The Enforcement Directorate (ED) has summoned billionaire diamond merchant Nirav Modi and his business partner and jewellery chain promoter Mehul Choksi in connection with its money laundering probe in the Rs 11,400-crore alleged fraud in Punjab National Bank.
The CBI has sought revocation of the passports of Nirav Modi and his partner Mehul Choksi who are reportedly the main accused in alleged fraudulent transactions of over Rs 11,400 crore through 150 letters of understanding issued by the Punjab National Bank.
Earlier on Thursday, the ED conducted searches in multiple properties linked to Nirav Modi in Mumbai, Delhi and few other cities and seized diamonds, jewellery and gold worth Rs 5,100 crore.
Let's have a look at who is Nirav Modi, what is the PNB scam of Rs 11,400 crore, and how the bank fraud busted-
Who is Nirav Modi
1. Nirav Modi is one of India's richest men, who deals in pearls and diamonds.
2. Nirav was born in India and raised in the Belgian city Antwerp.
3. Nirav Modi is a jeweller who is known for dressing Hollywood and Bollywood actors.
4. Nirav first appeared on the Forbes billionaire list in 2013.
5. Modi is ranked 1,234 in Forbes’s world’s billionaires list for 2017, and 85 in India.
6. Nirav's financial worth is estimated at $1.73 billion through his jewellery design and retail businesses.
7. Since 2014, Nirav Modi has been under the scanner of law enforcement agencies like CBI and Enforcement Directorate, Income Tax Department for alleged illegal transactions and frauds.
8. Today, Nirav Modi is at centre of the Rs 11,400-crore fraud at Punjab National Bank.
9. Nirav Modi, who holds an Indian passport, reportedly left India on January 1.
10. His brother Nishal, a Belgian citizen, also left the country on same day.
11. Nirav Modi's wife Ami, a US citizen, left on January 6.
12. His uncle and business partner Mehul Choksi, who is the promoter of Gitanjali jewellery chain, left on January 4.
What is PNB Scam of Rs 11,400 crore
1. The Punjab National Bank discovered that at least 2 of its employees - deputy manager Gokulnath Shetty and clerk Manoj Kharat - from its Brady House branch in Mumbai repeatedly issued Letters of Undertaking (LoU) to Nirav Modi's companies without following the processes.
2. The PNB says the employees issued the LoUs without securing cash reserve or collateral and without recording the transactions in the bank's core banking software.
3. 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.
4. Nirav and his companies allegedly leveraged those LoUs in Hong Kong to secure buyers' credit from the local branches of Allahabad Bank, Union Bank, Axis Bank, Bank of India, State Bank of India.
5. These suspect bank officials issued the LoUs and informed these branches via the international cash transfer service called SWIFT.
6. SWIFT stands for Society for Worldwide Interbank Financial Telecommunication which connects all international banks worldwide.
7. The suspect bank officials knew that PNB had not integrated its SWIFT network with the bank's core banking network.
8. They chose not to record these transactions in the bank's own system.
How the fraud busted
1. The scam unravelled when the officials from three diamond firms approached the PNB officials for a bank credit to import rough stones from overseas.
2. When the three firms approached PNB in January this year for bank credit via a Letter of Undertaking, the official concerned in the bank sought a 100 percent cash margin since there was no pre-sanctioned limit for these firms.
3. The diamond firms contested the bank's demand and claimed that they have been availing this facility in the past also.
4. However, the branch records did not reveal details of any such facility having been granted to the said firms.
5. This raised an alarm, forcing the bank to launch an internal investigation in the previous bank credits.
6. Preliminary enquiry revealed that two officials of the bank had in the past fraudulently issued LoU to the said firms without following due process.
7. These fraudulent LoUs were then transmitted across the SWIFT messaging system, based on which credit was offered to the said firms.
8. A total of 18 bank officials have been suspended till now in connection with the scam.
9. PNB, in its original complaint, specifies that 5 LoUs were issued in favour of Allahabad Bank at Hong Kong and 3 LoUs were issued in favour of Axis Bank at Hong Kong. These loans amounted to Rs 280 crore.
10. PNB, its recent press release, said that the amount far surpasses the original complaint.
11. Further inquiry has revealed that the accused have raised an amount to the tune of approximately Rs 14,400 crore on the basis of fraudulent LoUs forged by the two employees.
12. The PNB has said it has the capability to recover the dues from Nirav Modi and promised to take action against all wrongdoers.