THE central bank did not have a system of checks and balances in its Foreign Exchange Department, said a former Bank Negara Malaysia (BNM) officer, who is the second witness in the Royal Commission of Inquiry (RCI) into its forex losses two decades ago.

Former auditor Ahmad Hizzad Baharuddin today testified that BNM had “no system of checks and balances” and “supervision over the Foreign Exchange Department was found to be lax”.

Asked by RCI panel member Saw Choo Boon about how it came to be that there was a “total lack of rules” and “disregard for authority”, and why trade volume ran into the hundreds of billions, Hizzad said BNM did not have a “robust computer system” to capture all the transactions then.

Instead, he said, the transactions were manually entered.

The RCI at the Palace of Justice earlier today heard from another former BNM staff member, Abdul Aziz Abdul Manaf, that the central bank had lost RM31.516 billion from 1991 to 1994, but details were unclear as to how exactly the losses were tabulated.

The RCI, chaired by Petronas chairman Mohd Sidek Hassan, was set up to determine the validity of allegations of losses due to foreign exchange speculation, whether BNM’s activities in forex trading had contravened the Central Bank Ordinance 1958 or any other law, and whether there was an attempt to cover up the losses.

The panel is expected to recommend action against parties it finds to be directly and indirectly involved in the scandal, and measures to ensure such incidents do not recur.

Meanwhile, Tan Hock Chuan, who held a watching brief for BNM, had opposed to allowing the statements to be made by the former BNM staff.

He said the audit and accounting losses that Hizzad and Aziz spoke about were based on information that was still classified under the Official Secrets Act (OSA).

He said the two witnesses had not been granted immunity from OSA.

Citing Section 8 of the Commission of Enquiry Act, he said the evidence may not be admissible.

Sidek, however, overruled Tan’s request.

“This is an inquiry. This is not a trial. We are commissioned by the king to do this. I am going to continue this inquiry without delay.

“If you claim everything to be (classified under) OSA, then why have this inquiry? I will not allow any more debate, we are going ahead,” said Sidek, who is also former chief secretary to the government.

The inquiry will continue on August 24, 29 and 30; and September 6, 7, 18, 19 and 20.

A report on its findings is to be tendered to the king in October. – August 21, 2017.