Security & Fraud

Internal Auditor Charged In $2B India Bank Fraud Scandal

An internal auditor at a Mumbai branch of Punjab National Bank is accused of conspiring with other officials to defraud the lender of $2 billion, reported Reuters.

Citing Federal police in India, Reuters reported the Central Bureau of Investigation (CBI) said it has arrested Mohinder Kumar Sharma, an auditor at the lender, as the probe into the fraud continues to expand.

According to Reuters, the police in India have thus far arrested 13 people, seven of which are from Punjab National Bank (PNB) and six from companies owned by billionaire jeweler Nirav Modi and his uncle Mehul Choski, owner of Gitanjali Gems, who are at the center of the scandal. India law enforcement has contended the two have colluded with officials from the lender to secure land between 2011 and 2017. The loans came from overseas branches of Indian state banks. Both exited the country before the fraud came to the forefront and have denied any wrongdoing.

As the internal chief auditor at a branch in Mumbai, Sharma was in charge of verifying daily transactions to spot any irregularities. But instead, a court filing says he “in conspiracy with other co-accused persons, deliberately ignored to point out the issuance of illegal” letters of undertaking (LOUs) for companies that were by Modi and Choksi.

As the more than billion-dollar scam plays out in India, accusations are flying about who is to blame and who dropped the ball. On Feb. 19, the country’s finance ministry blamed the Reserve Bank of India (RBI) for failing to find the fraud, which took place in a branch of PNB in Mumbai.

In a letter to the Reserve Bank of India, the government said the failure raises questions about the “efficacy of supervision to detect and check systemic failure. Either the framework designed by RBI to prevent and detect such frauds is inadequate or RBI is unable to ensure its effective implementation.”

Rajeev Kumar, the top government official overseeing bank activities in India, said in an interview with Reuters that the finance ministry had communicated to the country’s banks to prevent a repeat of the fraud at PNB.



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