India’s Bank of Baroda (BoB) has just reported a new trade-based money laundering (TBML) case to the Indian authorities, despite knowing about the fraud for some time.

The bank reportedly approached investigation agencies only this month, apparently prompted by concerns that one of the alleged fraudsters, Vikram Kothari might leave the country like celebrity diamond jeweller Nirav Modi did when the Punjab National Bank (PNB) fraud case involving his diamond dealings came to light.

The new alleged fraud centres on Kothari’s high profile Rotomac pen company.

Marked similarities

The two cases bear marked similarities. Rotomac obtained foreign letters of credit (L/Cs) from BoB for making payments to its buyers and suppliers abroad that operated from virtual offices in several locations, including Dubai, Sharjah and Hong Kong.

In the PNB fraud, Modi also employed L/Cs to make it appear that his Indian business was trading with counterparties in Hong Kong while in fact it was allegedly laundering funds to other accounts.

Round-tripping

In the Rotamac case the money was being round-tripped to accounts of Rotomac and its sister companies.

The authorities are well aware of this type of fraud and have unearthed several cases of traders using a forged bill of entry or using a bill of entry several times in multiple bank branches to cash several L/Cs.

Sharp criticism

The Central Bureau of Investigation (CBI) is now investigating the Rotomac case and, along with Kothari and his son, it has arrested BoB’s assistant general manager SK Garg and head of forex division Jainesh Dubey.

The bank is facing sharp criticism from the CBI for not reporting the fraud earlier. The CBI said BoB should have come to them in 2015 when it first detected fraud or at the very least in December 2017 when Rotomac debts previously registered as non-performing loans were reclassified as fraud.

Categories: Trade Based Financial crimes News

Tags: Fraud, TBML