Bangladesh Bank robbery

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The Bangladesh Bank robbery, also known colloquially as the Bangladesh Bank cyber heist,[1] took place in February 2016, when thirty-five fraudulent instructions to withdraw close to US $1 billion from the account of Bangladesh Bank held at the Federal Reserve Bank of New York were issued via the SWIFT network. The central bank of Bangladesh is commonly called "Bangladesh Bank" locally. Five of the thirty-five fraudulent transfer instructions issued by security hackers, worth US $101 million, succeeded with $20 million traced to Sri Lanka and $81 million traced to the Philippines. Most of the money transferred to the Philippines went to four personal accounts, held by single individuals, and not to companies or corporations. The Federal Reserve Bank of New York blocked the remaining thirty transactions, amounting to US $850 million, due to suspicions raised by a misspelled instruction.[2] All the money transferred to Sri Lanka has since been recovered. However, as of 2018 only around $18 million of the $81 million transferred to the Philippines has been recovered.[3] It was later suspected that Dridex malware was used for the attack.[4]

A large portion of the blame for this cyber heist lies with the Federal Reserve Bank of New York (New York Fed), since they almost let the entire billion dollars get transferred fraudulently and they failed to notice the warning signs early enough, due to worrying weaknesses, clumsiness and disarray at their Central Bank and International Account Services (CBIAS) unit.[5] The New York Fed lacked a system for detecting possible fraud in real time, although such systems are used everywhere. Instead it relied on random checks but only after payments were made. Usually these weak checks were for merely detecting United States sanctions violations and not fraudulence or theft. The criminal activities of the staff at the RCBC bank in the Philippines cannot be ignored either because they acted with lightning speed to launder the money out of the bank and into the gambling industry, in complete violation of the Philippines anti-money laundering laws and in total disregard of the instructions of the central bank of the Philippines, which had ordered a freeze on the accounts.[6] Nearly one year before the robbery, the Governor of Bangladesh Bank had foreseen cyber security vulnerabilities and had hired an American cyber security firm to bolster the firewall, network and overall cyber security of the bank. However, due to multiple bureaucratic hurdles, the security firm could not join and it only started its operations in Bangladesh after the cyber heist.[7]

Background[edit]

The 2016 cyber-attack on the Bangladesh Central bank was not the first attack of its kind.

In 2013, the Sonali Bank of Bangladesh was also successfully targeted by hackers who were able to remove US$250,000.[citation needed]

In 2015, two other hacking attempts were recorded: a $12 million theft from Banco del Austro in Ecuador in January, and an unsuccessful attack on Vietnam's Tien Phong Bank in December.

In all these cases, the perpetrators were suspected to have been aided by insiders within the targeted banks, who assisted in taking advantage of weaknesses at giving access to the SWIFT global payment network.[8][9]

Events[edit]

Capitalizing on weaknesses in the security of the Bangladesh Central Bank, including the possible involvement of some of its employees,[10] perpetrators attempted to steal $951 million from the Bangladesh central bank's account with the Federal Reserve Bank of New York sometime between February 4–5 when Bangladesh Bank's offices were closed. The perpetrators managed to compromise Bangladesh Bank's computer network, observe how transfers are done, and gain access to the bank's credentials for payment transfers. They used these credentials to authorise about three dozen requests to the Federal Reserve Bank of New York to transfer funds from the account Bangladesh Bank held there to accounts in Sri Lanka and the Philippines.

Thirty transactions worth $851 million were flagged by the banking system for staff review, but five requests were granted; $20 million to Sri Lanka (later recovered),[11][12] and $81 million lost to the Philippines, entering the Southeast Asian country's banking system on February 5, 2016. This money was laundered through casinos and some later transferred to Hong Kong.

Attempted fund diversion to Sri Lanka[edit]

The $20 million transfer to Sri Lanka was intended by hackers to be sent to the Shalika Foundation, a Sri Lanka-based private limited company. The hackers misspelled "Foundation" in their request to transfer the funds, spelling the word as "Fundation". This spelling error gained suspicion from Deutsche Bank, a routing bank which put a halt to the transaction in question after seeking clarifications from Bangladesh Bank.[11][13][14]

Sri Lanka-based Pan Asia Bank initially took notice of the transaction, with one official noting the transaction as too big for a country like Sri Lanka. Pan Asia Bank was the one which referred the anomalous transaction to Deutsche Bank. The Sri Lankan funds have been recovered by Bangladesh Bank.[11]

Funds diverted to the Philippines[edit]

The money transferred to the Philippines was deposited in five separate accounts with the Rizal Commercial Banking Corporation (RCBC); the accounts were later found to be under fictitious identities. The funds were then transferred to a foreign exchange broker to be converted to Philippine pesos, returned to the RCBC and consolidated in an account of a Chinese-Filipino businessman;[15][12] the conversion was made from February 5 to 13, 2016.[16] It was also found that the four U.S. dollar accounts involved were opened at the RCBC as early as May 15, 2015, remaining untouched until February 4, 2016, the date the transfer from the Federal Reserve Bank of New York was made.[16]

On February 8, 2016, during the Chinese New Year, Bangladesh Bank through SWIFT informed RCBC to stop the payment, refund the funds, and to "freeze and put the funds on hold" if the funds had already been transferred. Chinese New Year is a non-working holiday in the Philippines and a SWIFT message from Bangladesh Bank containing similar information was received by RCBC only a day later. By this time, a withdrawal amounting to about $58.15 million had already been processed by RCBC's Jupiter Street (in Makati City) branch.[16]

On February 16, the Governor of Bangladesh Bank requested Bangko Sentral ng Pilipinas' assistance in the recovery of its $81 million funds, saying that the SWIFT payment instructions issued in favor of RCBC on February 4, 2016 were fraudulent.[16]

Investigation[edit]

Bangladesh[edit]

Initially, Bangladesh Bank was uncertain if its system had been compromised. The governor of the central bank engaged World Informatix Cyber Security, a US-based firm, to lead the security incident response, vulnerability assessment and remediation. World Informatix Cyber Security brought in the forensic investigation company Mandiant, for the investigation. These investigators found "footprints" and malware of hackers, which suggested that the system had been breached. The investigators also said that the hackers were based outside Bangladesh. An internal investigation has been launched by Bangladesh Bank regarding the case.[11]

The Bangladesh Bank's forensic investigation found out that malware was installed within the bank's system sometime in January 2016, and gathered information on the bank's operational procedures for international payments and fund transfers.[16]

The investigation also looked into an unsolved 2013 hacking incident at the Sonali Bank, wherein US$250,000 was stolen by still unidentified hackers. According to reports, just as in the 2016 Central Bank hack, the theft also used fraudulent fund transfers using the SWIFT global payment network. The incident was treated by Bangladeshi police authorities as a cold-case until the suspiciously similar 2016 Bangladesh Central Bank robbery.[17]

Philippines[edit]

The Philippines' National Bureau of Investigation (NBI) launched a probe and looked into a Chinese-Filipino who allegedly played a key role in the money laundering of the illicit funds. The NBI is coordinating with relevant government agencies including the country's Anti-Money Laundering Council (AMLC). The AMLC started its investigation on February 19, 2016 of bank accounts linked to a junket operator.[16] AMLC has filed a money laundering complaint before the Department of Justice against a RCBC branch manager and five unknown persons with fictitious names in connection with the case.[18]

A Philippine Senate hearing was held on March 15, 2016, led by Senator Teofisto Guingona III, head of the Blue Ribbon Committee and Congressional Oversight Committee on the Anti-Money Laundering Act.[19] A closed-door hearing was later held on March 17.[20] Philippine Amusement and Gaming Corporation (PAGCOR) has also launched its own investigation.[11] On August 12, 2016, RCBC was reported to have paid half of the Ph₱1 billion penalty imposed by the Central Bank of the Philippines.[21] Prior to that, the bank reorganized its board of directors by increasing the number of independent directors to 7 from the previous 4.[22]

United States[edit]

FireEye's Mandiant forensics division and World Informatix Cyber Security, both US-based companies, investigated the hacking case. According to investigators, the perpetrators' familiarity with the internal procedures of Bangladesh Bank was probably gained by spying on its workers. In a separate report, the US Federal Bureau of Investigation (FBI) says that Agents have found evidence pointing to at least one bank employee acting as an accomplice, with evidence pointing to several more people as possibly assisting hackers in navigating the Bangladesh Bank’s computer system.[23] The government of Bangladesh is considering suing the Federal Reserve Bank of New York in a bid to recover the stolen funds.[11]

FBI suspicion of North Korea[edit]

Federal prosecutors in the United States have revealed possible links between the government of North Korea and the theft.[24] U.S. prosecutors are reportedly at work building potential cases that would accuse North Korea of directing the theft of $81 million from Bangladesh Bank's account at the Federal Reserve Bank of New York. The report also said that to be included in the charges are "alleged Chinese middlemen," who facilitated the transfer of the funds after it had been diverted to the Philippines.[25]

Some security companies, including Symantec Corp. and BAE Systems, say that the North Korea-based Lazarus Group, one of the world’s most active state-sponsored hacking collectives, were probably behind the attack. They cite similarities between the methods used in the Bangladesh heist and those in other cases, such as the hack of Sony Pictures Entertainment in 2014, which U.S. officials also attributed to North Korea. Cybersecurity experts say Lazarus Group was also behind the WannaCry ransomware attack in May 2017 that infected hundreds of thousands of computers around the world.[26]

Some or all of the stolen funds may eventually have found its way to North Korea. The FBI is examining the possible North Korea’s link to the hack, according to two officials with direct knowledge of the investigation.[27]

US National Security Agency Deputy Director Richard Ledgett was also quoted as saying that, “If that linkage from the Sony actors to the Bangladeshi bank actors is accurate—that means that a nation state is robbing banks."[28]

The U.S. has charged a North Korean computer programmer with hacking the Bangladesh Bank, alleging this was carried out on behalf of the regime in Pyongyang. The same programmer has also been charged in connection with two other global cyber attacks, the WannaCry 2.0 virus, the 2014 Sony Pictures attack.[29]

Other attacks[edit]

Computer security researchers have linked the theft to as many as eleven other attacks, and alleged that North Korea had a role in the attacks, which, if true, would be the first known incident of a state actor using cyberattacks to steal funds.[30][31]

Response from linked organizations[edit]

Atiur Rahman, Governor of Bangladesh Bank who resigned from his post in response to the case.

The Rizal Commercial Banking Corporation (RCBC) said it did not tolerate the illicit activity in the RCBC branch involved in the case. Lorenzo V. Tan, RCBC's president, said that the bank cooperated with the Anti-Money Laundering Council and the Bangko Sentral ng Pilipinas regarding the matter.[32] Tan's legal counsel has asked the RCBC Jupiter Street branch manager to explain the alleged fake bank account that was used in the money laundering scam.[33]

The RCBC's board committee also launched a separate probe into the bank's involvement in the money laundering scam. RCBC president Lorenzo V. Tan filed an indefinite leave of absence to give way to the investigation by the authorities on the case.[34][35] On May 6, 2016, despite being cleared of any wrongdoing by the bank's internal investigation, Tan resigned as President of RCBC to "take full moral responsibility" for the incident.[36][37] Helen Yuchengco-Dee, daughter of RCBC founder Alfonso Yuchengco, will take over the bank's operations. The bank also apologized to the public for its involvement in the robbery.

Bangladesh Bank chief, governor Atiur Rahman, resigned from his post amid the investigation of the central bank robbery and subsequent laundering of the money by the RCBC Bank staff in the Philippines. He submitted his resignation letter to Prime Minister Sheikh Hasina on March 15, 2016. Before the resignation was made public, Rahman stated that he would resign for the sake of his country.[38]

On August 5, 2016, the Bangko Sentral ng Pilipinas approved a ₱1 billion (~US$52.92 million) fine against RCBC for its non-compliance with banking laws and regulations in connection with the bank robbery. This is the largest monetary fine ever approved by BSP against any institution. RCBC stated that the bank will comply with the BSP's decision, and will pay the imposed fine.[39]

Ramifications[edit]

The incident shows the risks that banks connected to the SWIFT system are exposed to as a result of the security vulnerabilities of other member banks. By breaching the Bangladesh Central Bank's security firewalls, hackers were able to hack the system and transfer the funds through the established global banking networks almost undetected. The failure of the Bangladeshi government to build adequate safeguards for its financial system became the starting point for a global, multi-million dollar theft and subsequent money laundering scheme whose effect was felt beyond the country's borders.

The case threatens the reinstatement of the Philippines to the blacklist, by the Financial Action Task Force on Money Laundering, of countries making insufficient efforts against money laundering.[40] Attention was given to a potential weakness of Philippine authorities' efforts against money laundering after lawmakers in 2012 managed to exclude casinos from the roster of organizations required to report to the Anti-Money Laundering Council regarding suspicious transactions.

The case also highlights the threat of cyber attacks to both government and private institutions by cyber criminals using real bank codes to make orders look genuine. SWIFT has advised banks using the SWIFT Alliance Access system to strengthen their cyber security posture and ensure they are following SWIFT security guidelines. Bangladesh is reportedly the 20th most cyber-attacked country, according to a cyber threat map developed by Kaspersky Lab, which runs in real time.[41]

References[edit]

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  2. ^ Schram, Jamie (22 March 2016). "Congresswoman wants probe of 'brazen' $81M theft from New York Fed".
  3. ^ Cabalza, Dexter. "Ex-RCBC branch manager free on bail".
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  35. ^ "RCBC Prexy resigns after board clears him of wrongdoing".
  36. ^ "Tan cleared of wrong doing, resigns to take full moral responsibility".
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