WHat is PNB Scam ?

#The geographic region full service bank Fraud Case relates to fallacious letter of endeavor price ₹14,356.84 large integer (US$ a pair of.1 billion) issued by the geographic region full service bank at its Brady House branch in Fort, Mumbai; creating geographic region full service bank accountable for the number. The fraud was allegedly musical organization by jeweler and designer Nirav Modi. Nirav, his mate Ami Modi, in-law Nishal Modi and uncle Mehul Choksi, all partners of the corporations, M/s Diamond R America, M/s star Exports and M/s Stellar Diamonds; beside PNB officers and staff, and administrators of Nirav Modi and Mehul Choksi's corporations have all been named in a very charge sheet by the CBI. Nirav Modi and his family absconded in early 2018, days before the news of the scam poor in Bharat.

(Courtesy: economic times)

• The bank at the start same that 2 of its staff at the branch were concerned within the scam, because the bank's core banking industry was bypassed once the corrupt staff issued LOUs to overseas branches of different Indian banks, together with Allahabad Bank, Axis Bank, and Union Bank of Bharat, victimization the international monetary communication system, SWIFT.

• The transactions were detected by a replacement worker of the bank. The bank then complained to the CBI, UN agencies are presently investigation the scam except for male dysfunction and tally.

• On a later date, CBI named key officers Usha Ananthasubramanian, former CEO of PNB, government administrator’s kilovolt Brahmaji Rao and Sanjiv Sharan in a very rap sheet holding them answerable for failure to implement many circular and caution notices issued by the tally relating to the reconciliation of SWIFT messages and core banking systems.

• On 29th Jan 2018, PNB filed a criticism with the CBI, whereby it had been alleged that Nirav, Ami Modi, Nishal Modi and Mehul Choksi, all partners of M/s Diamond R North American nation, M/s star Exports and M/s Stellar Diamonds, in collusion with 2 bank officers committed the offence of cheating against PNB and caused a wrongful loss.

• The PNB official in his criticism had educated the agency that at the Bank’s branch workplace at Brady House in Fort, Mumbai, 2 of its workers, Gokulnath Shetty, retired Deputy Manager of PNB and another bank official Manoj Kharat, issued deceitful LoUs to port primarily based creditors on behalf of 3 corporations related to Nirav Modi and also the Gitanjali cluster.

(Courtesy: - livemint.com)

• As of 18th May 2018, the scam has ballooned ₹14,356.84 crore to (US$2.1 billion) and Nirav Modi is alleged to be activity in London, allegedly move on a faux passport.

• On 13th June, 2018 the CBI approached the Interpol to issue a red corner notice (RCN) against Nirav Modi's brother Nishal and one among his executives in reference to its probe into the geographical region commercial bank (PNB) fraud. The CBI sent missive of invitation to the Interpol to issue a RCN against Nirav Modi and his uncle Mehul Choksi of the Gitanjali cluster.

• On 20th August 2018 former MD and CEO of Allahabad Bank, Usha Ananthasubramanian was granted bail on a bond certificate of Rs one lakhs by Special CBI court in Bombay.

Every week earlier, the government had pink-slipped Usha on the doomsday of her work. Ananthasubramanian was MD of geographical region commercial bank between August 2015 and should 2017 and had conjointly served as its administrator. She was pink-slipped with immediate result. On 7th Sep 2018 one among the suspect of the geographical region commercial bank (PNB) fraud, Nitin Shahi filed AN application in a very special Central Bureau of Investigation (CBI) court to book PNB as an extra suspect within the case. The hearing on the matter is regular to be remained on 21st September. The applying filed by Shahi declared that, though the PNB has not been charge sheeted on the fraud case, there are unit materials out there for clear continuing against the bank.

#We still wander despite of policies ordered down by tally however may such a huge operation are existing for many years while not raising red flags at auditing? The steering Note on Audit of Banks brought out by the Auditing and Assurance Standards Board of the ICAI once a year is a vital resource that provides elaborate steering on varied aspects of bank audits. a glance into the buyer’s credit and NOSTRO account (which facilitates forex transactions) section of this 674-page document clearly points to the utter failure within the auditing processes of PNB.

#The typical flow of dealing of buyer’s credit includes the receiver approaching foreign bank (or overseas branches of Indian banks) for availing buyer’s credit for payment to be created to the foreign provider. The Letter of Credit/Undertaking is issued by Indian bank to the foreign bank through SWIFT message. The foreign bank remits funds to the NOSTRO account of the Indian bank, backed by the LoU.

Hence, the Indian bank remits the funds to foreign provider through its NOSTRO and on the date the Indian bank remits the funds (inclusive of interest) to the overseas bank and recovers the similar quantity from its client (Nirav Modi during this case). The flow of operation clearly indicates that a correct audit would have noticed these drawback areas.