KARACHI: The National Bank of Pakistan (NBP) said on Wednesday it was cooperating with the Federal Investigation Agency (FIA), which is investigating a mega scandal worth Rs54 billion and has arrested several high-ranking officials of the bank and a petroleum company.

The FIA arrested Mumtaz Hasan, founder of the Hascol Petroleum Limited (HPL), on Jan 23. It said a total of 30 suspects — including present and former top officials of the NBP, HPL and other organisations — had been booked in the case and that efforts were under way to arrest the remaining suspects.

“As has been reported in the press, the FIA is conducting an inquiry on Hascol Petroleum’s banking arrangements with the NBP as well as several private and other public sector banks,” the NBP said in a statement on Wednesday.

The bank said it had been and continued to cooperate fully with the FIA on this investigation and made available all relevant records and transactional history, including arranging meetings with its employees who have managed Hascol’s relationship with the bank.

The NBP said its stance on the Hascol event had been documented in a submission made to the State Bank of Pakistan (SBP) in December 2021 and subsequently provided to the FIA.

“The fundamental challenges identified by the NBP stemmed from a material negative re-statement of the company’s financial records with acknowledgement of fraud by Hascol management at that time,” the bank’s statement said.

Credit decisions made by banks were based on a set of different audited financials, and as the fraud unfolded, two of the company’s auditors resigned, citing financial irregularities within Hascol, it added.

“While all the [oil marketing companies] incurred losses during the Covid crisis due to a rapid decline in demand, fall in oil prices and the rupee’s devaluation, Hascol’s issues were exacerbated by its financial fragility due to high leverage and over-valued assets,” the NBP said. However, the FIA found that the NBP granted funded and non-funded financial facilities to the HPL in the shape of bank loans from 2015 to 2020, violating prudent banking laws and practices.

The agency described the scam as the “country’s biggest financial fraud” and said it was committed by the HPL in connivance with the top managements of the NBP and other commercial banks, who would be investigated separately.

Published in Dawn, January 27th, 2022