At least 20 companies pocket incentives over 5 years through ghost shipments

"Some exporters are taking incentives from the government by falsely showing exports, with the help of some customs officials and C&F agents. Investigations show these products did not even enter the private ICD yards or the port."

— A letter to NBR chair from Ctg Customs House commissioner

Between August 2018 and September 2020, Dhaka-based Mamun Enterprise has drawn over Tk 6.2 crore in incentives against agro exports.

Nothing wrong in it, as farm sector exporters are entitled to the government benefit that aims to boost export of certain goods. The problem is, the company did not ship any of the 142 consignments against which it pocketed the incentive, a customs investigation has found.

Including Mamun Enterprise, at least 20 companies have claimed 20 percent export incentive over the last five years, laundering huge sums through ghostly shipments of 965 consignments worth about Tk 451.5 crore.  

Investigators assessed data from three out of the seven local banks where these companies opened their LCs (letter of credit), and found 17 of them pocketed Tk 33.5 crore in incentive.

Although these companies did not ship a single item, they received about Tk 182 crore against these shipments, as per bank documents.

Customs officials suspect the amount of incentive thus pocketed would go up to Tk 90 crore once information from the four other banks was available.

Customs documents seen by The Daily Star give no indication that these banks were involved in the scam, but officials said they would not rule out anything at this stage.

While the probe continues, the customs authorities unearthed the fraud after scrutinising documents of some 4,000 consignments against which cash incentives were claimed between May 2017 and January this year. 

All the 965 non-existent shipments were shown to be agro products or processed food such as potato, sesame seed, red chili, turmeric, tomato, curry coriander powder and biryani masala. Exporters of these items are entitled to a 20 percent cash incentive on the export value.

Investigators said the ghostly exports were shown by breaching the NBR server by an unholy alliance of exporters and their agents as well as some customs officials.

The NBR server is maintained by its IT department, which issues and manages IDs of all customs officials to access the Automated System for Customs Data (ASYCUDA). It is an integrated customs management system for international trade and transport operations of import, export, and transit procedures. With a valid ID and password, the system can be accessed from anywhere in the country.

Of the companies, Mamun Enterprise and Miazi Food Product Ltd, both owned by Elias Mamun Miazi, showed export of 205 consignments worth around Tk 99 crore. They encashed Tk 7.61 crore in incentive, data collected from three of the seven banks show.

Shipping papers show Mamun Enterprise is located at Shatabdi Centre in the Inner Circular Road in the capital's Fakirapool. On March 20, The Daily Star found another business establishment named Janani Enterprise there. A guard working for four years there said there was never a business named Mamun Enterprise at the centre.

Miazi Food Products Ltd, the other venture owned by Mamun Miazi, was found in its official address, but on a different floor.

Asked about the ghostly exports, Mamun said he had no clue how some of their consignments were shown 'shipped' on the NBR server.

"We received only Tk 7 to 8 crore in incentive and some of them were against legal invoices," he said, and declined to comment on the fake address of Mamun Enterprise.

Two other companies -- Doe Empex Ltd and MB Agro Food Product -- showed similar non-existent exports, claiming Tk 4.22 crore and Tk 15 lakh in incentives, respectively.

Contacted, Doe Empex Ltd Chairman Zia Hayder Mithu first asked this correspondent to call him later, but he did not pick up the phone afterwards.

MB Agro Food Product owner Mushtaq Khan sounded unperturbed about his company's involvement in the fraud.

"Even though the goods were not exported, several crores of taka have entered the country, which is playing a big role in increasing the foreign reserves," he said. 

UNEARTHING THE SCAM

The Chattogram Customs formed two probe committees in November last year, after The Daily Star published a report titled "Chattogram Port: Phantom export raises alarm".

That report was just a tip of the iceberg.

Five months later in February this year, Chattogram Customs House Commissioner Mohammad Fakhrul Alam sent a letter to the NBR chairman detailing the massive scam.

"Some exporters are taking incentives from the government by falsely showing exports, with the help of some customs officials and C&F [clearing and forwarding] agents. Investigations show these products did not even enter the private ICD [inland container depots] yards or the port," the letter reads.

The letter also requested the central bank and the commerce ministry to file criminal and money laundering cases against the scammers.

The customs had attached a detailed list of 872 fake consignments of 18 exporters with the letter.

At least 93 ghostly consignments of three other exporters have since been identified, and officials anticipate the number to go up as a separate investigation is underway.  

Customs documents show at least 20 C&F agents helped the exporters obtain customs officials' IDs and passwords to create fake export entries on the NBR server.  

Such forgery through false declaration happens mostly in the case of products whose export fetches 20 percent incentives, Fakhrul Alam said.

Imports and exports by these identified companies as well as the licences of the C&F agents have since been suspended, he added.

NBR authorities have also suspended payments of incentives to any of the identified fraudsters, and are considering legal actions against them, said Hossain Ahmed, an NBR member who looks after export, bond and IT sections.

"We will sue them over money laundering for bringing dollars into the country illegally," he said.

BREACHING THE NBR SERVER

These non-existent exports were possible just by changing the status of the shipments on the NBR server. It was done by using the IDs and passwords of customs officials, investigators found.

As per the rules, exporters through their nominated C&F agent first create a Bill of Export on the NBR server. The exporters then carry the consignment to ICDs at the port for customs inspection, before they are sent to the port.

The port authorities then clear the consignments for shipment on the designated ship. The exporters then submit the "shipment on board" certificate and other documents to the ICD official for upgrading the consignment status from "yellow" to "green" on the server, meaning the goods have left for the destination.

For the fake exports, however, the gangs have simply created an export file on the server by using authorised IDs and passwords. In some cases, they prepared fake documents, and in other cases no documents at all, investigators said. 

Customs authorities are yet to identify the IDs used.

The Daily Star randomly reviewed 84 documents and found eight IDs were used to upgrade the consignment status from "yellow" to "green".

Changing the status of export goods is easier as they go through a single-step customs inspection as opposed to the four-step inspection for imported goods, officials said. 

Abul Kashem, deputy commissioner of the Customs House, said the export process should be made more rigorous, having three to four phases of inspections.

"Currently, the Bill of Export is submitted on the server by the exporter's C&F agent. The export process is deemed complete upon receiving copies of the depot and port officials, without requiring any confirmation on the server," he added.

To prevent similar breaches, customs authorities have recently introduced one-time passwords (OTPs), sent to the authorised personnel's mobile phones.

HOW DID THE EXPORT PROCEED COME?

To claim incentives from Bangladesh Bank, exporters are required to submit export information on the NBR server along with an acknowledgment letter, confirming the receipt of the export proceeds by the lien bank.

The central bank pays the incentive after an internal audit by the exporter's bank.

Sources in banks, C&F agents and exporting companies said that in case of fake exports, exporters and their C&F agents often use a front office in the "importing" countries. These front offices sometimes collect remittance from Bangladeshi migrant workers living in those countries for sending back home, offering them higher cash incentives than those given by the government.

Posing as buyers, they then send the money through the exporter's bank, showing it as export proceeds.

"The money they send is in fact remittances of Bangladeshi expatriates," said one source, which was echoed by two other sources.

In case of the identified fake exports, the destinations were Malaysia, United Arab Emirates, Singapore and Saudi Arabia – countries where millions of Bangladeshi migrants live.

Asked, the customs commissioner said they were clueless how the export proceeds entered the country. "It needs an in-depth investigation. We requested the NBR and Bangladesh Bank to investigate it."

Md Serajul Islam, executive director and spokesperson of Bangladesh Bank, said a BB team visits the exporting company office for verification before disbursing any incentives.

"There is no scope for availing incentives by showing fake exports. There are scopes for investigating how the money entered the country without exporting goods. The law also has provisions to act against the bank and the audit firm concerned for their involvement in any illegal payment," he said.