Bank fraud charge sheet reveals details

SENIOR executives at India’s Punjab National Bank (PNB) misled the central bank in late 2016 over the lender’s handling of the financial messaging system and credit guarantees that were at the centre of a more than $2 billion (£1.5bn) fraud, Indian police alleged in a charge sheet filed in court last week.

PNB, India’s second-largest state-run bank, said earlier this year that two jewellery groups, headed by Nirav Modi and his uncle Mehul Choksi, had defrauded it of about $2.2bn (£1.6bn) by raising credit from overseas branches of other Indian banks using illegal guarantees issued by rogue PNB staff at a Mumbai branch over several years.

The PNB staff allegedly did not make note of the fake guarantees sent via the SWIFT financial mes­saging system in the bank’s core accounting soft­ware, leading to the fraud going undetected for years.

In 2016, after separate incidents of misuse of the SWIFT system elsewhere, the Reserve Bank of India (RBI) had repeatedly cautioned all banks, including PNB, and sought details from the banks on their compliance with required cyber security controls.

Former PNB chief executive Usha Ananthasu­bramanian, two of the bank’s executive directors – KV Brahmaji Rao and Sanjiv Sharan – and a general manager did not take “any meaningful corrective measures” on the RBI notices, the Central Bureau of Investigation (CBI) said in the charge sheet, filed in the city civil and session court, Mumbai.

The accused PNB general manager, Nehal Ahad, “prepared a misleading reply” to RBI questions in October 2016 specific to SWIFT and measures in place for issuing letters of undertaking and letters of credit – forms of credit guarantees at the heart of the fraud – according to the police charge sheet, a copy of which was seen by reporters on Monday (21).

The questions had been “dealt by” all four offi­cials and Sharan had approved the reply which said outward messages on SWIFT were being sent only after entries in the core accounting software were made, police said.

The CBI also said that senior executives of Modi’s group had met Ananthasubramanian “to continue with the credit facilities to the group entities”, with­out saying when the meetings took place.

Ananthasubramanian, Rao, Sharan and Ahad are among 22 people and three firms that have been charged by police in India’s biggest bank fraud case. The defendants face charges of criminal conspira­cy, cheating and dishonesty and criminal breach of trust by a public servant.

Ananthasubramanian, Rao and Sharan did not reply to calls seeking comment, while Ahad could not immediately be reached.