Ex-managers scam Tk 300cr at Prime Islami Life Ins

According to an audit, a number of directors of Prime Islami Life Insurance embezzled more than Tk 300 crore of funds by holding the insurer’s fixed deposits as collateral to secure bank loans to another company, jeopardizing interest of the insured.

The former directors served on the board of directors of the insurer and their company PFI Securities Ltd.

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And the administrators during their tenure forced Prime Islami Life Insurance to keep fixed deposits as collateral with banks to help the securities company qualify for the loans, breaking company rules, the special audit conducted by the Bangladesh Securities and Exchange Commission (BSEC).

In mid-2021, the BSEC decided to proceed with the audit when allegations of irregularities surfaced against the company.

It found that the board of Prime Islami Life Insurance had approved the retention of fixed deposits of Tk 120 crore as collateral for a loan to PFI Securities in 2012.

As a result, the insurer opened time deposits totaling Taka 117 crore with three banks, and the banks lent Taka 59 crore to PFI Securities.

As PFI Securities failed to repay the loan, the banks adjusted fixed deposits against loans and interest in 2017 and 2018.

But the insurer showed the fixed deposits and interest earned worth Tk 167 crore as a short-term investment in PFI Securities.

“The board of directors of the insurance company made the investment decision without analyzing the risks associated with PFI Securities, and no formal documents or contracts were also kept, which indicates negligence by management at the time. execution level,” the audit report said.

The company also did not record any loan debt in the books and did not disclose it in the 2012 financial statements, nor did it make a provision on the amount to be received.

Prime Islami Life Insurance charged Tk 9.7 crore interest on the investment for 2018 and still shows the amount as receivable. The auditor qualified the interest as doubtful.

The loan was also not recognized and disclosed in PFI Securities’ audited financial statements for 2020, creating significant doubt as to whether the fund would be recovered from the securities firm.

Prime Islami Life Insurance has opened a beneficial owner account with PFI Securities to trade in shares. On June 29, 2017, all shares worth Tk 15.37 crore were sold but the fund was not transferred to the insurer’s account.

However, PFI Securities claims were not disclosed as related party transactions in 2017 and 2018.

Additionally, the insurer took out a loan of Tk 34 crore from a private bank in 2012, but it was transferred directly to the title company through payment orders.

Prime Islami Life Insurance did not take any legal action until 2020.

Former insurer directors are not the only criminals in the insurance industry in Bangladesh who have used policyholder premiums as collateral to secure loans for themselves or others.

In fact, with evidence surfacing of a few insurance companies misusing policyholders’ funds, the Insurance Development and Regulatory Authority recently ordered them to refrain from borrowing from banks using life funds as guarantee.

The move came after those borrowers went into default and banks and financial institutions then demanded the fixed deposits, according to insiders.


Prime Islami Life Insurance granted a lien of a fixed deposit of Tk 67 crore in favor of Prime Islami Securities without board approval in 2011, 2012 and 2014.

A lien is a right to retain possession of property belonging to another person until a debt owed by that person is discharged.

Two banks sanctioned a Tk 43 crore loan to the securities firm against the fixed deposit. Banks adjusted fixed deposits as Prime Islami Securities failed to repay loans.

Including interest, the fund of Tk 79 crore is now classified as doubtful. Also, the fixed deposit lien was not disclosed in the financial statements, the audit report said.

The insurer also did not recognize interest income in 2020 due to the title company’s poor financial condition, the audit report said.

In another scam, the board of directors of Prime Islami Life Insurance approved an investment of Tk 15 crore at an interest rate of 7.5% to 8% for a group of companies. However, the group rejected any request for unpaid debt to be paid to the insurer.

An investment proposal was placed by the then managing director to the board although there was no supporting documentation except the board resolution.

There was no disclosure in the financial statements that indicates management’s negligence, according to the audit report.

Contacted, Md Apel Mahmud, CEO of Prime Islami Life Insurance, asked this correspondent to speak to the company secretary.

Abul Hasnat Mohammed Shamim, the company’s secretary, admitted that there had been serious irregularities and that some companies were not returning the funds.

“We have filed lawsuits against certain companies, including Sterling Group and PFI Securities, and certain individuals, including former Prime Islami Life Insurance chairman MA Khaleque.”

Khaleque could not be reached for comment yesterday as his mobile phone was found switched off.

Kazi Fariduddin Ahmed, CEO of PFI Securities, did not receive phone calls or respond to text messages.

Shares of Prime Islami Life Insurance closed down 1.44% on the Dhaka Stock Exchange yesterday.

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