Citibank has unearthed a banking fraud allegedly engineered by its relationship manager Shiv Raj Puri that could run up to $100 million at its Gurgaon branch in the north Indian state of Haryana.
The fraud, which is one of the biggest of its kind, came to light when the bank initiated a probe into a certain set of suspicious transactions involving a few accounts in the branch.
A case has been registered against Puri and three of his relatives under sections of cheating and forgery following a police complaint filed by Citibank’s assistant vice-president Binu Soman giving details of the plot.
Eighteen accounts having close to about $1 million have been frozen even as funds amounting to about $100 million of 20 high networth customers had been siphoned off.
Soman’s complaint said Puri had opened a joint account in names of three close relatives in September 2009 and had forged a circular in the name of market regulator Securities and Exchange Board of India (SEBI) stating that a scheme that gives high returns was available only at this particular branch.
On checking the joint account, the bank realized that there were large cash transactions from the account.
Citibank grew suspicious when it got inputs from some of its customers that the branch had a specific scheme that promised high returns to investors which was not the case, the police said.
Puri allegedly showed a forged circular to win the trust of prospective customers and to convince them to invest, and he was successful in tapping some major players. Internal investigations later showed SEBI never issued such a circular and the regulator has given this in writing to the bank, said an investigating officer.
After getting the big deposits, he generated forged bank slips and statements to the duped customers before siphoning off the money into the stock market.
Citibank has already informed the Reserve Bank of India and SEBI about the fraud.
“We recently initiated an investigation into a certain set of suspicious transactions based on documents forged by an employee involving a few accounts in our Gurgaon branch,” the bank statement said.
The bank said the issue did not impact other accounts or transactions or customers of the bank.
The fraud comes to light a month after India’s state-run investigating agency Central Bureau of Investigation (CBI) uncovered bribery-for-loan racket leading to arrest of many senior officials of banks and financial institutions.
The bank officials had allegedly colluded with the firm to sanction large scale corporate loans, overriding mandatory conditions for such approvals along with other irregularities.
The CBI has arrested CEO of LIC Housing Finance and seven others senior bankers including Naresh K Chopra, Secretary (Investment), LIC, R N Tayal, General Manager of Bank of India and Maninder Singh Johar, Director (Chartered Accountant) of Central Bank of India.