Federal Reserve Bank of New York defends fund transfer procedures after Bangladesh bank heist

The US flag hanging on the facade of the Federal Reserve Bank of New York headquarters in New York.
The US flag hanging on the facade of the Federal Reserve Bank of New York headquarters in New York.PHOTO: BLOOMBERG
The Bangladesh central bank in Dhaka.
The Bangladesh central bank in Dhaka. PHOTO: REUTERS

NEW YORK (Reuters) - The Federal Reserve Bank of New York is standing by its procedures for wiring funds after facing scrutiny in the wake of the US$81 million cyber heist at the Bangladesh central bank, a letter released by a congressman on Friday (May 13) showed.

The New York Fed was responding to criticism lobbed by United States Representative Carolyn Maloney, who had called for a probe of the fund transfers triggered by the February cyber attack on Bangladesh Bank.

Criminals tried to withdraw US$951 million from Bangladesh Bank's US bank account in what ranked as one of the largest cyber heists in history. They succeeded in transferring US$81 million.

In the April 14 letter, Mr Thomas Baxter, general counsel and executive vice-president at the New York Fed, said the correct procedures were followed in approving five transfers of money on Feb 4 and in blocking 30.

Mr Baxter said the New York Fed's procedures for checking transfers included catching those to people subject to sanctions but would not stop a transfer if it had passed the authentication process on the SWIFT messaging network.

"The vast majority of authenticated instructions received from foreign official account holders are not flagged for manual review by the automated systems," Mr Baxter wrote in the letter.

The authorities in Bangladesh and elsewhere are still trying to figure out how hackers carried out the attack and what happened to the money, which was routed from the Bangladesh Bank's account at the New York Fed to accounts in the Philippines.

Rep Maloney said in a statement on Friday that while Mr Baxter's letter provided key information about the incident, she remained "concerned that there are critical security gaps in the international payment system".

Rep Maloney said she would urge the New York Fed to review its security protocols to make sure such a heist does not recur.