How the scam happened

Nirav Modi allegedly secured counterfeit approvals for credit from two officials, Gokulnath Shetty and Manoj Khare, at Punjab National Bank’s (PNB) Brady House branch in Mumbai in February 2017, according to an FIR filed by the bank with the Central Bureau of Investigation (CBI).

According to the first complaint dated January 29, two Letter of Undertakings (LoUs) were allegedly issued by the PNB staffers on Februsry 9, 2017, guaranteed against an account in Allahabad Bank in Hong Kong, both of them due to be repaid on Jan 25 this year.

An LoU is a guarantee by the issuing bank to the receiving bank and the companies that it would undertake to pay a certain amount of money on a specific date.

Three more LoUs were allegedly issued the next day on Feb 10 by the same duo, against a guarantee in Allahabad Bank in Hong Kong. The date for repayment was the same ie Jan 25, 2018. Three more LoUs were allegedly issued on Feb 14, with the repayment due on Jan 25. This time around, the loan was guaranteed against deposits at Axis Bank in Hong Kong.

Reportedly, the PNB employees misused the SWIFT network to transmit messages to Allahabad and Axis Bank on fund requirement. One has to log on to the SWIFT network to fill up fields like the account number and SWIFT code, following which it is endorsed by a supervisor. The process is completed once the bank gets a confirmation message. In this case, the transactions were reportedly never recorded on the bank’s system due to connivance of Khare and Shetty.

In total, it’s alleged that eight LoUs amounting to a total of ₹280 crore were given away to Nirav Modi and his associates, as per the first FIR.

“In the light of the above, it has now transpired that the above named accused Gokulnath Shetty and Manoj Hanument Kharat in connivance with the partners of the above firms namely Nirav Modi, Nishal Modi, Ami Nirav Modi and Mehul Chinubhai Choksi and their authorised signatories Hemant Bhatt and Kavita Mankikar committed fraud upon the banks (PNB, Allahabad Bank, Axis Bank) to the tune of ₹280.70 crore,” Deputy General Manager of Punjab National Bank’s (PNB) Zonal Office in Mumbai, Avneesh Nepalia, wrote in a written complaint to the CBI on Jan 29.

Choksi, the maternal uncle of Nirav Modi and allegedly a personal connection of Prime Minister Modi, is the Chairman and MD of Gitanjali Jewellery Retail Limited, Modi was associated with several companies including M/S Solar Exports, M/S Stellar Diamonds and M/S Diamonds R US. In the light of the accused named in the complaint being untraceable, an INTERPOL notice has been served against Nirav Modi, his wife Ami Modi, brother Nishal Modi and uncle Mehul Choksi. All these persons have been named in the FIR.

The funds so raised for payment of import bills have not been utilised for such purposes in many cases, according to the CBI complaint.

As it turns out, this was just the tip of the iceberg. In a face-saver press conference, PNB Chief Executive Sunil Mehta revealed on Thursday that a fraud of a total of ₹11,500 crore had been committed, which wasn’t an accurate representation of the total figure.

Mehta also echoed BJP’s claim that the scam actually began in 2011, without delving into much details if an LoU had been issued back then too.

On Friday, Congress party spokesperson Randeep Surjewala said in a press conference that the value of the scam was much higher, pegging the figure at approximately ₹21,306 crore.

It is emerging that any bank with exposure to Nirav Modi and his associates has been defrauded using the same modus operandi.

It is now learnt that at least 30 banks, including Bank of Baroda, Andhra Bank, Central Bank of India, Vijaya Bank, Union Bank of India, Oriental Bank of Commerce, Dena Bank, Syndicate Bank, UCO Bank, Corporation Bank, IDBI Bank, ICICI Bank, Standard Chartered and EXIM Bank, among others conducted financial transactions with Firestar International, Firestar Diamonds, Gitanjili Gems and Gitanjali Export Corporation. Al, the companies have been named in the FIR filed against Modi and his associates on Jan 29.