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DNA Sunday (Mumbai) - - FRONT PAGE -

prop­er­ties as­so­ci­ated not only with the ac­cused, but also their rel­a­tives. “We have been given clear di­rec­tion from the Min­istry of Fi­nance to seize all prop­er­ties of the ac­cused com­pa­nies and peo­ple,” said a se­nior IT of­fi­cer, adding that they have also been en­trusted to probe quid pro quo in the case.

The in­ves­ti­gat­ing agen­cies found that it was more than just a fail­ure on the part of PNB, which is­sued sev­eral Let­ter of Un­der­tak­ing ( LoU) and Let­ter of Credit on be­half of which Modi and Choksi took money from for­eign branches of In­dia- based banks. The CBI found that a to­tal 293 Let­ters of Un­der­tak­ing ( LoU) and 224 for­eign let­ters of credit were is­sued. The CBI said that the cheat­ing and fraud hap­pened dur­ing 2017 and 2018.

The agency stated that the Re­serve Bank of In­dia ( RBI) pre­scribes that credit for im­port of semi- pre­cious and pre­cious stones, in­clud­ing pearls should not be more than 90 days. How­ever, in most cases, the credit al­lowed un­der re­ferred LoUs are much beyond 90 days. “For out­stand­ing buy­ers’ credit, the LoUs are estab­lished for about 360 days ab- ini­tio. This should have evoked sus­pi­cion in the minds of over­seas branches of In­dian banks ex­tend­ing credit to buy­ers. These banks never raised any alarm on vi­o­la­tion of RBI guide­lines and con­tin­ued to pro­vide fund­ing against fraud­u­lent LoUs,” said a se­nior CBI of­fi­cer.

The agency found that PNB em­ploy­ees fraud­u­lently is- sued let­ters of un­der­tak­ings on be­half of firms — So­lar Ex­ports, Stel­lar Di­a­monds, and Di­a­monds R Us — that is owned by Ni­rav Modi, for avail­ing of buy­ers’ credit from over­seas branches. The same branch of­fi­cials fraud­u­lently is­sued LoUs and for­eign let­ters of credit to com­pa­nies — Gi­tan­jali Gems, Gili, and Nak­sha­tra — be­long­ing to Me­hul Choksi.

“But in­ter­est­ingly, none of the trans­ac­tions was routed through the core bank­ing sys­tem ( CBS), thus avoid­ing early de­tec­tion of fraud­u­lent ac­tiv­ity,” CBI spokesper­son Ab­hishek Dayal told DNA.

He fur­ther said that the modus operandi with re­gard to the for­eign let­ters of credit is that they were opened ini­tially for smaller amounts by cre­at­ing pur­ported en­tries in core bank­ing so­lu­tion ( CBS) sys­tem and send­ing the rel­e­vant for­eign let­ters of credit through SWIFT mes­sages.

“The ac­cused bank of­fi­cial, pur­suant to the con­spir­acy, unau­tho­ris­edly and dis­hon­estly en­hanced the value of for­eign let­ters of credit man­i­fold and is­sued amend­ments to the said let­ters of credit through SWIFT mes­sages, with­out record­ing them in CBS, which led to the over­seas branches of In­dian banks dis­count­ing the bills sub­mit­ted by the ben­e­fi­ciary sup­pli­ers,” he said.

The agency stated that bank of­fi­cials de­lib­er­ately did not make en­tries in CBS and pur­port­edly is­sued LoUs and for­eign Let­ters of Credit to ‘ avoid de­tec­tion’.

To me it is case of sys­tem fail­ure. It is strange that SWIFT mes­sages could be made with­out get­ting into CBS sys­tem. In such a sit­u­a­tion, frauds are likely to oc­cur, not only in this Bank, but in other banks as well, where sim­i­lar prac­tices are fol­lowed. Also, a per­son not be­ing ro­tated on a job for more than eight years is baf­fling and HR man­age­ment of the Bank has to be held ac­count­able for the same.

As things stand to­day, there is a need to look into ac­counts of all ma­jor jew­ellers, par­tic­u­larly what hap­pened a few years back in the Win­some Di­a­monds case, and sur­pris­ingly PNB was in­volved in that case as well. Sur­pris­ingly, we do not hear about more than 5,000 crore fraud cases for rea­sons best known to banks, RBI and the gov­ern­ment.

There is an ur­gent need to look at LOCs, LOUs and SBLCs, hav­ing been is­sued by banks over all these years and their mis­use. Banks with for­eign op­er­a­tions are more sus­pect to these prac­tices. I would not be sur­prised if more skele­tons come tum­bling out of the cup­boards.

As re­gards role of au­di­tors, whereas one would like to sym­pa­thise with them for the dif­fi­cult task that they face in view of LOCs/ LOUs hav­ing been is­sued out of the books, but un­usual move­ments in Nostro ac­counts could have given them some rea­sons to look in to the mat­ter deeply. But it is also a mat­ter of fact that rec­on­cil­i­a­tion of Nostro ac­counts is an on­go­ing process and even RBI in­spec­tors and in­spec­tors of banks who spend far greater time in branch com­pared to statu­tory au­di­tors could not de­tect it. In my view, such a fraud could not have oc­curred with­out the con­nivance of at least six em­ploy­ees. The SWIFT mes­sage in­volves maker, checker and ap­prover, and in case of large amounts, the for­eign op­er­a­tion em­ployee is sup­posed to get the trans­ac­tion con­firmed from an em­ployee other than maker, checker or ap­prover. So, it is not a straight- jack­eted case. It needs to be in­ves­ti­gated from var­i­ous an­gles, par­tic­u­larly of money laun­der­ing.

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