Even as the Munjal family-run Hero Group clarified on Friday that its exposure to the Citibank fraud was a tenth of what has been reported so far, police investigators are widening the scope of the inquiry to probe both the clients as well as the brokerages through which the monies were routed into the stock market.
Regulators are also looking at how – and why – no red flags were raised by the bank or the bourses as Shivraj Puri, the principal accused, funnelled hundreds of crores in and out of his personal accounts.
“Any bank where fraud (has taken place), we cannot (ignore)… and from banking side we have to do our own job.. how it ( Citibank fraud) has happened and what are the implications,” RBI, executive director, G. Gopalakrishna told a television channel.
RBI will be concerned how major transactions, which are to be routinely reported to the authorities, escaped notice. The Income Tax authorities will also be probing how Puri’s PAN was not flagged. As per rules, it is mandatory to provide one’s PAN number for opening a bank or trading account and to transact on the stock markets.
“It’s either a colossal failure of the KYC (know your customer) norms or part of a well- orchestrated scam,” a senior banker said. Munjal Group flagship firm Hero Honda said that it did not have any exposure to the Citibank scam but some of its other entities had lost Rs 28.75 crore and they had initiated steps to recover the money.
The firm further said that the exposure of the BML Munjal-controlled Hero Group in this case is only via its entities and is Rs 28.75 crore. “These investments were made as part of routine treasury operations in what seemed like perfectly legal investment options,” it said.
“The Hero Group is disappointed to learn that it has become a victim of the fraud under question. The group is taking appropriate action and has also initiated dialogue with relevant authorities and Citibank to recover its dues,” the firm said.
Meanwhile, Gurgaon police officials investigating the case questioned the chief financial officer of the Hero Group in this regard. The police are not ruling out the possibility that the CFO may have connived with Puri and routed company funds to him, police sources said.
A senior banker said if the transactions are done through the bank and the investors have issued cheques to Citibank, then the HNIs involved will get back their money.
Police are in the process of unearthing the way the parallel accounts have been maintained by Shivraj Puri, who engineered the fraud and diverted the funds to accounts of at least three of his close relatives.
However, legal experts say there is no way that people who have been duped in the Citibank fraud will not be paid back their money invested in the bank.
“Those who deposited money in the bank and have been duped are victims of fraud. It has been a deficiency on the part of the bank. They do not have proper system in place to detect the fraud,” a senior lawyer Lalit Bhasin told Mail Today. “If consumers don’t get any favourable response from bank, they can file a civil suit or to consumer forum. It is unlikely that the bank will not pay back the money,” Bhasin said.
Investigating agencies are also questioning Shivraj Puri’s wife Nidhi and investment counsellor Nitin Chawla.