Senior officials at India's Punjab National Bank (PNB) misled the central bank in late 2016 over the bank's handling of the SWIFT financial messaging system in respect of letters of credit (L/Cs) and letters of undertaking (LoUs) employed in India's largest ever fraud.

The US$2 billion fraud, allegedly perpetrated by celebrity jeweller Nirav Modi and his uncle Mehul Choksi, involved raising credit from overseas branches of other Indian banks using illegal guarantees issued with the connivance of PNB staff.

Fraud concealed

Indian police allege in a charge sheet filed in court that PNB bankers failed to make note of fake guarantees sent via the SWIFT financial messaging system in the bank's core accounting software.

This effectively hid the fraud from the bank's compliance system for several years.

Bankers accused

The police now accuse a PNB general manager, Nehal Ahad, of preparing "a misleading reply" to the Reserve Bank of India's questions in October 2016 specific to SWIFT and measures in place for issuing L/Cs and LoUs.

Ahad, along with former PNB chief executive Usha Ananthasubramanian and two of the bank's directors, K V Brahmaji Rao and Sanjiv Sharan, all signed off on paperwork that told the RBI that outward messages on SWIFT were being sent only after entries had been made in the core accounting software.

Bank failures

According to police, the bank failed to make such entries, thus enabling the fraud to continue for years.

So far, 22 people and three firms face charges of criminal conspiracy, cheating and dishonesty and criminal breach of trust by a public servant in this case.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.