Explained : Bank of Baroda's Rs. 6100 forex scam

India's second largest public sector bank by assets is in trouble. A 6100 crore forex scam is a source of embarrassment for 107 year old bank established by Maharaja Sayajirao Gaekwad III. Bank of Baroda has also brought shame to India in the time when Ministry of Finance is seeking clarification on black money stacked in countries abroad.

During the period of May 2014 to August 2015, New Delhi's Ashok Vihar branch opened 59 current accounts through which large foreign exchange remittance transactions were done. During the period of August 2014 and August 2015, Rs 3500 crore has been transferred from 38 current accounts to 400 overseas parties. Majority of the transfer were reported to Hong Kong and 1 in UAE. The branch did not adhere to Foreign Exchange Management Act (FEMA) guidelines. FEMA Act governs all foreign exchange related transactions in India. 

The Financial Express reported that remittances were reported in the name of Hong Kong traders but the actual exports went to Afghanistan. Another newspaper DNA reported that an account was opened by South Korean citizen and immediately transferred money to the books of Jasco Ltd, a company based in Mexico City. Among other companies named in the Bank of Baroda audit, two have owners whose city of residence is India’s capital – New Delhi. One of them is Mega Forwarders and Traders Ltd – which has its office at Des Voux Road West, Sheung Wan, Hong Kong. But guess what? Its owners are two obscure men in two localities of Delhi. One of them is a fake identity with a false address, yet they managed to open a company in Hong Kong and received millions of dollars through Ashok Vihar branch of Bank of Baroda in Delhi. With terrorism on the rise, Bank of Baroda might be probed under terrorism funding inquiries set up by IMF. Previously, HSBC Bank, Arab Bank and Credit Suisse have been probed for terrorism funding.

Bank of Baroda suspected illegal transaction in July and inquired internal audit. After the forex scam being unearthed, BoB reported the case to Central Bureau of Investigation, Central Vigilance Commission, Enforcement Directorate and Reserve Bank of India. Asst General Manager, Chief Manager, Credit Manager and 2 other employees were arrested by Delhi Police. In a statement released by Bank of Baroda, authorities mentioned that the bank did not received any financial loss.

The Central Bureau of Investigation has conducted further searches at 50 locations on various companies /firms in an on-going investigation of a case related to alleged violation of banking norms. It was revealed that most of the addresses given by the companies / firms were either false or the companies / firms did not exist at the said addresses. Most of the accused persons allegedly involved in perpetration of the said crime have been identified and their interrogation is underway. There was allegedly overseas remittance of foreign exchange of Rs.6000 crore approx,

It was further alleged that the amount remitted in each transaction would be kept at less than USD 100,000. All the remittances were made to Hong Kong.  The amount was remitted as advance for import and in most of the cases, the beneficiary was the same.  Most of the foreign exchange related transactions were carried out in newly opened current accounts wherein heavy cash receipts were observed but the branch did not generate Exceptional Transaction Report (ETR) and did not monitor the high value transactions. A case has been registered by CBI under Prevention of Corruption Act against bank officials, 59 current account holders and private parties.

Similar forex scams have been reported in HDFC Bank, Punjab National Bank and Oriental Bank of Commerce. RBI governer Raghuram Rajan said that the investigations into the Bank of Baroda fraud will be carried on to the ultimate conclusion by both the central bank and the investigating agencies. India's 'top' banks have surely weakened India's G20 stance against black money in foreign banks.

By - Chaitanya Kulkarni ( twitter.com/chai2kul )