Friday evening. The National Bank's board urgently decides to withdraw Union Standard Bank from the market.
The Deposit Guarantee Fund is visiting the bank on Saturday. What's the rush?
On September 24, we classified the bank as problematic. The reason was formal—"due to increased information security risks." But this phrasing actually conceals many interesting facts.
For example, the Georgian Ministry of Energy’s complaint about the failure to fulfill a $1 million guarantee provided by Strait Oil and Gas.
The explanation from Union Standard Bank for this was unique - “unidentified person, unauthorized, tampered with the robot of an electronic computing machine (computer), which is located at the registered PJSC “USB BANK” at the address: Odessa, st. Gimnazichna, 21, committed malicious acts by issuing a bank guarantee in the name of PJSC “USB BANK” through the SWIFT system.”
So, it's unclear who at the bank walked up to the computer and gave a million dollar guarantee?
These same “unidentified individuals” used the bank’s computers to confirm guarantees on September 14, 2014, March 19, and April 6, 2015.
The National Bank learned of these facts at the end of summer 2015 and began its own investigation.
The result of the security breach investigation was the bank's designation as problematic and the appointment of a supervisor from the NBU.
Typically, a troubled bank has 180 days to fix the situation. In our case, it took us a week to go from troubled to insolvent. What went wrong?
It's almost a detective story.
We felt like we were working with two different banks. On the one hand, management was talking about developing retail, creating new products, and working to identify the ultimate beneficiary. But then the bank turned around, and we saw a completely different picture.
So, on September 29, 57% of Union Standard Bank's cash – UAH 108 million – was concentrated in the bank's branch at 50 Artema Street.
September 30, 9:00 AM. Employees of the NBU Main Office in Kyiv and the Kyiv region arrive at Artema Street to inspect branches. They are not allowed into the cash registers for an hour and a half.
10:30 AM. During these ninety minutes, 50 million hryvnias were transferred from the Artemivsk branch of Union Standard Bank to the Odesa branch, and another 27 million hryvnias to the Lviv branch. In Kyiv, an audit revealed a shortfall of 410 hryvnias. A significant margin of error, you'll agree.
It's midday. National Bank employees in Odesa and Lviv are checking Union Standard Bank cash registers. There's no cash.
17:11 PM. According to the transaction data, 47 million hryvnias left Odessa for Kharkiv, and 12 million hryvnias from Kharkiv immediately migrated to Dnipropetrovsk.
Incidentally, the Kharkiv branch at 41/43 Lenin Avenue, where the 12 million hryvnias were stolen, was never found by the employees. In fact, neither was the money.
October 1. The NBU asks Union Standard Bank to accumulate funds in Lviv, Kharkiv, and Dnipropetrovsk by October 2.
October 2. The National Bank's demands have not been met.
Friday evening. The National Bank's board decides to withdraw Union Standard Bank from the market.
October 3, Saturday. The temporary administrator of the Deposit Guarantee Fund enters Union Standard Bank.
October 5. The 77 million hryvnias still haven't arrived. Union Standard Bank publicly states that it doesn't consider the regulator's actions justified.
Incidentally, while NBU employees were searching the country for the phantom money, on October 1, 15,3 million hryvnias were transferred from the accounts of two legal entities associated with the bank to the accounts of an individual.
The bank provided 52 individuals with "financial assistance" ranging from 250 hryvnias to 295 hryvnias. The bank likely knew that the supervisor would quickly uncover such transactions, but apparently hoped to complete the transaction before the temporary administration was appointed.
October 5. Union Standard Bank: “We hope that we will have the opportunity to work with the regulator to find compromise solutions for regulating the situation that has arisen.”
We are always open to dialogue with banks. If Union Standard Bank were experiencing financial problems, a financial recovery program would be developed.
Opaque ownership structure? Discussion was underway to bring it into compliance with the law. But we will not turn a blind eye to fraudulent transactions. The bank has been removed from the market. Law enforcement agencies will investigate its operations.
Ekaterina Rozhkova, Director of the Banking Supervision Department of the National Bank of Ukraine
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