Police have accused senior officials at Punjab National Bank (PNB) of misleading India's central bank in late 2016 over the lender's handling of the SWIFT financial messaging system in respect of letters of credit (L/Cs) and letters of undertaking (LoUs) employed in the country'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 kept the fraud away from the bank's compliance system for several years.

Misleading reply

The police now accuse a PNB general manager, Nehal Ahad, of preparing "a misleading reply" to the Reserve Bank of India's (RBI'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.

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

Facing charges

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

Modi and Choksi are not in India and deny involvement in the fraud.

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