Nirav Modi case points to endemic trade-based financial crime in India’s diamond trade

The recently revealed alleged fraud involving celebrity jeweller Nirav Modi has reignited concerns over the diamond trade’s role in trade-based financial crime in India.

Punjab National Bank (PNB) said last week it had fallen victim to a US$1.7 billion scam linked to the jeweller while the Reuters news agency reckons banks may have suffered losses of up to US$3 billion in the case.

Now it is emerging that the authorities have been well aware of the trade-based money laundering typology used in the Modi case, and it appears to have been deployed in similar cases in recent years according to the Indian authorities.

Previous cases

In 2013 the Directorate of Revenue Intelligence (DRI) cracked a case in which a diamond trader used a forged bill of entry and had a letter of credit encashed in Hong Kong and the DRI unearthed several similar cases in following years.

Traders would typically use forged bills of entry or use of one bill of entry in multiple bank branches to cash several letters of credit.

Central bank role

Meanwhile the Enforcement Directorate (ED) wrote a detailed note to the Reserve Bank of India (RBI), flagging the cases.

According to an ED official, there was gross misuse of suppliers’ and buyers’ credits and all the relevant authorities were informed of this.

Widespread abuse

The note said several diamond traders were found to be misusing the 270-day credits.

The Reserve Bank of India did not respond to the ED’s queries according to the official.



Categories: Trade Based Financial crimes News