The Reserve Bank of India (RBI) has ordered the country’s banks to be more rigorous in their monitoring of export finance deals.
The warning follows news that investigators have uncovered a mis-invoicing scam that may be part of a multibillion US dollar scheme to bypass financial sanctions imposed on Iran.
The RBI’s order does not specifically contemplate the scheme in which state-owned UCO Bank is involved, but the central bank seems most likely to have been motivated by the huge amounts the bank paid out for shipments of goods that were never delivered.
“Banks should exercise proper due diligence and ensure compliance with KYC [know your customer] and AML [anti-money laundering] guidelines so that only bona fide export advances flow into India,” the RBI said in its warning to banks.
The scheme involving UCO Bank allegedly centred on a group eight foreign nationals, seven Iranians and one from Azerbaijan.
They entered India on student visas set up shell companies in a provincial city.
Eight companies set up by the group were paid for shipments that, according to documentation provided to UCO bank, would be delivered in the future.
The shipments, which included purchases of diamonds for re-export to Iran, were never made.
Investigators have reportedly confirmed US$150 million of suspect transactions but the actual figure could be as high as US$3.2 billion, according to an RBI source.
Categories: Trade Based Financial crimes News