa Group extends further, including Standard Bank, Agrani Bank, Pubali Bank, Mutual Trust Bank, Southeast Bank, NCC Bank, and NRB Commercial Bank, among others, with defaulted loans amounting to hundreds of crores.

Despite these extensive financial irregularities, Muhammad Mohsin continues to claim he can rectify the situation if supported by the government, citing his operational factories and machinery as potential assets for recovery.

Investigations also uncovered that Mohsin purchased an industrial plot in California, USA, in 2012 using laundered money. Although the plot was sold secretly in 2014, a money laundering case filed by the National Board of Revenue (NBR) against Mohsin is ongoing.

An official from Bangladesh Bank described Mohsin as “very cunning,” noting suspicions of his attempts to bring back laundered money in the guise of foreign loans. Despite recommendations from the BFIU, the ACC has yet to take decisive action against Mohsin.

Bangladesh Financial Intelligence Unit’s 2021 report to the Anti-Corruption Commission (ACC) detailed specific instances of loan fraud and recommended legal action, yet ACC’s investigation suggested dropping charges against Mohsin, citing his potential to create employment opportunities through future investments.

Saad Musa Group scandal underscores the pervasive issues of financial fraud and corruption within Bangladesh’s banking sector, highlighting the need for stringent oversight and accountability to protect public and depositor interests.

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