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Old 15th February 2018
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PNB fraud: Two rogue employees, one famed jeweller, and Rs 11,300 crore vanishing into thin air

PNB fraud: Two rogue employees, one famed jeweller, and Rs 11,300 crore vanishing into thin air

It was a ploy to avoid immediate detection: the SWIFT messages used to raise overseas credit were not readily available in PNB’s FINACLE software system as these were issued without entering into the bank’s CBS.
MUMBAI: How did two employees try to fool a stodgy bank in the largest diamond house fraud that surfaced on Valentine’s Day, when thousands of pearls and gems change hands across the world?
In raising funds and moving money out of Punjab National Bank (PNB), the two employees of the state-owned lender directly used SWIFT — the global financial messaging service used to move millions of dollars across borders every hour — and bypassed the core banking system (CBS) which processes daily banking transactions and posts updates.
It was a ploy to avoid immediate detection: the SWIFT messages used to raise overseas credit were not readily available in PNB’s FINACLE software system as these were issued without entering into the bank’s CBS.

WHAT REALLY HAPPENED?
It began with diamond firms approaching PNB for opening letters of credit for import of rough stones. As per the terms of the LC, a common banking tool, PNB would pay the overseas suppliers on behalf on Nirav Modi’s firms within a certain period (typically three months) and recover the money from Modi. It’s a market practice to extend the LC if the client (i.e, NM) is unable to cough up the money at the end of the LC tenure.

Fake LoUs were Issued

This is done on the basis of letters of undertaking given by the local bank (which in this case is PNB).
PNB employees issued fake LoUs, on the back of which foreign branches of a few Indian banks — including Axis and Allahabad Bank — gave dollar loans to PNB. These foreign currency loans were used to fund PNB’s Nostro accounts and from these accounts funds moved to certain overseas parties. A Nostro account is the account an Indian bank (here, PNB) has with an overseas bank.
Based on unauthorised Lo-Us, the PNB employees misused the SWIFT network to transmit messages to Allahabad Bank and Axis Bank on fund requirement. In using SWIFT, one has to log into the network to fill up fields like the account number and SWIFT code, following which it is endorsed by a supervisor. The process is completed when the bank receiving the message confirms and the details are validated. While all this was done using SWIFT passwords, the transactions were never recorded in the bank’s core system — thus keeping the PNB management in the dark for a long time.
The other question that crops up is: who were the suppliers? In the closely-knit world of diamonds, the overseas suppliers of rough stones and the final exporters of diamonds (after these are cut and polished in Surat) are often members of the clan, if not same family. According to PNB’s statement to enforcement agencies, the funds so raised for payment of import bills have not been utilised for such purposes in many cases.
According to banking circles, PNB will have to make good the lost money even though technically Allahabad Bank and Axis Bank took the exposure. “It is not known whether Axis and Allahabad still have the loans on their books or they have offloaded some of it to other banks,” said another banker.
According to a confidential note from PNB to some banks, similar modus operandi was used by the same officials in companies belonging to Mehul Choksi-promoted Gitanjali Gems, Gili India and Nakshatra, while issuing Lo-Us/ LCs. The transactions were initially routed through the CBS system but subsequently changes were made in the LCs by substantially increasing the amount and transmitted through SWIFT without reporting this to CBS.
According to the note, LoUs were opened for pearl import for which total time period allowed by RBI is 90 days. Some of the overseas branches of Indian banks overlooked the rule. PNB has alleged “clear criminal connivance” of group companies of Modi and Gitanjali with some officials of PNB and other banks. In what could lead to a feud between PNB and other Indian banks, the former has complained that some of the branches of other Indian banks have not shared key documents related to the credit with PNB.
It appears the overseas buyers’ credit against LoUs was used to retire import bills or replenish maturing credit.

Allahabad Bank has also issued a confidential note to other banks on the modus operandi of the fraud.
HOW THE FRAUD WILL HURT BUSINESS?
Banks will clampdown on credit limits and insurance companies will turn cautious. On Wednesday, a large American insurance company alerted all its offices not to take any exposure to two companies linked to Nirav Modi and his associates, sources told ET.
It is unclear whether the insurer in question would wriggle out of its existing commitments (if any) on the grounds that there has been a fraud.
ECHO OF WINSOME
Exactly five years ago, in the summer of 2013, a consortium of Indian banks were hit when the Winsome group, a well-known diamond house, failed to repay a dozen lenders. Then too, PNB was hurt the most: Of the Rs 6,800 crore credit extended by the consortium led by Standard Chartered Bank, PNB has the highest exposure of Rs 1,800 crore. Some of the transactions have an uncanny similarity with the Winsome case: the banks had issued standby letters of credit — or SBLC which are similar to guarantees — in favour of international bullion banks which supplied gold to Winsome Group companies.
The arrangement was if Winsome failed to pay the bullion banks, Indian banks would step in to pay for the gold consignment. Eventually, banks in India were left holding the baby when Winsome claimed that they were unable to repay with their clients in the Middle East suffering huge losses on derivative bets. Like the Nirav Modi case, PNB had reported the transactions to the Central Bureau of Investigation (CBI) which is still investigating the case. Since then, Mehtas -- the family which founded Winsome -- never visited India, with some of them settling in Singapore and Dubai after taking citizenship of Saint Kitts. Modi, till last week, was in China, according to one of his fraternity members. Meanwhile, in Mumbai's diamond and bullion districts everyone is guessing how long would Modi and his uncle Mehul Choksi take to return to India.

https://m.economictimes.com/industry...w/62922878.cms
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Old 15th February 2018
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WOW! Real heist!
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Old 15th February 2018
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5100 crores assests already seized. Remaining 5000 plus crores must have been paid to all the groups who are making press conferences (all - irrespective of which colour or denomination). If fellow is in London then i think legal process should be initiated to get the remaining funds.

Already 1.5 billion dollars of Vijay Mallya's assests worldwide are frozen by UK court - "Restrained until further order, from removing from the jurisdiction any of their assets in the jurisdiction up to a limit of 1,145,000,000 pounds and in any way disposing of etc"

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Old 16th February 2018
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Did Nirav Modi write "Bank walon teri aisi ki taisi" on the wall of PNB?
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Old 16th February 2018
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His Indian passport has been suspended . What is the point . He already has a Belgian passport ..
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Looking at the number of bank employees being exposed in scams...

Banks need to focus first on *KYE* ( _Know Your Employees_)...

instead of *KYC* ( _Know Your Customers_)..!!
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Old 16th February 2018
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Lol two employees.
I don't the fellow who wrote that has the faintest idea of how bank works.
That too swift transactions. Fucking this couldn't have been done without top management's help. You need someone with real authority to approve SWIFT transactions.
Atleast about 50 people should be in the know how of the whole mess.

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Quote:
Originally Posted by erotic.alpha View Post
Lol two employees.
I don't the fellow who wrote that has the faintest idea of how bank works.
That too swift transactions. Fucking this couldn't have been done without top management's help. You need someone with real authority to approve SWIFT transactions.
Atleast about 50 people should be in the know how of the whole mess.
Absolutely true. According to Arnab Goswami, more public sector banks are involved and the scam runs to 35000 crores and started in 2004. Two middle level management employees are just scapegoats.

Without the know how of top management and directors of banks as well as top politicians - THIS SCAM COULD NOT HV HAPPENED. Suddenly after one day's of press conferences all political parties are quiet.

DISCLOSURE: This is not a political comment but just a general state of affairs of the state of our nation and its administration.

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Old 17th February 2018
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2016 -> UDTA PUNJAB

2018 -> UDTA PUNJAB NATIONAL BANK!
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Wrong. LOUs cannot be sanctioned by Junior Employees. A Dy Manager has pnly authority till 50000. Beyond that there is a structure. Top bosses are involved.

This Modi was modis friend. Both are part of a team.

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