Explained | How Bangladesh's economy was siphoned dry

Using a web of financial schemes, Bangladesh's central bank chief said, perpetrators in the government and at some of the country's biggest companies pulled off what was effectively the largest bank heist in the history of money.

Dhaka, Bangladesh: The new governor of Bangladesh's central bank, Ahsan Mansur, calculates that about $17 billion was siphoned from the country's financial system in the 15 years before the government of Sheikh Hasina collapsed in August.

Other economists guess that the true value looted during Hasina's rule, before she fled the country, could exceed $30 billion. But no one can say for sure. Using a web of financial schemes, Mansur said, the perpetrators in the government and at some of the country's biggest companies pulled off what was effectively the largest bank heist in the history of money. And they did incalculable damage to Bangladesh's economy.

"The highest level of political authority realized that the banks are the best place to rob," said Mansur, an appointee of an interim government in Bangladesh. For an inside job, that meant taking control of the central bank and the ownership of a clutch of private banks and their boards of directors. The banks then issued billions of dollars in loans to companies, some of them fictional, that would never be paid back. Much of that money was then transferred out of the country illegally.

"Whole boards were hijacked," said Mansur, an economist who worked at the International Monetary Fund for 27 years. In that time, he never witnessed "any country where the highest level of the government, engineering with the help of some goons," managed "the systematic robbing of the banks."

In October, Mansur was in Washington to lobby the IMF and other international lenders for financial help through the difficult period ahead. Like many members of the new government, led by Nobel Prize-winning economist Muhammad Yunus, he is a seasoned technocrat.

Bangladesh, home to 170 million people, is still reeling from the cycle of vengeance, including mob violence, that came after a protest movement toppled Hasina, who persecuted her critics and used the power of the state to crush the political opposition. The economic storm is likely to worsen next year, Mansur reckons, before it clears.

Hasina escaped to India, her fate and fortune indeterminate. Bangladesh's interim government said it would seek her extradition. One of her allies who fled the country, Saifuzzaman Chowdhury, a former lawmaker in her party from the port city of Chittagong, is under investigation by the interim government for money laundering, according to A.K.M. Ehsan, executive director of the Bangladesh Financial Intelligence Unit, the central bank's investigation arm. Charges have not been filed. Chowdhury told Al Jazeera that he was the subject of a "witch hunt" against members of the Hasina government.

Attempts to reach Chowdhury, as well as Hasina, were unsuccessful. Their party's office in Dhaka, the capital, is empty. Multiple calls and messages to its spokespeople, there and abroad, went unanswered.

The student movement that brought down Hasina started as a complaint about the lack of jobs and economic fairness. Before security forces fired at protesters, killing hundreds, it had gained momentum on the back of widespread misery. For two years, the country had been tipping into a full-blown financial crisis.

An Offer He Couldn't Refuse

It was a hectic but ordinary day when Mohammad Abdul Mannan, managing director of Islami Bank of Bangladesh, then the country's biggest financial firm, set out to work on Jan. 5, 2017. His chauffeur was steering him through traffic in Dhaka to an early-morning board meeting. Then Mannan got a phone call. It was the head of Bangladesh's military intelligence service, telling him to change course and come to the service's headquarters.

In an interview in October, Mannan, safely back in Dhaka after eight years living abroad, told what happened next.

Military agents took his phone, watch and wallet. The intelligence chief began by summarizing Mannan's long career, praising him for having brought banking to Bangladesh's rural poor.

Mannan said he remembered starting to wonder whether his time was being wasted. But then he was told to sign a letter of resignation from Islami Bank, effective immediately. The order, the security chief told him, had come from "the highest authority in the country," meaning the prime minister, Hasina.

He refused to sign. Mannan recalled thinking about the early Islamic caliph Usman, who was set upon by assassins in the seventh century and resisted until the end.

At this point, Mannan found his story difficult to tell. First, he said, his captors "tried to convince me verbally." Then officers took him from the chief's office to another location.

Even now, "because of my personality," Mannan said, he did not want to describe the "indignities" that were forced on him. He said he had lost track of time and learned only subsequently that he had signed the resignation letter sometime before noon. He was released and spent the next eight years in effective exile. Today he is back running a bank.

According to Mannan and Mansur, the central bank chief, a conglomerate called the S. Alam Group took control of Islami Bank, as well as other banks.

S. Alam Group's founder, Saiful Alam, began as a trader but expanded into many other fields, including energy and real estate, during Hasina's reign. The central bank's claim is that Alam's company, among others, conspired with her government to empty out the banking sector.

Since the interim government took over, bank accounts held by Alam and his close associates have been frozen under a money-laundering prevention act, according to Ehsan of the central bank's investigations unit.

Other companies were also able to take controlling interests in other banks, which became like money-printing machines. Without government oversight and with compliant executives and directors, they made loans to favored companies that were never likely to be repaid. Those loans, which are classified as nonperforming, now sit on the books of Bangladesh's banks, Mansur said.

Through lawyers in London at the firm Quinn Emanuel, the S. Alam Group said in a statement that it had a controlling stake in only one bank, and that it was not Islami Bank. The company accused Mansur of waging a "persecutory" campaign against the group's business empire that "has failed to respect even basic principles of due process," according to the lawyers' statement. The dispute revolves around questions about who owns the companies that came to own the controlling stake in Islami Bank.

Banks With Nothing Left

Some of Bangladesh's banks are now on life support. All of them, even the healthy ones, are unable to provide much credit and can honor their depositors' withdrawals only sporadically. Mansur has to figure out which ones are worth saving.

The law enforcement authorities in the new government are chasing the trail of money that has been spirited out of the country. Money-laundering cases, most involving mispriced exports or imports, have been filed against former members of Hasina's party and the companies that worked with them, including several of the country's biggest.

The schemes not only put ill-gotten gains in the pockets of exporters, but also undermined the Bangladeshi currency and the net worth of everyone who held it. The damage started to accumulate after 2014, when Hasina won reelection in a contest "marred by vote rigging, intimidation and violence," in the words of the U.S. State Department. The economy's problems piled up when the war in Ukraine put pressure on weaker currencies everywhere.

In 2022, the cost of Bangladesh's most important imports started rising -- fuel and food most of all. That made it harder for businesses to pay their bills. Energy plants were forced to impose power cuts.

Ordinary businesses and consumers have been left struggling to survive. With so many banks short on cash, some workers were unable to get more than a small portion of their money out, even on payday.

At Techno Drugs, a pharmaceutical manufacturer, laid-off workers have staged demonstrations. But it is the lowest-paid employees who are hurt the worst, according to Majedul Karim, an assistant general manager.

He said these workers were telling him, "The bank is not giving me my money." So the company is instead paying them in cash and avoiding the bank, Karim said, adding that his own debit card does not work.

Nipa Khan has been shopping at Kawran Bazar, a sprawling hub of commerce in Dhaka with nearly 2,000 shops, for 20 years. She cares for two children and lives on money, or remittances, that her husband sends from Britain.

Her focus is on "survival first," she said, adding that she skipped one or two meals a day to ensure that her school-age children stayed well fed.

Mansur, who took over the central bank in August, recounted what he had seen when he first surveyed the economy. "Everything was a disaster," he said. Now he says he is "cautiously optimistic" that things are being stabilized.

This "is not the year for economic growth," Mansur added. But inflation is coming down, and remittances are going up. "We have to be satisfied with that," he said. He has said he is hopeful that the IMF will provide $3 billion to support Bangladesh's currency.

Khan, too, believes that the longer-term future looks brighter. "I need to be scrappy," she said, because a lot more needs to be done before "I can live my life without feeling robbed."