Audit Report of SDV Mall Road Branch, Rawalpindi (0814) Islamabad Region

Name of Branch Manager:

Khawaja Murad Ali

Date of Posting of Branch Manager:

05.04.2010

Name of Auditors:

M/s Khalid Mahmud Team Leader,

Munir Ahmed, Fakhar Imam, Usman Abdullah,
Nasir Mahmood & Asma Kayani (Team Members)

Audit Period:

08.12.2010 to 05.07.2012

Audit Category:

C-1 (Unsatisfactory with Low Reputational Risk)

Financial Highlights

As of Audit Date 05.07.2012

As of 31.12.2011

(Rs. in Mn)
Total
Deposits
4140.215
3296.175

Finances
Total
Classified
41.127
5.350
49.493
5.441

Imports
36.478
59.984

Exports
1.939
0.784

Scope & Objectives

Audit covered entire operations of the branch on sampling basis including Cash, ATM, Collections,
Remittances, Deposits, Staff & General, FINCON, Income & Expenditure, Finances and IT operations.
Audit coverage was limited to the transactions that were recorded in books of the branch.
Management & Staff
Staff strength of the branch consisted of 18 personnel including Branch / Area Manager, Manager
Operations, Manager Trade, Manager Teller, one CSO, 8 officials supporting operations and Credit Hub
functions, one RBO and three Tellers. Two contractual staff and three outsourced security guards were
also provided to the branch. Four staff members were posted in the branch / airport booth as back as
1997 were not transferred. Staff needs training to enhance their skills for better understanding of
contents of MISYS output reports and standard operating procedures.
Assessment Summary
Based on audit findings and weak supervisory controls exposing Bank to various risks, internal working
of the branch is rated as C-1 (Unsatisfactory, with Low Reputational Risk). Serious irregularities
enumerated below, need immediate attention of the branch management and controlling office for
resolution & non-recurrence:
Two incidents of fraudulent online cash withdrawals totaling Rs.0.910mn took place from the branch
during the period under review. Cases were investigated and two staff members were held responsible
for deviating banks procedure while making payments.
Different anomalies of serious nature were observed in operations of the branch; stop payment
instructions received from three customers as back as 19.04.11 were not marked in the system till date
resulting in payment of one stopped cheque for Rs.66690/- which remained unidentified till pointation
by audit. Credit balance of a deceased account was paid to one legal heir without consent of other heirs.
On 11.05.2012 an O/w clearing cheque for Rs.0.610mn was wrongly lodged twice in OBC as well as
clearing; resultantly proceeds through clearing were received on account on next day and OBC entry was
still outstanding in system the amount of which will be automatically credited in account on completion
of default period of 120 days. During the course of audit it was observed that debit / credit entries
irrespective of amount were being supervised by the supervisors in the system without referring source

document / cheques. Many LFTs / BCs were issued through various A/cs without verifying customers
signatures on remittance application forms involving risk of unauthorized / fraudulent transfer of funds.
Eight such instances involving funds upto Rs.21.500mn were documented. Stamps on Hand were short
by Rs.5800/- due to non recovery from customers against stamp papers utilized on their behalf. An
amount of Rs.8000/- being the payment made to outsource trainers for staff training on 02.07.11 by
debiting GL Suspense A/c Sundry debtors was still outstanding in that head and branch was totally
ignorant about that debit till pointation by audit due to non monitoring of GLs. A sum of Rs.1.117mn
was paid from 9 different customer accounts through cash debit vouchers on different dates but
confirmatory cheques were yet not obtained.
Rent Rs.1811756/- has become over due on 221 lockers due to lack of follow up which also included
113 lockers where rent was overdue for more than 2 years but break opening process was not yet
initiated. Operation in one locker was allowed to a 3rd party by linking her account with that locker
without consent of the licensees. SS Card of the locker was also not available.
As on 1st day of audit keys of 8 vacant lockers were not available / shown to audit involving risk of
unauthorized / misuse of the same. ATM cards and PINs were delivered to customers without verifying
their signatures as a matter of practice involving risk of wrong delivery. In case of 236 ATM cards
received by the branch due to incomplete addresses of the customers no information was available that
whether the same were delivered to customers or destroyed after completion of requisite formalities.
Besides 619 undelivered ATM cards were lying in the branch for more than 15 days but not destroyed.
Clearing Operations of the branch were found unsatisfactory as a number of exceptions of serious nature
were noted; Sundry Assets (Clearing) GL was showing excess debit balance of Rs. 36,656,364.33 since
28.06.2012 as the amount pertaining to Sundry Assets (OBC) GL was wrongly debited to this GL. On
various occasions fate of Islamabad clearing received in OBC GL was not transferred to Clearing GL as
per arrangement; resultantly those credits upto Rs.20.616mn were transferred with delay upto 5 days
resulting in mismatch between both the GLs. Four inward clearing cheques involving funds up to
Rs.1Mn were debited to customers accounts with delay upto 8 days after clearance of fate to presenting
banks. One wrong debit of Rs.60K to Sundry Assets GL by CCPU was reversed with delay of 9 days due
to lack of effective follow up. In case of one FDD for Rs.13K paid in I/w clearing but respective GL was
debited in system with delay of 2 days. An I/w clearing cheque for Rs.3.000Mn was wrongly debited as
Rs.0.300mn in customer account and correction was made with delay of 2 days. Similarly another I/w
clearing cheque of Rs. 0.200mn was debited to wrong account and correction was made with delay of 2
days; cheque in question was also not available with the branch. Outward clearing returns were not
marked by using proper system option (ARC) resultantly undue credit remained in customers A/cs up to
12 days. 8 instances involving funds Rs.5.921mn were documented in the working papers.
On ten different occasions undue / excess credit upto Rs.2.500mn (total Rs.3.135mn) was afforded in
customer accounts and corrections were made with delay upto 16 days.
As on 1st day of audit very unusual state of affairs was noted in the branch as various important items /
record were found lying open / in table drawers of staff instead of keeping in safe custody / under dual
controls; undelivered cheque books were found in unlocked table drawer of a staff lying in main
banking hall. 18 packed credit cards were lying in the open drawer of an official. Various items were
lying in table drawer of an official which included 100 leaves cheque book of a customer containing a
blank cheque duly signed and stamped with company stamp, two stale cheques of customer accounts
totaling Rs.0.551mn, a confirmatory cheque for Rs. 1.000mn of a customer account, S.S cards of three
lockers, 8 duly signed S.S cards with CNIC Nos. written thereon without any account number, date or
stamp, duly signed blank letter head pad of a company carrying company stamp, blank cash memos of a
Shell Dealer and a cash memo for Rs.2650/- of a petrol pump. A cheque for Rs.2632/- fvg. a 3rd party
was credited in the concerned staff without any endorsement.

Different anomalies were noted in cheque book issuance; 12 cheque books were delivered to 3rd parties
without obtaining any authority letter. Three cheque books were missing as neither the same were issued
to customer nor was any acknowledgement on record. 10 cheque books were delivered without obtaining
acknowledgements from customers as such it could not be ascertained that the same were issued to
genuine customers. 13 undelivered cheque books were kept beyond the 75 days retention period but not
destroyed as yet. Cheque books were delivered to customers without verification of their signature on
acknowledgment as a matter of practice involving risk of wrong / fraudulent delivery; despite occurrence
of two incidents of fraud due to issuance of cheque book in a customer account against forged / fake
requisition slip. Reminder letters to customers within 15 days of receipt of cheque books were not being
issued as a matter of practice.
While reviewing account opening / KYC profiling activity of the branch a number of lapses were noted;
an account of a university endowment fund was opened where AOF was not signed by two authorized
signatories and signature of other two signatories on AOF were not admitted. Specimen signatures of
signatories approved by the competent authority of Foundation University were also not available on
record. A private limited company account was opened without obtaining board resolution. Another
account of a private company was opened without admitting signatures on AOF. A govt. organization
account was opened without obtaining permission from one step above the individual operating the
account. Three accounts were opened without placing on record copies of CNICs of the customers,
signatures on AOFs were not admitted and AOFs not signed by any Branch Official. Two sole
proprietorship accounts were opened without admitting / verifying customers signatures on AOFs / sole
proprietorship declarations. AOFs of many A/cs were not signed by any official; 31 instances including
non individual accounts were documented in working papers. Account opening forms were not signed by
any 2nd official in almost 70% cases showing non involvement of 2nd person in account opening. KYC
profiling of 68 accounts having credit balance ranging between Rs.0.500mn to 8.806mn was not fed into
the system. KYC prints were not generated in 30 cases. Four non individual accounts are marked with
low risk category instead of High or Moderate. An account was opened on the strength of unsigned AOF
by the customer. Customers profession was not mentioned on AOFs of 8 accounts.
A number of lapses were noted in customer service of the branch; proceeds of 30 OBCs / HMT up to
Rs.1.164mn were credited in customer accounts with delay upto 17 days after receipt of fate / funds. The
branch was not in practice of sending reminders for OBCs not realized for more than 10 days. 66
instances involving funds up to Rs.0.986mn were documented where proceeds were realized with delay
up to 104 days. Two Advantage A/cs totaling Rs.15.800mn were booked late up to 42 days after receipt
of customers requests. On six occasions standing instructions of a customer to transfer USD 3000/- on
10th of every month were executed with delay upto 8 days. Normal BC / remittance charges were
recovered on remittances favouring educational Institutions instead of charging concessional rates as per
SOBC. Excess FBC charges totaling Rs.5750/- were recovered from customers on 14 occasions.
Inordinate delay was observed in recovery of mark up on finances; in case of a SBF limit Rs.9.500mn,
markup for the quarter ended on June11 was recovered with delay of 41 days and penal markup Rs.53K
was also not recovered. In various other cases mark up was recovered with delay causing opportunity
loss of Rs. 43K to the bank. Mark up totaling Rs.1.262mn for June12 quarter was outstanding in case of
17 finance limits awaiting recovery.
Two issues of last audit including short recovery of auto lease insurance Rs.0.281mn were still
outstanding.

Short Recovery
Total excess payment/short recovery of Rs.110855/- was detected by audit out of which Rs.99692/- were
recovered and Rs.11163/- were yet to be recovered.

Khalid Mahmud
Team Leader

High Risk Issues

The observations classified by Audit as High Risk are considered more serious in nature and warrant
immediate attention of Senior Management for resolution.
1. Fraudulent On Line Cash withdrawals
Two incidents of fraud & forgery amounting to Rs.2.870mn & Rs.0.930mn were occurred in Jinnah
Avenue Branch Islamabad and Faizabad Branch Rawalpindi, when some unknown fraudsters
managed issuance of cheque books fraudulently and thereafter withdrew the amount through online
cash withdrawals from various branches including the auditee branch from where withdrawals
totaling Rs.0.910mn took place and concerned staff was found negligent while allowing
withdrawals. Refer below detail.
a. One cheque for Rs.0.450mn of A/c # 08617900224503 maintained by Syed Khalid Ali Warsi at
Landhi Town Branch (0861), Karachi in which the funds were fraudulently transferred was paid
by this branch on 24.02.12. Mr. Muhammad Asif Mir-Cash Teller (UA5801), P # 459022
Inputter and Syed Qasim Hussnain Shah, Manager Teller (HQ01) P # 216442 supervisor were
held responsible for allowing withdrawals without observing banks laid down procedure
regarding online payments. Disciplinary action was recommended against both the staff,
however, final decision of the enquiry was yet to be received. P-104
b. One cheque for Rs.460000/- drawn on CD A/c # 1301-79000733-03 of Mr. Muhammad Kamran
Abbasi of Faizabad Branch, Rawalpindi was fraudulently got encashed from this branch on
02.02.2012. Mr. Muhammad Asif Mir-Cash Teller (P# 459022) and Mr. Syed Qasim HasnanManager Teller (P # 216422) supervisor of transaction were again held responsible as Inputter
and Supervisor of the transaction for allowing withdrawals without observing banks laid down
procedure regarding online payments. Disciplinary action was recommended against both the
staff for fraudulent transactions and staff was reprimanded. P-105
Risk: Occurrence of such type of incidents involved financial and reputational risks.
Recommendations: Management should adhere to bank procedure to avoid such type of lapses in
future.
Management Response:
a. All the precautionary measures were observed at the time of payment. Enquiry was completed
but the decision is still awaited.
RHQ Comments: While checking the branch record we observed that laid down procedure was
followed by the branch and all possible care was taken despite the fact that there remains rush at
our branch. Moreover, Final decision of enquiry has been received and case stands closed by the
enquiry committee Mr. Qasim Hasnain was just warned while Mr. Muhammad Asif Meer was
totally absolved from the charges.
b. All the precautionary measures were observed at the time of payment, however the staff was
reprimanded.
RHQ Comments: Also, in this case it is observed that laid down procedure was observed and
required documents were obtained which are on record. Similarly report of enquiry committee
has been received and staff was reprimanded.
2. Weak Operating Levels
i. Stop payment instructions received from three customers maintaining A/c # 08140018822603,
08140016947101 and 08147900030701 as back as 19.04.11 were not marked in the system till
date resulting in payment of one stopped cheque # 2166290 for Rs.66690/- on 12.05.11
pertaining to A/c 1882-26. P-37,38
ii. Mr. Lal maintaining A/c # 08140017587901 died on 12.03.2011 by leaving 7 legal heirs and
entire credit balance Rs.5591.45 of the A/c was paid to his widow Ms. Jamil Begum through
Bankers cheque on 20.04.11 without obtaining consent of the other legal heirs. CNIC copy of
Ms. Jamil Begum was also not on record. P-59

iii. On 11.05.2012 an O/w clearing cheque for Rs.0.610mn pertaining to A/c # 5454-36 was
wrongly lodged twice in OBC (value date 14.05.2012) as well as in clearing; resultantly
proceeds through clearing were received in account on next day and OBC entry was still
outstanding in system the amount of which will be automatically credited in account on
completion of default period of 120 days. P-15
iv. During the course of audit it was observed that debit / credit entries irrespective of amount were
being supervised by the supervisors in the system without referring source document / cheques.
Six instances of paid cheques totaling Rs.1.303mn were documented in the working papers. P-9
v. Many LFTs / BCs were issued through various A/cs without verifying customers signatures on
remittance application forms involving risk of unauthorized / fraudulent transfer of funds. Eight
such instances involving amount upto Rs.21.500mn were documented. P-20,21
vi. Stamps on Hand were short by Rs.5800/- due to non recovery from customers against stamp
papers utilized on their behalf as the GL-901273 was showing balance of Rs.38600/- whereas
the stamps worth Rs.32800/- were physically available in the branch. P-79
vii. An amount of Rs.8000/- being the payment made to outsource trainers for staff training on
02.07.11 by debiting GL # 901215 Suspense A/c Sundry debtors was still outstanding in that
head and branch was totally ignorant about that debit till pointation by audit due to non
monitoring of GLs. P-64
viii. A sum of Rs.1.117mn was paid from 9 different customer account A/cs through cash debit
vouchers on different dates but confirmatory cheques were yet not obtained. P-10
Risk: Weak controls leading to operational and financial risks.
Recommendation: Management should follow bank procedure and resolve the pointed out issues.
Management Response:
i. Stop payment instructions withdrawn by account holder in one case, revocation now shown to
auditor. RTD 14.09.2012 for 2nd case.
RHQ Comments: Stop Payment Marked on 12-07-2012 against account Number
08147900030701 and against account Numbers 08140016947101 & 08140018822603.In one
case cheque had already been paid and in other two cases stop payment request withdrawn by
the customers.
ii. CNIC copy of Ms. Jamil begum and signature of Mr. Muhammad Shakoor obtained on
12.07.2012. For remaining RTD 14.09.2012.
RHQ Comments: Copy of CNIC of Mst Jamil begum and signature of Muhammad Shakoor
obtained on 12-07-2012. Consent of other legal heirs also obtained.
iii. Regretted, now entry reversed.
iv. Now correct practice started.
v. Regretted, non Repetition assured. Signatures are now verified.
vi. Now balanced on 13.07.12
RHQ Comments: Rs. 4700/- recovered on 06-07-2012 and remaining recovered on 10-07-2012
& 12-07-2012
vii. Two staff of credit hub attended this course, amount was debited by CDA branch, RTD
14.09.12.
viii. Regretted, RTD 14.09.2012.
RHQ Comments: Three confirmatory cheque were obtained for remaining RTD 14-09-2012
3. Lockers / ATM Operations
a. Rent Rs.1811756/- has become over due on 221 lockers due to lack of follow up. Moreover rent
on 113 lockers was overdue for more than 2 years but break opening process was yet not
initiated. P-4,5,6
b. As per AOF locker # 358 was allotted to Mr. Shahid Rehman Khokhar & Miss. Rehana
maintaining A/c 0814-00143791-01 on 23.12.1996, operational instructions for the locker was
either or survivor but A/c # 0814-00550091-01 title Abida Jabeen was linked with the locker

and Mrs. Abida Jabeen operates the locker instead of locker holders. SS Card of the locker was
not available at branch record. P-7
c. As on 1st day of audit (06.07.2012) keys of 8 vacant lockers # 10,157,352,401,929,977,981 &
982 were not available / shown to audit involving risk of unauthorized / misuse of the same. P-1
d. ATM cards and PINs were delivered to customers without verifying their signatures as a matter
of practice involving risk of wrong delivery. P-2
e. While reviewing disposal / delivery of ATM cards received by the branch due to non receipt of
the same by the customers at their given addresses it was noted that in case of 236 cards no
information was available that whether the same were delivered to customers or destroyed after
completion of requisite formalities. Besides 619 undelivered ATM cards were lying in the
branch for more than 15 days but not destroyed as yet. P-1,2
Risk: Weak supervisory controls and non meeting of laid down criteria involved financial and
operational risks.
Recommendation: Management should look into the matter and resolve the pointed out issues and
ensure proper control.
Management Response:
a. Reminders were already sent to customers two times, Break opening of overdue lockers more
than 2 years is under process RTD 14.09.2012.
RHQ Comments: Cautioned marked and operation stopped. Reminder letters sent by HOK.
Second reminders were already served. Break opening is under process.
b. RTD 14.09.2012.
RHQ Comments: Mr. Shahid Rehman Khokhar is employee of HBL presently he is posted in
Bahrain. He is maintaining locker 358 joint with Rehana Shahid and Abida Jabeen (his aunt)
with the instructions E/S Locker account opening form and SS card are available in our record.
We have talked to Mr. Shahid Khokhar and he provided us his staff account # 06097900095801.
Now staff account tagged with locker for recovery of rent.
Auditors further comments: As per available record locker was in the name of two persons
excluding Abida Jabeen. The matter should be properly handled and resolved accordingly.
c. Keys of locker#, 352, 401 &977 were found and shown to auditors for remaining RTD
14.09.2012.
RHQ Comments: Out of 8 lockers, locker #10 was rented, keys of locker # 157, 977, 352 and
401 were found. We are trying our best to locate the remaining 3 keys. We have marked caution
and further there is no chance of any misuse. RTD 15.09.2012
d. Regretted, now correct practice started.
RHQ Comments: All the signatures of ATM card delivery and PIN code delivery register are
now verified.
e. Now undelivered cards destroyed. RTD 14.09.2012 for location of missing cards.
RHQ Comments: All undelivered ATM card destroyed and sent to card operation for
cancellation. 236 missing card are located and destroyed. We assure, in future extra care will be
exercised while delivering ATM cards to customers through branch.
4. Clearing Operations
Clearing Operations of the branch were found unsatisfactory as a number of exceptions of serious
nature were noted:
a. Sundry Assets (Clearing) GL-884200 was showing excess debit balance of Rs. 36,656,364.33
since 28.06.2012 as the amount pertaining to Sundry Assets (OBC) GL 884300 was wrongly
debited to this GL. P-65
b. As per procedure lodgment of Islamabad clearing is to be done by debiting Sundry Assets GL 884200 while fate is received from NIFT in Sundry Assets GL-884300. Therefore, branch has to
transfer credit received in GL-884300 to Clearing GL-884200 but it was noted that on various
occasions those credits upto Rs.20.616mn were transferred with delay upto 5 days resulting in
mismatch in those GLs. 13 instances pertaining to June 2012 were documented. P-65

c. 4 inward clearing cheques involving funds up to Rs.1Mn were debited to customers accounts
with delay of 1 & 8 days after clearance of fate to presenting banks. P- 66
d. On 01.02.2011 CCPU wrongly debited an amount of Rs. 60,000/- to Sundry Assets GL -884200
of this branch and reversal was got done on 10.02.2011 with delay of 9 days due to lack of
effective follow up with CCPU. P-67
e. A FDD for Rs.13000/- was paid in I/w clearing on 14.09.11 but amount was debited to
respective GL in the system on 16.09.2011 with delay of 2 days.P-67
f. An I/w clearing cheque for Rs.3.000Mn was wrongly debited as Rs.0.300mn to A/c # 081400214688-01 on 28.11.2011 and difference amount Rs. 2.700mn was debited on 20.11.2011
with delay of 2 days; however, funds remained intact. Another I/w clearing cheque of Rs.
0.200mn pertaining to A/c # 08140020914601 paid in I/w clearing on 23.07.2011 was debited to
A/c on 25.07.2011 with delay of 2 days; cheque in question was also not available at branch. P68
g. Outward clearing returns were not marked by using proper system option (ARC) resultantly
undue credit remained in customers A/cs up to 12 days. 8 instances involving funds Rs.5.921mn
were documented in the working papers.P-68,69
Risk: Weak controls / procedural deviations may lead to operational and financial risks.
Recommendation: Management should follow bank procedure and resolve the pointed out issues.
Management Response:
a. This amount pertaining to Islamabad clearing was credited in GL-884300 but lodged in sundry
asset GL-884200 now reversed and balanced.
b.-g. Regretted, non repetition assured.
5. Undue / Excess Credit
a. Cash Rs. 22,660/- deposited in A/c # 08140000536303 title P.I.A.C Collection A/c was
wrongly credited to A/c # 08140021304703 Title CAA Collection A/c on 27.04.2011. The
entry was reversed on 29.04.2011 with delay of 2 days. P-7
b. Cash receipt voucher for Rs. 117,795/- of A/c # 08140041516003 title Pakistan Handicrafts
was wrongly posted in A/c # 08140015785103 title PIA Islamabad on 03.05.2011 and entry
was reversed on 21.05.2011 with delay of 16 days. P-8
c. Cash Rs. 100,000/- deposited in PIA Islamabad A/c # 08140015785103 was wrongly credited to
A/c 08147900218001 title Mr. Adnan Razaq on 16.01.2012 and entry was reversed on next
day. P-8
d. Cash Rs. 200,000/- deposited in A/c # 08140015682601 title Mubashir Abbas Malik was
wrongly credited to A/c # 08140015785103 in the name of PIA on 25.02.2011 and entry was
reversed on next day.P-8
e. Cash Rs. 32,500/- deposited in A/c # 13420010843601 title Muhammad Arif Mahmood was
wrongly credited to A/c # 13420013682901 title Tanvir Ahmad Malik on 22.12.2011 and
entry was reversed on 26.12.2011 with delay of 4 days when the customer approached the
branch. P-8
f. An O/w clearing cheque for Rs.59070/- deposited in A/c 08140020284701 title Mazhar Ali
Khan was wrongly lodged in A/c # 08140000536303 PIAC Collection on 27.01.2011 which
was reversed on 02.02.2011 with delay of 5 days. P-67
g. A cheque for Rs. 25,000/- deposited in A/c # 13017900046303 title Sabat Qadam Security SVS
Pvt. Ltd. was wrongly credited to A/c # 13017900064303 titles Good Way Enterprises on
27.12.2010 and entry was reversed on 30.12.2010 with delay of 3 days. P-8
h. Two O/w clearing cheques of Rs.2.5Mn pertaining to PTDC A/c # 22060050009501 were
wrongly lodged in A/c # 08140050009901 Title M Raza Khan on 05.04.11 and amount was
reversed on 07.04.2011 with delay of 2 days. P-67
i. On 18.04.2011 a cheque # 08610781 for Rs. 69,885/- drawn on CAA Disbursement A/c #
08147027145201 was deposited in A/c # 08147900084603 title Muahmmad Ayaz but
beneficiarys A/c # 08147900084603 was wrongly debited by overriding the cheque series

option instead of debiting CAA account and reversal of the entry was made when the customer
approached the branch on 25.04.2011 with delay of 7 days. P-7
j. An OBC of Rs. 8000/- was lodged in normal clearing in A/c # 5394-51 on 02.03.2011 and
account was credited on 03.03.3011 with normal clearing but A/c was again credited on
realization of OBC on 07.03.2011, wrong credit of clearing was reversed on 08.03.2011 with
delay of 5 days. P-68
Risk: Weak controls leading to operational and financial risks.
Recommendation: Management should follow bank procedure and resolve the pointed out issues.
Management Response: Regretted, non repetition assured.
6. Unusual State of Affairs
As on 1st day of audit various important items / record were found lying open / in table drawers of
staff instead of keeping in safe custody / under dual controls; refer below detail.
i. Undelivered cheque books were lying in unlocked table drawer of Mr. Nasir Taqi Ali lying in
main banking hall. P-34
ii. 18 packed credit cards were lying in the open drawer of Mr. Raza Shah, AM. P-33
iii. Following items were found lying in locked table drawers of Mr. Raza Shah AM. P-31 to 35
a. 100 leaves cheque book pertaining to M/s Aman Traders A/c # 04897000251003, first 25
leaves were already used from the cheque book, blank cheque # 3765126 duly signed and
stamped with company stamp, cheques # 3765127 42 were stamped with company stamp,
cheque # 3765143 was used and remaining cheques # 3765144 200 were blank.
b. Duly signed & crossed stale cheque # 6874026 dated 19.12.11 for Rs.500000/- favouring
Haider Ali pertaining to A/c # 0814020338803.
c. Duly signed stale cheque # 4885426 for Rs.51000/- dated 04.10.2007 of A/c #
04890083987403.
d. Confirmatory cheque # 5861905 for Rs. 1,000,000 dated 10.09.11 of A/c # 08147900224203
e. Duly signed cheque # 0638152 for Rs.2632/- dated 24.03.2011 of University of the Punjab
A/c # 01330000182203 favouring Ms. Farah Naz Rawalpindi Cantt (suptt MA/MSc). The
cheque was signed by Farah twice at the back and her signature was also verified with
instructions to credit A/c # 04890031600801 in the name of Mr. Raza Shah without any
endorsement and amount was credited in his A/c on 08.04.2011.
f. S.S cards of lockers # 114, 271 & 325 were lying in the drawer of Mr. Raza Shah.
Moreover, signature on S.S card of locker # 271 was not verified.
g. S.S cards of lockers # 117,496 & 1082 surrendered in 2007-08 instead of attaching the same
with the respective locker AOFs.
h. 8 duly signed S.S cards with CNIC Nos. written thereon without any account number, date
or stamp.
i. Duly signed blank letter head pad of M/s Saeed & Company along with company stamp.
j. Blank cash memos of Javaid Brothers Shell Dealers.
k. A cash memo for Rs.2650/- dated 07.06.12 of PSO Service Station 20, The Mall
Rawalpindi.
Management Response:
i. Lapse regretted. Lock was out of order which is now repaired. Cheque books now kept in dual
control. Non repetition assured.
ii. These are undelivered cards received. Informed the customers to collect the same and now
placed in dual control.
iii. a. While visiting the branch by my cousin, Cheque book remained with branch due to bad
weather. However, the same handed over to account holder against proper acknowledgement
receipt and shown to auditor. b. Stale cheque pending due to signature difference. Customer
informed to collect the same. RTD 14.09.2012. c. Lapse regretted. Stale cheque of 2007.
Informed the customer to collect the same. RTD 14.09.2012. d. Omission regretted.
Confirmatory cheque attached with the voucher. e. Regretted, the cheque pertained to the teacher

of my daughter who does not have account in HBL so I paid her the amount and credited the
cheque in my account. Now endorsement done at back. f. Omission regretted. Cards verified and
placed in box. g. Lapse regretted. Non repetition assured, now attached with AOFs. h. Extra card
obtained while opening of account. However account number mentioned/admitted. i. Letter pad
was forgotten by the company worker which was kept safe in the drawer, returned back to him
on 10.07.2012. j. While depositing clearing cheque, the same were left by customer on table.
However the same handed to representative of Javaid Bros on 10.07.2012. k. While filling of
fuel by family member receipt obtained which kept in drawer. Its personal expenses.
7. Anomalies in Cheque Book Issuance
Following anomalies were noted in cheque book issuance. P-60 to 62
a. 12 cheque books were delivered to 3rd parties without obtaining any authority letter.
b. 3 cheque books were missing as neither the same were issued to customer nor was any
acknowledgement on record.
c. 10 cheque books were delivered without obtaining acknowledgements from customer as such it
could not be ascertained that the same were issued to genuine customers.
d. 13 undelivered cheque books as old as of 01.03.12 were kept beyond the 75 days retention
period but not destroyed as yet.
e. Cheque books were delivered to customers without verification of their signature on
acknowledgment as a matter of practice involving risk of wrong / fraudulent delivery. It is
pertinent to mention here that two incidents of fraud has also occurred in the branch due to
issuance of cheque book in a customer account against forged / fake requisition slip.
f. Reminder letters to customers within 15 days of receipt of cheque books were not being issued
as a matter of practice.
Risk: Weak controls involve operational and financial risks.
Recommendation: Management should follow bank procedure and resolve the pointed out issues.
Management Response:
a. RTD 14.09.2012
RHQ Comments: Authority letters obtained from all customers and placed in branch record,
b. RTD 14.09.2012
RHQ Comments: Proper acknowledgment obtained
c. RTD 14.09.2012
RHQ Comments: Acknowledgement obtained in register.
d. Destroyed as on 12.07.2012 by 2 attorneys
e. Regretted. Correct practice maintenance assured.
f. Regretted. Correct practice maintenance assured.
8. Account Opening
While reviewing account opening / KYC profiling activity of the branch following irregularities of
serious nature were observed.
a. A/c # 08147900560803 titled Foundation University Endowment Fund was opened with
following anomalies: P-40
i. Signature of two out of four signatories namely Professor Dr. Aftab Ahmed and Air Cdre
Tanwir ul Islam were not available on AOF and signature of other two signatories on AOF
were not admitted by Branch Manager or Manager Operations.
ii. Specimen signatures of signatories approved by the competent authority of Foundation
University were also not available on record.
iii. Copies of CNIC of signatories of the account were not compared and matched with original
from both sides.
b. A/c # 08147900608403 titled Rafi Builders (Pvt.) Ltd. was opened without obtaining the Board
Resolution, signature on list of directors were not admitted by Manager Operation or A/c

10

opening Official, copy of NTN certificate was not obtained and an application form for freedom
account appended along with AOF was not signed by any concerned bank officer. P-41
c. A/c # 08147900465803 was opened in the name of M/s IBEX Engineering (Pvt.) Ltd without
attesting the copies of CNICs of directors and signature of the signatories were also not admitted
on AOF. P-41,42
d. A/c # 08147900432701 was opened in the name of HQ Frontier Works Organization (FWO) but
permission from one step above the individual operating the account was not obtained, instead
the signatory himself requested to open the account, copies of CNICs of signatories were not
attested and AOF was not signed by any branch official.P-42
e. A/c # 08147900560501 & 08147900560303 were opened without obtaining copy of CNIC,
KYC was not printed and attached with AOFs, customers signatures were not admitted on
AOFs and AOFs were not signed by any Branch Official. P-40
f. A/c # 08147900433803 & 08147900557603 were opened in the name of M/s The Uni Reflection
& GOA Outreach (sole proprietorship concerns) without admitting / verifying the sign on AOF /
Sole Proprietorship Declaration and AOF was not signed by any official. Copy of CNIC of
account holders was not compared and matched with original from both sides. P-42,41
g. AOFs of many A/cs were not signed by any official; 31 instances including non individual A/c #
79004494, 4500, 4719, 6253, 6427, 6429 were documented in working papers. P-46
h. Account opening forms were not signed by any 2nd official in almost 70% cases showing non
involvement of 2nd person in Account opening. 28 instances were documented in working
papers. P-43
i. KYC profiling of 68 accounts having credit balance ranging between Rs.0.500mn to 8.806mn
was not fed into the system. P- 49 to 51
j. KYC prints were not generated in 30 cases and not signed by any official in 4 cases. P-44
k. 4 non individual accounts are marked with low risk category instead of High or Moderate as per
SBP instructions for separate legal entities. P-52
l. CD 50 forms were not got signed by the illiterate A/c holders in case of A/c # 79004133, 4717,
4802 & 4832. Form CD-50 of six photo accounts were not signed by any branch official in token
of having read the photo A/c instructions before the customers for their understanding. P-45,47
m. A/c # 08147900483903 was opened on the strength of unsigned AOF by the customer.P-45
n. Customers profession was not mentioned on AOFs of 8 accounts. P-45
o. Copy of CNIC for A/c # 08147900505910 was not obtained and attached with the AOF for
record. P-47
p. Student ID card or proof of similar nature was not obtained regularly, 4 accounts were pointed
out in working papers.P-47
Risk: Chance of opening of unscrupulous accounts. Weak controls involved operational, financial
and regulatory risks.
Recommendation: Management should follow banks laid down procedure and resolve the pointed
out issues.
Management Response:
a. No transaction after opening of account. We have now marked the account closed.
b. Signature and Freedom account application form signed. For remaining ambiguities RTD
14.09.2012
c. Copies of CNIC verified. Signatures now admitted on AOF.
d. For obtaining permission letter RTD 14.09.12. CNIC now verified/matched and AOF now
signed by both officers.
e. Needful done.
f. Needful done now.
g. Now signed.
h. Omission regretted. Now AOF signed.
i. Lapse regretted. RTD 14.09.12
j. KYC now printed and attached with AOF and signed.

11

k. Omission regretted. Now marked high risk.

l. Omission regretted. Now CD-50 signed by Manager. RTD 14.09.12
m. RTD 25.07.12
RHQ Comments: AOF now signed by the account holder.
n. Now profession of the customer on AOF mentioned through KYC.
o. RTD 15.09.12
RHQ Comments: Copy of CNIC now obtained and attached for Br record.
p. Out of 4 accounts, 3 ID/ proof obtained and attached with AOF for one RTD 14.09.12
9. Customer Service
i. Proceeds of OBCs up to Rs.1.164mn were credited late after receiving fate in Sundry Asset GL884200 in customers A/c 18 instances of delay ranging between 5 to 7 days were noted. P-14,15
ii. Branch was not in practice of sending reminders for OBCs not realized for more than 10 days.
66 instances involving funds up to Rs.0.986mn were documented where proceeds were realized
with delay up to 104 days. P-12 to 14
iii. Proceeds of HMTs involving funds up to Rs.0.662mn were credited in the respective customers
A/cs with delay of up to 17 days after receipt of funds. 18 instances were noted. P-16,17
iv. Two Advantage A/cs totaling Rs.15.800mn were booked late up to 42 days after receipt of
customers requests as per the dates on AOFs.P-23
v. Standing instructions of A/c # 0814-00605850-11 to transfer USD 3000/- on 10th of every month
to A/c # 1305200413057118728 (Canada) were not followed as delay ranging between 2 to 8
days was noted on six different occasions. P-58
vi. Normal BC / remittance charges were recovered on remittances favouring Educational
Institutions instead of charging concessional rates as per SOBC.P-20
vii. Excess FBC charges totaling Rs.5750/- were recovered from customers on 14 occasions.P-96
Risk: Lapses in customer service may adversely affect the bank business.
Recommendations: Branch needs to endeavor for excellent customer service.
Management Response:
i. Regretted, non repetition assured.
ii. Regretted, now correct practice started.
iii. Omission regretted.
iv. In case of Rs.1.500Mn the issuance was withheld on the verbal instructions of depositor, non
repetition assured.
v. Lapse regretted. Non repetition assured.
vi. Regretted, Non repetition assured.
vii. Regretted, non repetition assured.
10. Delay in Mark Up Recovery
Inordinate delay was observed in recovery of mark up on finances; refer below delay.
a. In case of SBF A/c # 0814-79002497-03, title M/s. Razia Kidwai, limit Rs.9.500mn, markup for
the quarter ended on June11 was recovered on 11.08.11 with delay of 41 days, and penal
markup amounting Rs.53341/- was not recovered from the customer.
b. Quarterly mark up servicing was not done timely i.e. within 7 days from due date as delay up to
42 / 87 days was noted in case of 6/3 SBF/ RF limits.19 & 15 instances totaling Rs.3.235mn &
2.034mn were reported respectively resulting in opportunity loss of Rs. 43K to bank income. P80 to 82
c. Mark up totaling Rs.1.262mn for June quarter was outstanding in case of 17 finance limits as of
audit date and not recovered as yet. The branch was advised to recover the outstanding markup.
P-83
Risk: Delay in recovery of Mark up leading to financial risk / loss.
Recommendation: Branch was advised to recover the mark up on timely basis.
Management Response:

12

a. Rs.53341/- recovered on 13.07.12.

b. Regretted, non repetition assured.
c. RTD 14.09.12
RHQ Comments: Rs. 1,194,549.52 recovered for remaining i.e. Rs. 67071.38 RTD 14.09.12
11. Short Recovery
Total excess payment/short recovery of Rs.110855/- was detected by audit out of which Rs.49304/were recovered and Rs.61551/- were yet to be recovered as per detail given below. P-21,39,5356,58-60, 87,88,90,91,93,95,98,99
Page #
Amount
Detail
39
150.00
Stop Payment Charges
53,54
12243.00
ATM Annual Charges
55,56
19600.00
A/c Service Charges
58,59
1692.00
Standing Instructions Charges
59,60
1160.00
Deceased A/c processing Charges
66
1160.00
Special Clg Chgs
87,88
20010.00
Limit Processsing Charges
90,91
2320.00
Handling Charges
90,91
232.00
EDS Commision
95
2984.00
FBC Charges
Risk: Leakage of income is direct loss to the bank.
Recommendation: Management should strengthen controls to avoid leakage of income and recover
the pointed out amount.
Management Response: RTD 14.09.12
RHQ Comments: Out of remaining recovery Rs.61551/- a sum of Rs.50383/- further recovered.
RTD 14.09.12 for the rest amount

13

Medium Risk Issues

The observations classified by Audit as Medium Risk are considered less serious in nature and need to
be resolved early by the management of auditee branch under close supervision and monitoring of Senior
Management.
12. Last Audit Issues
a. Mr. Naseeb Ali Khan SM-1 posted at Air Port Booth, Islamabad Airport since 31.05.1997 was
not transferred / rotated despite of repeated audit exceptions.
b. Auto Lease Insurance Charges Rs.281383/- were not recovered as yet.
Management Response:
a. Matter pertains to RHQ.
b. Out of 18 cases 10 cases for Rs. 218,804 are NPL cases (Loss). In 5 Cases for Rs. 36,303 NOC
had already been issued in the year 2007 customers are not traceable. For remaining 3 Cases of
Rs. 26,276 Rs. 18362/- already recovered. We have also raised the memorandum for waiver of
remaining auto insurance. RTD 14.09.12
13. NPL Portfolio
39 Personal loans and 11 Auto loans having PDB totaling Rs.2.915 + non accrual markup
Rs.1.658mn and PDB totaling Rs.2.388 + non accrual markup Rs.1.114mn respectively were main
part of the classified portfolio. No follow up for recovery of stuck up funds was available with the
branch. In few cases, small amounts up to Rs.24K were outstanding. P-84,85
Management Response: We will make follow up for recovery of outstanding Auto finances, follow
up for personal loan is being made.
14. Expenditure
i.
A sum of Rs. 187,423/- pertaining to 6 different GLs was wrongly debited to Maintenance
Charges GL 917510 as per following details. Similarly expenditure vouchers totaling Rs.3K
were also posted in wrong GLs of expenditure.P-70 to 74
No.
of
Actual
Instances Amount
GL
Head of A/c
On A/c of
36
103470.00 917508
Other Incl Gas
Drinking water charges
06
28350.00 917508
Other Incl Gas
Diesel Charges
37
20445.00 917901
Printing & stat
P/ S including Photocopies
Maint
Off Maintenance of Office
11
10625.00 918026
Equip
Equipment
04
7040.00
917186
F&F < Rs.10K
F &F items costing < 10K
01
1288.00
917701
Postages
Postal Charges
01
16205.00 916035
Data Cabling
Power cabling
ii.
Expenditure on diesel for generator is on quite higher side as a budget of Rs.436,363.40 was
allocated for GL 917508 (Others Incl Gas) for the year 2012 but branch has already incurred a
sum of Rs. 452,145/- during the half year (Rs. 320,325 by debiting GL 917508 and Rs. 131,820
mis posted in GL 917510) exceeding the annual budget by Rs. 15,782/- in half year. P-74
iii.
Cash sorting charges Rs.11060/- were paid on 31.05.2012 without obtaining the approval from
competent authority.P-7
iv.
Bills of following expenditure totaling Rs. 0.823mn debited on 42 occasions through cross
branch transactions were not available in the branch. P-75 to 78

14

Instances Amount GL
On A/c of
21
0.478
918018 Cash Transportation Charges
19
0.326
917901 Printing & Stationery
01
0.003
916035 Debited by IT Deptt
01
0.016
917510 Maintenance Charges
v.
Surrendered locker keys are no more to be replaced as per P/Inst 3197 dated 23.02.2011, but an
amount of Rs.1500/- was paid for replacement of 3 lockers keys on 24.02.11 against the
instructions. P-74
vi.
The branch is paying Rs. 2,000/- per month to Mr. Iqbal Masih for cleaning charges at Airport
Booth and Rs. 12,000/- have been debited to GL 916040 in this regard in year 2012 but approval
of the same is not available. Moreover, charges for May 2012 were not disbursed to him as yet
and Charges for the month of April 2012 were disbursed from GL 917510 Maintenance Charges.
P-74,75
vii.
Although the branch is having a photo copy machine but photo copy charges amounting to Rs.
5,171/- were incurred by debiting Maintenance Charges GL 917510 during audit period. P-76
viii.
Cost of SIM Rs.600/- (purchased for security alarm) was wrongly debited to Income GL 912303
on 11.01.2012 instead of debiting GL 918035.P-70
Management Response: i. Regretted for entries pertaining to year 2011. Entries pertaining to year
2012 reversed into correct GLs on 12.07.2012. ii. We were trying our best to curtail these expenses but
were unable to do that due to increase in diesel prices and load shedding timings. Regretted, RTD
14.09.2012 for excess over limit budgets approval. iii. iv. v. vi. RTD 14.09.2012. vii. The photocopy
machine of the branch remained out of order during those periods which is now working perfectly. viii.
Regretted, now reversed in correct GL.
15. Other Issues in Cash / ATM
a. Cash exceeding the safe in limit of Rs.110.00mn was not reported for Insurance on regular basis,
12 instances of excess cash to the tune of Rs.48.790mn were found unreported while checking
the aspect on test basis. P-6
b. Branch did not adhere to instructions of keeping required FCY cash on hand i.e. up to 1% of the
FC deposits. FCY cash on hand was kept up to 2.41 % of the FCY deposit, 5 instances were
noted while checking the aspect on sampling basis. P-100
c. Handing / taking over the charge of cash by branch staff and relievers was not documented
during the audit period. P-6
d. Cash Shortage GL-901211 was frequently debited by Kashmir Road branch (pool branch) but no
documentary evidence of shortage was sought from that branch, 10 instances involving a sum of
Rs.2K were pointed out. P-9,10
e. FC accounts maintained at the branch comprise of 3 currencies i.e. USD, GBP and EURO
whereas SAR 4149/-, CAD 3852/-, CHF 200/- & AED 5015/- were also kept without any
purpose. Furthermore, denomination wise details of foreign currency notes was not prepared for
these currencies instead lump sum figure was mentioned on cash position. P-98
f. Record of ATM applications not processed for one reason or the other was not maintained, some
of the latest applications found in the drawer of ATM Cards custodian show that the same were
returned due to difference in contact number with MISYS on AAE screen. 13 instances of last
month were documented in the working papers. P-3,4
g. Branch was not in practice to obtain the copy of CNIC of customers while delivering the ATM
cards.P-3
h. Branch was not in practice to round off the amount of deposits / withdrawals and coins GL
showing the paisas and branch made the paisas entries regularly in violation of HOK circular #
P-INST-3357 dated 08.03.2012; branch is advised to follow the HOK circulars.P-6
Management Response: a. b. Regretted, non repetition assured. c. d. g. h. Regretted, now correct
practice started. e. For disposal of this FC, RTD 14.09.12. All the above mentioned FC is now

15

denomination wise mentioned on cash position. f. Now and onward record will be maintained
properly and now application will be sent after proper scrutiny.
16. TRFs
a. An I/w clearing cheque for Rs.6833/- was debited to A/c # 08140021453101 on 24.05.2012
against the credit balance of Rs. 530.24 hence TRF of Rs. 6302.76 was created. The fate was
given to HBFCs CMD account, fate was recalled from HBFCs CMD account into sundry
assets GL 884200 in order to adjust the TRF which was received on 30.05.2012 and the TRF
was adjusted. The cheque was not returned as yet. P-35
b. A LFT for Rs.10000/- pertaining to A/c # 08047900093303 was wrongly executed in A/c #
08147900093303 on 20.08.2011 by Karachi Vegetable Market Branch (1213). The amount was
withdrawn by customer through ATM on 20.08.2011 and 24.08.2011 leaving a balance of Rs.
530.60 only. On 26.08.2011 the amount was reversed by Karachi Vegetable Market branch
without any intimation to this branch creating a TRF of Rs. 9469.40 which was adjusted in
piecemeal i.e. Rs.6000/- 1800/- & 2090/- on 29.08.2011, 01.02.2012 & 17.04.2012 by
depositing cash, online credit and by debiting Routing A/c of that Branch respectively but Post
Facto confirmation of the TRF was not sought. P-35,36
c. Post facto approval of following TRFs totaling Rs. 55,864 was not obtained.P-36
A/c #
TRF
7900524703 3,672.80
7900290401 17,717.70
5904-4
34,293.57

Reason
Transfer debit
Cash
Transfer debit

Dated
04.07.12
01.11.11
30.12.10

Adjusted on

05.07.12
02.11.11
14.01.11

Adjusted through
Salary
Transfer - Credit
3 Cash deposits

Management Response: RTD 14.09.12 for returning the cheque and post facto approval.
17. Stop Payments
a. Stop payment applications in respect of 21 stop payments marked in the system were not
available on branch record. P-36,37
b. Stop payments instructions pertaining to A/c # 5413-77, 18518-3 & 79002955 were marked with
the delay of up to 2 days.P-38
c. The branch is not in practice to record date and time of stop payment received from the
customer, instead date and time of stop payment marked is recorded against the instructions
which may result in dispute in case a stopped cheque is paid. Refer A/c # 14635-9, 48479-5,
9622-5, 79006179 P-38,39
d. Customers signatures on stop payment requests were not verified refer A/c # 48479-5, 55298-8
& 79004398 P- 38,39
e. Stop payments of A/c # 52-82 & 16762-7 were marked on the strength of fax copy of stop
payment request dated 24.05.11 & 16.12.11but original letters were not obtained as yet. P-39
Management Response: a.RTD 14.09.2012 b. Regretted. Non repetition assured. c. Date and Time
now mentioned on Stop Payment letters, noted for future. d. Customers signatures verified now. e.
Requested the customers to provide us original letters RTD 14.09.2012
18. Remittances
a. Bankers Cheque (# 7061712) for Rs.20Mn was issued in favor of Mr. Tallet Zareef Satti A/c #
08140054218703 on 03.07.12 on the strength of photocopied/scanned remittance form without
receiving original remittance form; moreover, KYC profiling & signature verification was also
not done. P-19
b. Source of funds/purpose of remittance was not mentioned on foreign outward remittance forms.
4 instances totaling $ 0.474mn up to $0.250mn were reported in working papers while checking
the aspect on test basis.P-99

16

c. Remittance Application forms were not completely filled as to meet AML / KYC requirements
i.e. purpose of remittance, source of funds and relationship with beneficiary etc. was not
mentioned on a number of application forms. P- 17,18
d. The branch was not maintaining any record of inward foreign remittances for audit review. P100
e. Branch copies of Banker Cheques were not initialed as a matter of practice while issuing the
bankers cheque. P-18,19
Management Response: a. He is our very valued customer, now a days he is in Saudi Arabia for
Hajj & Umra arrangements. He requested for the issuance of bankers cheque on scanned copy of
remittance form & promises to provide original form very soon. RTD 14.09.12 b. Now mentioned. c.
d. e. Regretted, noted for future compliance.
19. Advantage A/c Deal Booking
a. No system was in place for delivery of Confirmation of Deposits to the depositors as such it
could not be ascertained that whether CoDs were delivered to the respective depositor or not.
Confirmations of Deposits were either not delivered to the depositors or acknowledgement for
the delivery was not obtained. CoD of Advantage A/c # D1M/11/02 for Rs.0.100 was delivered
to 3rd party in absence of any authority letter. P-22
b. Branch management was not regular in verifying the depositors signature on AOFs for booking
of Advantage A/c as 22 instances totaling Rs.15.650mn were pointed out in working papers.
Many of such Advantage A/cs were also paid. P-22
c. Applications for premature encashment of Advantage A/cs were not filed properly (with the
relevant AOFs) as such the same pertaining to many Advantage A/cs were not available on
branch record. P-23
d. Account Opening forms of 4 Advantage A/cs totaling Rs.5Mn were not available on record. P23
e. Advantage A/cs were booked with rollover option without getting the instructions checked by
the depositors. 6 instances totaling Rs.4.600mn were pointed out in working papers. P-23
f. Branch management was not in practice of writing the date on AOF on the date of receipt as
many AOFs were still undated. P-23
g. Advantage A/c No. is not being mentioned on AOF as a matter of practice. P-24
h. AOFs of Advantage A/cs were not being filled properly i.e. in chronological order. P-24
Management Response: a. Correct practice started from now onwards, RTD 14.09.12. b. Signature
verified in all the cases, non repetition assured. c. d. RTD 31.07.12. e. All these Advantage A/cs
were issued on the instructions of customers, we assure to get the instructions checked invariably in
future. f. Practice started. g. h. Non repetition assured.
20. Trade
a. Export documents valuing USD 14000/- pertaining to M/s. Valor Pharma were sent on
collection basis on 18.05.12, however while reviewing the documents it was noted that the copy
of Airway bill was not available with the branch.P-89
b. The branch was not in practice to verify customer signatures on E forms. P-89
c. Branch stamp was not affixed on the E form stock available with the branch. P-90
Management Response: a. Copy of Airway bill now obtained. b. Now verified and noted for
compliance. c. Now affixed.
21. Clearing / Collection
a. Two cheques amounting to Rs. 23.123mn favoring PTDC A/c 0814-79002498-01 were lodged
in special clearing on 02.02.2012 but charges Rs. 1160/- were recovered by debiting GL-884200
instead of partys A/c, which were reversed on 14.03.2012 with delay of 40 days by debiting the
GL-912083. P-66
b. NIFT scrolls were not entry wise checked by the Officer In Charge as a matter of practice. P-69

17

c. Branch was not in practice to printout the OBC lodgment register on daily basis. P-15
d. Lodgment vouchers were not being passed in the system in case of FBCs. P-97
e. 2 FBCs of $ 3194/- sent on collection basis on 06.06.12 were not realized for even more than a
month but follow up was not made for realization. P-97
Management Response: a.. Regretted, now charges recovered from party account. b. Regretted,
now correct practice started. c. Regretted, now correct practice started. d. Noted for compliance. e.
Both the FBCs stand realized on 09.07.12
22. Letters of Guarantee
a. A sum of Rs.0.227mn was outstanding in 6 margin accounts but no funded/non funded facilities
were outstanding in the system there against. P-92
b. Contra liabilities of outstanding L/Gs appearing in Equation and TI were showing a difference of
Rs.2262343/- i.e. balance as per Equation is Rs.66982559.43 but TI is showing a balance of Rs.
64,720,216.43 as of 06.07.12. The branch was advised to balance both the figures. P-91
c. Shadow files of the L/Gs were not maintained for audit review in respect of LGs issued during
the period under review. P-92
Management Response: a. The above amounts lying in margin accounts would be refunded against
indemnity from customers. RTD 14.09.12. b.RTD 14.09.12 c. Noted for compliance.
23. IT Operations
Following anomalies were noted in IT Operations: P-101 to 103
a. Branch staff was not in practice to check back end reports entry wise i.e. Daily Posting List,
Auto Transaction Reports etc.
b. Branch staff is not in practice to disable their Misys IDs when going on leave. Refer
User
User ID Name
Class
On leave(date)
HJ13
Mr. Abid Hayat
SSP
26.06.12-10.07.2012
MQ22
Miss Maria Qibtia ENQ
On 90 days leave w.e.f.02.07.12
MU31
Mr. Murad Ali
SSP
29.06.12-06.07.12
SM96
Mr. Sohail Mazhar TEL
02.07.12-16.07.12
c.
d.
e.
f.

Branch staff was not in practice to temporarily sign off their system when leaving their seats.
CCTV DVR is not password protected.
Recording of CCTV cameras was not available from 4 to 11 July, 2012.
CCTV camera coverage of strong room & ATM entrance was not proper due to which clear face
coverage of person entering both sites was not visible.
g. Duty of CCTV management was not assigned to any staff member.
h. Antivirus utility was out of date on five systems, which may result in data loss / system
breakdown.
i. Computer hardware malfunctioning/maintenance log and software updating record was not
maintained by the branch.
Management Response: a. Regretted, correct practice started henceforth. b. We have sent the Form
C along with application. Matter pertains to HOK. c. Regretted, correct practice started henceforth.
d. Company is contacted for updating of system. e. Regretted, while concealment of system the
recording cassette was unplugged. f. We have contacted the company for adjustment of cameras. g.
Now duty assigned for CCTV management. h. Requested the IT Department to upgrade the antivirus
system. i. Regretted, now log book maintained.
24. Leakage of Income
a. Service charges amounting to Rs. 19,600/- were recoverable from 58 current accounts in the
names of individuals marked with condition 085 meant for service charges waiver where

18

average balance in certain months remained less than Rs. 5,000/-. Branch also needs to remove
the condition to avoid further leakage of income. P-55,56
b. ATM fee amounting to Rs. 12,243/- were recoverable in 35 cases as the A/cs were wrongly
marked with condition 086 meant for ATM Fee Waiver. 53,54
Management Response: RTD 14.09.2012
25. Air Port Booth
a. Air Port Booth at Islamabad Intl Air Port is working under the branch, cheques of PIA, CAA
and individuals A/cs maintained at the branch were being paid at Air Port Booth without
signature / balance verifications as observed on checking date i.e. 11.07.2012 when the MYSIS
system was not working but 3 cheques totaling Rs. 0.227mn of CAA were paid.
b. All the cash receipts / exchange related dealings are dealt singly by Mr. Naseeb Ali Khan since
12.04.2012. P-11
Management Response: a. CAA is our valued client we are compensating their executives at
Airport Booth. b. Matter already taken up with RHQ. RTD 14.09.2012
26. Tax Evasion
Three individual accounts were marked with condition 093 meant for waiver of withholding tax on
cash withdrawal, branch needs to remove this condition from these accounts. Refer A/c # 20051-1,
203477 & 79002312. Withholding tax Rs.906/- is also recoverable from 1st A/c.P-54
Management Response: RTD 14.09.2012
27. Special Conditions:
a. 10 active accounts opened as back as in September 2011 were still marked with condition 092
meant for Provisional Account. P-57
b. 748 & 130 accounts having an aggregate balance of 26.763mn & 2.091mn were running with
condition 095 & 096 meant for incorrect CNIC & incorrect address respectively. Branch needs
to view these accounts and endeavor to regularize the same. Details provided separately.P-57
c. 30 Joint Accounts were not marked with condition 127 meant for joint accounts. P-52,53
Management Response: RTD 14.09.2012
28. Furniture & Fixture
5 items of Furniture Fixture < Rs.10K totaling Rs.10890/- were purchased without obtaining
approval of competent authority. It was further noted that required record for previously purchased
such items as pedestal fan, chairs, insects killer was not maintained.P-63
Management Response: Last one approval shown for rest RTD 14.09.12 entries made in register.
29. GL Review
a. As per office order # ISL/4212/9/1/Com/15620 dated 13.12.2008 of CAA the only cash security
deposited with CAA Islamabad for HBL booth was Rs.687602/- where as a sum of Rs.791296/was outstanding in GL 901275 Advance deposit but detail / receipt of difference amount of
103694/- was not available in the branch. P-64
b. Credit balance Rs.200/- outstanding in GL # 924963 Stamp on Hand L/G since Jan 2011 was
not settled as yet. P-64
Management Response: RTD 14.09.12
30. Term Deposits
Two Term Deposits totaling Rs.1.150mn were lying in overdue without effective follow up for
encashment / reinvestment. Furthermore, 77 CDRs totaling Rs.0.128mn as old as of 1974 are also
outstanding without any effort for payment.P-24
Management Response: We could not contact the depositors despite of several efforts, RTD
14.09.12

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31. Other Issues in Account Opening

a. CNIC copies obtained for account opening were not attested by affixing stamp Original seen
and compared as the required stamp for the purpose is not available in the branch. 10 cases
were pointed out in working papers. P-46
b. Copies of CNICs were not attested in five cases. P-48,49
Management Response: a. Omission regretted. Now practice started. b. Omission regretted, CNIC
copies attested.
32. Non A/c holders Lockers
106 lockers A/cs were still running with A/c type CY (Suffix 69) but neither customer account
opened nor were the lockers got surrendered, as per P/INST/2922 dated 30.04.2009.P-4
Management Response: RTD 14.09.2012

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Low Risk Issues

The observations classified by Audit as Low Risk are of routine and procedural in nature and need to be
resolved by the management of auditee branch.
33. Staff Matters
a. Following staff members working in branch for more than 3 years were not yet rotated /
transferred. Refer: P-29,30
Name
Mr. Nasir Taqi
Mr. Sharjeel Ahmed
M. Asif Meer

Designation
Assistant Manager
AM-II
Officer-I

P.No.
401554
444507
459022

Posted since
10.03.2009
04.04.2009
26.01.2009

b. Manual leave record was not maintained and system based record was also not available for the
months of Dec, 2010, Jan, April, May, 2011 & Mar, May, 2012.P-25
c. Muster roll was not being supervised on daily basis by the Manager Operations. A number of
instances were noted in the working papers. P-26,27
d. Car finance documents of 4 staff transferred out of this branch were kept in the branch instead
of sending the same to their respective branches.P-87
e. Power of attorney documents of Miss Shagufta Aslam Officer Trade Deptt & Qasim Hasnain
Manager Teller were not available in the branch.P-28
f. Personnel files of Mr. Sharjeel Ahmed CSO, Mr. Shahzad Malik AM II and Mirza Aqeel Baig
Officer I were not available in the branch. P-29
g. Branch Staff was not in practice to initial the circulars in token of having read the same for
implementation.P-28
Management Response: a. Matter pertains to RHQ. RTD 14.09.12 b. Regretted, Record now
updated. c. Omission regretted, now checked & verified. d. f. RTD 14.09.12 e. No power of attorney
allotted to Miss Shagufta Aslam, RTD 14.09.12 for Qasim Hasnain attorney. g. Regretted, correct
practice started now.
34. Key Charge
Change of hand was not documented / updated in key charge register when the staff possessing main
safe keys / ATM combination Code availed leave. 4 instances were referred in working papers. P-25,
26
Management Response: Record updated now & non repetition assured.
35. Security Matters
a. Cash counter door leading to strong room remained open overnight. P-34
b. Training certificate and verification of CNIC of security guards were not available on branch
record. P-27,28
c. Copies of renewed licenses of guns provided to security guards by their company were not
provided.P-27,28
Management Response: a. Lapse regretted. Non repetitions assured. b. Company is requested to
provide the documents. c. Company is asked to provide copies of valid license.
36. Security Stationary
Security stationary memo file was not up to date, due to which it was difficult to ascertain that how
much stock of security stationery was received from HOK. P-26
Management Response: Regretted, correct practice started now.
37. Courier Register
Branch Staff was not in practice to supervise the entries of courier register. P-26
Management Response: Regretted, correct practice started now.

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38. Vouchers
Vouchers were not kept in sealed envelopes and number of debit / credit vouchers was not being
written on the vouchers covers / envelopes.P-63
Management Response: Correct procedure since adopted.
39. Account Type
6 organizational/institutional accounts were marked with wrong account type EA meant for
individual accounts. P-51
Management Response: Lapse regretted, RTD 14.09.12
40. Old Record Register
Old record register was not maintained by the branch. P-27
Management Response: Now maintained.

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