Forensic audits for trustworthy governance

With over three decades in Bangladesh's banking sector, I've witnessed its resilience, potential, and persistent weaknesses. Although long regarded as the backbone of the economy, the sector has seen public trust fade as scandals like loan defaults and money laundering exposed serious flaws.

Restoring faith requires zero tolerance for corruption, with forensic audits to hold wrongdoers accountable and functional audits to strengthen internal operations. But audits alone aren't enough -- there must be real consequences for misconduct. Only through firm action and meaningful reform can we rebuild a financial system that is transparent, resilient, and trustworthy.

Having spent much of my career in banking and as a cost and management accountant, I've often seen people use forensic and functional audits interchangeably, unaware of their distinct purposes. Forensic audits are like surgical tools with sharp investigative features. They dig into specific transactions to uncover fraud, embezzlement, or regulatory breaches, answering who did what and how. These audits expose offenders behind major scandals, like the Hallmark loan scam, where tracing illicit fund flows was essential to holding persons accountable.

Functional audits, by contrast, are like diagnostic check-ups. They don't just search for wrongdoers; they assess whether systems work as they should. These audits reveal enablers of misconduct, such as weak internal controls, outdated protocols, or poorly enforced compliance. While forensic audits uncover the damage, functional audits help prevent it. Together, they form a powerful duo -- one reveals the rot, the other covers the cracks.

However, uncovering problems means little without action. Investigative reports often lie untouched because institutions lack the will and courage to act. Zero tolerance must be enforced, and audit findings must lead to real accountability. That means identifying individuals instead of broadly blaming "the system." Consequences should include legal action, asset recovery, and blacklisting when necessary. Zero tolerance also requires transparency; keeping audit results hidden to protect reputations only intensifies public distrust.

To build a sustainable, audit-centric ecosystem, institutional reforms are essential. Auditors must be trained in forensic techniques and equipped with digital tools to match modern financial crimes. Whistle-blowers must be protected, audit independence ensured, and implementation of audit recommendations mandated within strict timelines. Regular functional audits of IT systems, loan approval processes, and compliance mechanisms should be the norm. Automating loan disbursements can reduce fraud risks linked to human discretion.

A transparent and accountable banking sector is not just good policy; it is the foundation of a stable economy. When the system is clean and reliable, foreign investors take notice, borrowing becomes cheaper, and the economy benefits. As a service provider and depositor, I know how important it is to feel that savings are safe and that the system won't collapse under hidden corruption or mismanagement. Building such trust requires strong regulations, consistent oversight, and experienced, principled leadership -- people who value institutional integrity. That is how Bangladesh can build a banking culture rooted in accountability and long-term stability.

Bangladesh's banking sector stands at a crossroads. The choice between inaction and meaningful reform is clear. Building an audit-centric culture isn't only about catching offenders; it is about preventing offences before they begin. Bangladesh Bank, the Bangladesh Securities and Exchange Commission, and other regulators have already taken steps to conduct authentic audits without hesitation. Banks must prioritise ethics over short-term gains, and civil society must demand accountability. A balanced combination of rigorous forensic audits, efficient functional audits, and immediate action against misconduct can guide the sector toward integrity. It is now an urgent demand to act for a sustainable banking framework.

The writer is managing director & CEO of NRBC Bank PLC