Calls for SWIFT to set up local office grow louder

SWIFT Global, whose service was used by hackers to transfer Bangladesh Bank's $101 million, should set up an office in the country to reduce the risks that arise from cross-border transactions, bankers said.

If SWIFT had an office in Dhaka, the BB could have detected the February hacking much earlier, the bankers said. It is also evident in the case filed by the central bank on March 15.

Officials of the BB dealing room sensed on February 5 that something was wrong with the SWFIT terminal and it took three days to get the system up and running again.

On February 8, after analysing the information on the terminals connected to the SWIFT interface, they discovered that four unauthorised messages were sent from their end against which $101 million were remitted to the Philippines and Sri Lanka.

The $81 million that was channelled to the Philippines was withdrawn on February 9, while the $20 million wired to Sri Lanka could be retrieved as the hackers made a spelling error on the transfer order, which prompted the bank to contact the BB.

“If SWIFT had a customer support office here, the problem with the BB's SWIFT system could have been fixed promptly,” said a senior BB official wishing not to be named.

Not only that, SWIFT does not have a security server in Bangladesh although the BB and 52 banks have been using its system to transfer funds for the last 10 years or so.

In its absence, Bangladeshi banks have to make do with SWIFT's security servers in India, Singapore, Hong Kong or elsewhere. “It is a good time for the BB to initiate setting up a SWIFT's central server here,” said Kazi Saifuddin Munir, managing director of IT Consultants that run Q Cash, a payments switch with a network of 3,000 ATMs.

“The BB as the central bank can initiate the process,” said Masodul Bari, head of IT of Al Arafah Bank.

Since SWIFT is the protocol messaging system of the real-time gross settlement, the BB can now go ahead and set up a server in the country, Munir said.

The move will not only reduce the costs for banks but also address the security concerns that arise from cross-border messaging, according to Bari.

But Syed Abu Naser Bukhtear Ahmed, a former banker, is sceptical of the benefits. “Maybe a central server will reduce costs, but there will be risks too. Who is going to maintain the server?”

Anis A Khan, managing director of Mutual Trust Bank and chairperson of SWIFT User and Member Group of Bangladesh, said being a member-owned cooperative and not for profit organisation, SWIFT operates on a unique model.

The Bangladesh market is still small, even though 52 banks are part of SWIFT, he said. “Our business volumes are low to justify having both an office and a server here.”

SWIFT has a regional office in Mumbai but no server there.

SWIFT servers are owned and managed by themselves in their own premises and this also ensures that no one can tamper with them in any way, he said.

But some bankers disagree with Khan on the volume of business, saying Bangladesh is the second largest garment exporter in the world after China.

“We imported over $40 billion worth of goods and exported $30 billion in fiscal 2014-15. The figure indicates how many LCs we open and how many transactions we make every day,” said the head of a treasury division of a private bank, asking not to be named.