Indian auditor group begins probe into PNB fraud case (updated)

Gitanjali Gems

23/02/2018 08:32

* ICAI says probing whether auditors played a role in PNB 
fraud 
    * PNB has tapped PwC to probe into the alleged fraud -report 
    * RBI sets April 30 deadline for all banks to link SWIFT 
with bank 
systems 
 
 (Adds details on RBI directive; share price move) 
    By Nidhi Verma and Devidutta Tripathy 
    NEW DELHI/MUMBAI, Feb 23 (Reuters) - The Institute of 
Chartered Accountants of India (ICAI), a state-controlled 
regulator for the sector, has said it is probing whether 
auditors played a role in perpetrating the alleged $1.77 billion 
fraud that Punjab National Bank  PNBK.NS  unearthed last week.  
    The ICAI said on Thursday it has asked the Securities and 
Exchange Board of India, Punjab National Bank (PNB) and federal 
investigating agencies to share their findings about the alleged 
fraud, including anything related to the involvement of any 
chartered accountants. 
    The ICAI, which functions under the administrative control 
of India's Ministry of Corporate Affairs, said it has set up a 
committee to study the systemic lapses that contributed to  the 
fraud and to suggest remedial measures and improvement. 
    Separately, the Economic Times newspaper reported that PNB 
has tapped PwC to conduct a probe into the alleged fraud that 
would help the bank build a case against jewellers Nirav Modi 
and Mehul Choksi.  
    PNB officials were not immediately available for comment, 
while PwC declined to comment on the matter.  
    Modi, his companies, and firms with links to his uncle  
Choksi, are at the center of the alleged fraud that involved 
illegally issued letters of undertaking (LoU) from PNB which 
were used to get credit from overseas branches of other, mostly 
Indian banks.  
    The alleged fraud went undetected as the SWIFT interbank 
messaging system used to transmit the LoU was not integrated 
with PNB's core banking system (CBS), thus allowing the LoU to 
go unnoticed for years. 
    In what has been dubbed the biggest loan fraud in India's 
banking history, police have so far arrested at least a dozen 
people - six from the bank and six more from Modi's and Choksi's 
companies. 
    A lawyer for Modi has denied his client was involved in any 
fraud. Choksi has not commented but his firm, Gitanjali Gems 
 GTGM.NS , has also denied involvement in the alleged fraud. 
     
    BANKS SCRAMBLE 
    India's central bank, the Reserve Bank of India, has asked 
other Indian banks with similar vulnerabilities as PNB to fix 
these issues by April 30, said Allahabad Bank's  ALBK.NS  Chief 
Executive Usha Ananthasubramanian.   
    Allahabad Bank, a state-run lender, said on Thursday that it 
is working on linking its core banking system with the SWIFT 
messaging service. 
    Responding to a question on whether the RBI had directed all 
banks to link their main banking systems with SWIFT by April 30, 
Ananthasubramanian said: "Correct". 
    "That is an outer limit, but today the urgency is such that 
may be I'll shelve one project aside and step into this and tell 
my vendor to fast track this," she told media on the sidelines 
of an industry event. 
    Shares in PNB, which have lost nearly 30 percent of their 
market capitalization since the fraud was made public, were down 
nearly 1 percent in afternoon trading on Friday.  
 
 (Reporting by Nidhi Verma and Devidutta Tripathy; Writing by 
Euan Rocha; Editing by Raju Gopalakrishnan) 
 ((euan.rocha@tr.com; +91 22 6180 7257; Reuters Messaging: 
euan.rocha.reuters.com@reuters.net)) 
 
Keywords: PUNJAB NATL BANK FRAUD/