Staff Correspondent:

Bangladesh’s banking sector has once again come under scrutiny over allegations that the procurement of foreign Core Banking Software (CBS), software license renewals, and Annual Maintenance Contracts (AMC) are being used as channels for illicit financial outflows.

Industry experts warn that practices such as over-invoicing, unnecessary software purchases, fictitious license renewals, and the use of offshore intermediaries could create significant opportunities for money laundering.

According to experts, these irregularities generally occur through four major methods. First, banks may declare software prices far above their actual market value and transfer the excess funds abroad through legitimate letters of credit or remittance channels. Second, substantial payments may be made annually for software license renewals or maintenance services that are never actually delivered. Third, procurement may be routed through offshore shell companies or intermediary firms instead of the original software developer, allowing excess funds to be siphoned overseas. In some cases, banks are also accused of purchasing outdated or ineffective software and later declaring it unusable, resulting in financial losses.

Bangladesh Bank Investigation into Agrani Bank:

Agrani Bank has previously been at the center of controversy over alleged irregularities involving its Core Banking Software.

A Bangladesh Bank inspection report found serious irregularities in the bank’s T24 Core Banking Software upgrade and license renewal process. According to the report, attempts were made to release payments despite the software not being properly upgraded. The report also identified irregularities in IT-related expenditures involving Flora Telecom, the local representative of software vendor Temenos.

The inspection further raised questions about the accountability of the bank’s management and recommended that the Bangladesh Financial Intelligence Unit (BFIU) examine whether the transactions had any links to money laundering.

Similar Allegations Against Other Banks:

Sources familiar with the matter claim that Agrani Bank is not the only institution facing such allegations.

Sonali Bank has reportedly faced accusations of irregularities in foreign software upgrades and annual maintenance contract renewals. BASIC Bank has also been criticized at different times over alleged financial irregularities related to Core Banking Software procurement and IT infrastructure purchases.

Meanwhile, Janata Bank has faced allegations concerning software license renewals and excessive overseas payments for IT consultancy services, which have reportedly been reviewed by relevant authorities on various occasions.

Bangladesh Bank Shifts Policy:

Bangladesh Bank itself has moved toward reducing its reliance on foreign Core Banking Software after years of experience with overseas vendors.

According to sources, between 2011 and 2024, the central bank paid more than BDT 10 billion for software licenses, maintenance, and consultancy services to a foreign IT company.

To reduce dependency on foreign technology, lower operational costs, and strengthen cybersecurity, Bangladesh Bank subsequently introduced its own Bangladesh Bank Core Banking Information System (BCBICS), developed by its in-house technology professionals.

Fresh Plans to Purchase Foreign Software:

Despite the central bank’s policy shift, concerns have emerged that several commercial banks are once again moving to procure foreign Core Banking Software.

A bank director, speaking on condition of anonymity, claimed that one bank is currently pursuing the purchase of Core Banking Software from Oracle at an estimated cost of around BDT 970 million (approximately BDT 97 crore).

The director alleged that a domestically developed solution with similar functionality could be implemented for between BDT 20 million and BDT 30 million (BDT 2–3 crore), raising concerns over cost efficiency and value for money.

Why Such Irregularities Are Difficult to Detect:

Fazle Rabbi, Chairman of the Strategy and Policy Forum and an IT expert, said the technical complexity of Core Banking Software makes conventional financial audits insufficient.

“The source code, licensing framework, user licenses, software modules, upgrades, and maintenance agreements are highly technical matters,” he said.

“A standard financial audit alone cannot determine whether the software was properly delivered or whether the contracted services were actually provided. Independent and specialized IT audits are essential to verify software licenses, source codes, updates, and service delivery. Without such scrutiny, software upgrades and license renewals can potentially be exploited to facilitate the transfer of funds abroad over many years.”

Experts Recommend Stronger Oversight:

Experts recommend that banks adopt internationally recognized technical evaluation standards before purchasing Core Banking Software. They also call for mandatory independent IT audits, verification of software source codes and licenses, competitive procurement processes, and enhanced regulatory oversight by Bangladesh Bank.

They argue that prioritizing reliable domestic software solutions wherever feasible could reduce foreign currency expenditure while significantly lowering the risk of financial irregularities and potential money laundering through software procurement.