UK court extends fugitive diamond merchant Nirav Modi's remand till May 24

Fugitive diamond merchant Nirav Modi was Friday further remanded into custody till May 24 by a UK court hearing his extradition case in the $1-billion Punjab National Bank (PNB) fraud and money laundering case.
The 48-year-old, who has been behind bars at Wandsworth prison in south-west London since his arrest last month, appeared before Westminster Magistrates' Court Chief Magistrate Emma Arbuthnot via videolink from the jail.

Dressed in a beige and black sweater and looking slightly less dishevelled than his last appearance in person before the court in March, Modi spoke only to confirm his name.
"Mr Modi, you will be back for another short hearing via videolink on May 24, with a full hearing in the case planned for May 30 when you will be produced in person," Judge Arbuthnot told the diamantaire.
She asked his barrister Jessica Jones if there were any matters to be considered and was told there were none, which confirmed that Modi's team did not file another bail application before the court.
The May 24 hearing will be another procedural one, to meet the 28-day timeline for judicial custody in such cases in the UK. The case will then proceed to a full case management hearing, scheduled for May 30 so far, when Modi will be produced in person.
The Crown Prosecution Service (CPS), arguing on behalf of the Indian authorities, was represented by barrister Nilofar Bawla at Friday's hearing, which followed a second bail application being rejected by Judge Arbuthnot on March 29 on the grounds that there was a "substantial risk he would fail to surrender".
"This is a case of substantial fraud, with loss to a bank in India of between $1-2 billion. I am not persuaded that the conditional bail sought will meet the concerns of the government of India in this case," Judge Arbuthnot had noted in her ruling.
Modi's legal team could have made a third bail application at the court on Friday but only if the grounds for the bail plea are substantially different. The CPS has previously confirmed that Modi intends to appeal against the rejection of bail in the UK High Court. However, such an application has not been logged so far.
Previously, Modi's legal team, led by solicitor Anand Doobay, had offered 1 million pounds as security alongside an offer to meet stringent electronic tag restrictions on their client's movements, "akin to house arrest".
The diamond dealer's "lack of community ties" in the UK and an attempt to acquire the citizenship of Vanuatu - a remote island located in the South Pacific Ocean - in late 2017 went against him as the judge said it seemed like he was trying to “move away from India at an important time”.
CPS barrister Toby Cadman had argued that there was a “substantial risk” that the prime accused in the PNB fraud case would flee and attempt to interfere with witnesses and evidence.
"Due to the nature of his business he has at his disposal diamonds gold and pearls,” Cadman told the court.
During the course of the hearing last month, it emerged that Modi had made death threats to witnesses and also attempted to destroy evidence such as mobile phones and a server holding “material critical to the fraud”.
Modi's defence team, the same as that deployed by former Kingfisher Airlines boss Vijay Mallya in his extradition case, denied the allegations and said their client saw the UK as a “haven where his case will be fairly considered”.
Modi is believed to have been living in the UK on an Investor Visa, applied for in 2015 – at a time when the so-called “golden visa” route was relatively easier for super-rich individuals to acquire residency rights in the UK based on a minimum of 2-million pound investment.
He was arrested by uniformed Scotland Yard officers in central London on March 19. During his first court appearance a day later, it emerged that the diamantaire accused of defrauding PNB via fraudulent Letters of Undertaking (LoUs) had been in possession of multiple passports, since revoked by the Indian authorities.

Meet Nirav's A-Team that may have helped him pull off Rs 14,000-cr scam

How did fugitive jeweller Nirav Modi pull off what he is accused of — the country’s biggest banking fraud at Punjab National Bank, worth over Rs 14,000 crore — without an army of trusted lieutenants while keeping his moves under wraps? After all, he employed over 2,200 people and it’s a matter of conjecture as to why someone didn’t blow the whistle earlier. It turns out that while his family council was involved, he also — according to a report submitted to a US Bankruptcy Court by an appointed examiner — had a highly organised core management team. The common denominator: They were predominantly Gujarati, mostly male, and either related by blood or very well-known to Nirav.
The family: Nishal Modi who was his half-brother and in charge of diamond trading was a director and has a look out notice on him and is wanted by the authorities. Nehal Modi, Nirav’s other brother in New York was reportedly a consultant with Firestar and involved with the Ithaca Trust, an entity set up to fund and buy real estate for the fugitive jeweller through questionable sources of finance.

Mehul Choksi, Nirav’s uncle and mentor, and boss of Gitanjali Group, is hiding out in Antigua. Purvi Modi Mehta, Nirav’s sister, managed the Hong Kong business but was not a key director in the holding companies, sources say, adding that she and the brothers were intentionally put in positions with no or very limited liability, but supported Nirav by transferring funds when required. Nirav’s wife Ami Modi is supposedly in the United States and like Purvi assisted by transferring funds through her account when required, according to the examiner’s report. There’s a look out notice on her and she has also been recently charge-sheeted by the enforcement directorate.
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Nirav’s sister was also involved with other facets that involved shadow companies and transferring money to various group companies as well as to Nirav’s wife, according to the report.
Also, Choksi had a daughter — Priyanka — who wed Antwerp-based diamond merchant Akash Mehta in 2011. At the time Priyanka was running A.Jaffe, in which Nirav had invested and was deeply involved in. A.Jaffe was also a company that allegedly saw funds from LoUs routed through it.
Former CEO of Firestar Diamonds and Firestar India Mihir Bhansali, who is Nirav’s cousin, worked closely with him and allegedly had involvement that ran deep into the shadow companies — a set of firms that were supposedly created by Nirav to divert funds. Bhansali, a graduate from Babson College and HR College of Commerce and Economics, was Nirav’s “de facto number 2” and is alleged by the Indian authorities to have a significant control over the entire group.
In May 2017, Bhansali allegedly directed Shyam Wadhwa, an alleged Nirav confidante and employee of Firestar India, to replace the director in Hong Kong with Bankim Mehta a diamond trader in New York working for FDI.
In an interview with the examiner, Mehta admitted that he did little more than sign paperwork. In other discoveries by the examiner, managers of shadow companies say that Bhansali trained them to say they were jewellers with several generations of experience when in fact they were just Firestar employees.
A.Jaffe CEO Sumay Bhansali is also the brother of the wife of Anurag Jain, the boss at Parag Diamonds, the company which ended up buying A.Jaffe for $8 million at its bankruptcy sale. It was valued at $22 million. It’s not clear whether the two Bhansalis were related. Vipul Ambani, CFO of the firm’s India operations, was arrested and had been in jail for a few months when the scam broke. He has since been released but the extent of his involvement is not clear.
Working shoulder to shoulder with Mihir Bhansali was Ajay Gandhi, CFO of the US-based Firestar companies, who received his Bachelor’s degree in India and became a licensed CPA in 1994 after graduating from York College in New York City. Gandhi allegedly had control over all of Firestar’s financial transactions including managerial sign off on loose diamond transactions with the shadow companies that were worth hundreds of millions. His day-to-day role at the US entities included checking all account balances, monitoring cash flow, reviewing payments, managing payables, and receivables and reviewing inputs from sales teams.
He would also sign monthly borrowing certificates for lending banks IDB and HSBC and based on the reviews by the examiner’s team it’s inferred that he clearly controlled the finances of the debtor entities. In several interviews with the examiner, Gandhi was quizzed about his knowledge of shadow companies and their ties to the debtors. In his first interview he said he only knew that they were Bhansali’s customers.
Bhansali allegedly hired proxy or placeholder employees who would do what they were asked to without question.
This included the likes of Hemant Bhatt, who — though identified as Nirav’s business partner and director in the group’s oldest company Diamonds R Us — was, some former employees say, just “the canteen supervisor at the India Office”.
According to Firestar India’s general manager of accounts Saju Poulose Parokaran, the authorities were told Bhansali requested he “select some of the trusted employees from the company who do not apply much brain to work for Firestar overseas entities”.

UK court remands fugitive diamantaire Nirav Modi to custody till March 29

Nirav Modi, the main accused in the $2 billion PNB scam case, has been arrested in London where a court on Wednesday remanded the fugitive diamantaire in custody till March 29, saying there substantial grounds to believe that he would fail to surrender if granted bail.
"Nirav Deepak Modi, 48, was arrested on behalf of the Indian Authorities on Tuesday in Holborn," the Metropolitan Police said in a statement.
He was produced before the Westminster Magistrates' Court on Wednesday, where he contested his extradition to India.
District Judge Marie Mallon denied bail to Modi and remanded him in custody till March 29, saying there was substantial grounds to believe that he would fail to surrender if granted bail.
His arrest came days after a London court issued an arrest warrant against him in response to a request by the Enforcement Directorate for his extradition in a money laundering case.
ALSO READ: Nirav Modi likely to be held in separate cell in Wandsworth prison
The location of the arrest indicates that Nirav Modi, wanted in India in connection with the Rs 13,500 crore Punjab National Bank scam case, was arrested from where he is believed to have been living in a plush apartment in Centre Point in the West End.
The case is expected to follow a similar pattern through the UK courts as that of liquor tycoon Vijay Mallya, who remains on bail since his arrest on an extradition warrant in April 2017 on fraud and money laundering charges.
The 63-year-old businessman has since filed an application seeking leave to appeal against his extradition ordered by UK home secretary Sajid Javid last month.
Javid had certified India's extradition request for Nirav Modi earlier this month, triggering the legal process in the courts, kick-started with the issuance of a warrant.

ALSO READ: PMLA court allows I-T dept to sell 68 Nirav Modi paintings worth Rs 58 cr
News of the certification of India's request came just as Modi was tracked down to a three-bedroom flat in the Centre Point tower block of luxury apartments in the West End of London.
He is believed to have arrived in London last year and was able to travel in and out of Britain at least four times since his passport was cancelled by the Indian authorities in February 2018.
During some of his stay in London he was reportedly also living in the heart of the city above his jewellery boutique called “Nirav Modi” on Old Bond Street, which has since closed down.
ALSO READ: PNB scam: ED attaches Nirav Modi's properties worth Rs 147.72 crore
Modi is now believed to be running a new business, which describes itself on the UK's Companies House register as a wholesale trader in watches and jewellery and a retailer of watches and jewellery in specialised stores.
Modi and his uncle, Mehul Choksi, are the main accused in the PNB scam and they both left India before the details of the fraud came to light in January 2018.

Fugitive Nirav Modi tracked down to swanky London apartment: Report

Fugitive billionaire diamantaire Nirav Modi, accused in the USD 2 billion PNB fraud case, is living openly in a swanky 8-million pound apartment in London's West End and is now involved in a new diamond business, a British daily reported on Saturday.
Modi, 48, is currently living in a three-bedroom flat occupying half of a floor of the landmark Centre Point tower block, where rent is estimated to cost 17,000 pounds a month, The Telegraph reported.

The revelation comes a day after Modi's 30,000 sq ft seaside mansion at Kihim beach in Maharashtra was demolished by authorities using explosives.
Despite his bank accounts being frozen by the Indian authorities and an Interpol red notice being issued for his arrest, Modi, a diamond jeweller whose designs have been worn by Hollywood stars, is now involved in a new diamond business based in London, the report said.
In a video posted by the newspaper, Modi can be seen sporting a handle-bar moustache and wearing an Ostrich Hide jacket, estimated to cost 10,000 pounds. When journalists from the paper questioned him on various issues, including whether he has urged Britain to grant him asylum, Modi ducked them by saying, "Sorry, no comments".
A source told the the UK daily that Modi had been given a National Insurance number by the Department for Work and Pensions, meaning he can legally work in Britain, and has used British bank accounts.

Nirav Modi cannot return, afraid of getting lynched in India: Lawyer

Fugitive diamantaire Nirav Modi, a key accused in the $2 billion PNB fraud case, cannot return to India as he is afraid of "getting lynched" and is being compared to demon 'Ravan', his lawyer told a special court Saturday, but the ED dismissed the claim saying if he felt there were "security threats", he should have filed a police complaint,.
Nirav Modi's lawyer Vijay Agarwal stated this while arguing before Prevention of Money Laundering Act (PMLA) court Judge MS Azmi against the Enforcement Directorate's (ED) application to declare Modi a fugitive under the Fugitive Economic Offenders Act.

ALSO READ: Nirav Modi case: CBI registers DA case against retired PNB deputy manager
Countering the ED plea, Nirav Modi also said through his lawyer that he had no record or data with him about his finances.
Referring to Nirav Modi's claims of "security threats" in India, the ED said these points are "irrelevant" to the case.
The ED has claimed that Nirav Modi had refused to join the probe despite acknowledging mails and summons issued to him and that he doesn't want to return to India.
Agarwal, however, said the diamond trader had responded to the emails sent by the investigating agencies and expressed his inability to return due to "security threats".
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"In a letter addressed to both the CBI and the ED, Modi had stated that he was not able to join the probe because of security threats (in India) from private persons, the families of those who have been detained (in the PNB case), landlords, the creditors who have not been paid and the customers whose jewellery was taken away by the ED," he said.
"My (Modi's) 50-ft tall effigy was burnt in India. There was evidence of a mob lynching (against me) and I (Modi) was being compared with 'Ravan'. I have been projected as evil and being made the poster boy of the bank fraud," said Agarwal.
He also claimed that Modi cannot be declared a fugitive as various legal requirements stipulated by the Fugitive Economic Offenders (FEO) Act have not been met by the investigating agency.
ALSO READ: ED seeks attachment of 11 Dubai assets of Nirav Modi worth Rs 568 mn
"The main reason the ED is seeking to declare Nirav Modi a fugitive is that he left India under suspicious circumstances on January 1, 2018. However, there was no criminal case (against him) when he had left the country," Agarwal said.
"They cannot just say that he left the country under suspicious circumstances. They need to specify what those suspicions were. Also there is no material on record to say that he is refusing to return to India," he said.
Unlike liquor baron Vijay Mallya, who is accused of a loan default of over Rs 90 billion, Modi had no Non-Performing Assets (NPAs) when he left the country, Agarwal argued.
He said that being a (jewellery) designer, Modi is a sort of an "artist" who cannot provide any financial information as desired by the ED.
"All my (Modi) finances were taken care of by my employees who are already in the custody of the investigating agency. I have no record or data. What are they going to investigate with me, as they have taken away all my source of information," Agarwal said.
Countering Agarwal's submission, ED counsel Hiten Venegaonkar said all these arguments have nothing to do with the Fugitive Act (FEO).
ALSO READ: Not only banks, Nirav Modi also defrauded individuals with fake diamonds
"As far as security threats are concerned, any prudent person who is fearing threats to his life needs to file a police complaint. Until now, there is no material before the ED or the court (about any such complaint). So these points are irrelevant," he said.
As per the investigating agencies, Modi and his uncle Mehul Choksi, in connivance with certain bank officials, allegedly cheated the Punjab National Bank (PNB) to the tune of Rs 140 billion through issuance of fraudulent Letters of Undertaking (LoUs).
These LoUs were allegedly issued in a fraudulent manner by a Mumbai branch of the PNB to the group of companies belonging to Modi since March 2011 till the case came to light.

Court asks Nirav Modi, family to appear before Sept 25 under fugitive act

A special Fugitive Economic Offenders Act court in Mumbai today issued public summons to the sister and brother of absconding diamantaire Nirav Modi, the main accused in the $2 billion bank fraud case, asking them to appear before it on September 25.
It said if they fail to appear, their assets will be confiscated under the newly enacted Act aimed at curbing big ticket economic crimes.
The court of M S Azmi, also the special judge for Prevention of Money Laundering Act (PMLA) cases in Mumbai, issued three public notices in leading dailies today naming Nirav Modi's sister Purvi Modi and brother Neeshal Modi as they have been "enumerated as an interested person" in an application made under the new Act by the Enforcement Directorate (ED) against the diamond merchant.
The two have been charged by the ED to have indulged in money laundering and subsequently, escaping from India as the alleged scam came to light.
The notice against Purvi and Neeshal show causes them to explain as to "why the properties mentioned in the application (filed by the ED earlier), in which you have pecuniary interest and/or otherwise, should not be confiscated under the said Ordinance (now the Fugitive Economic Offenders Act)."
The court has asked the duo to appear before it on September 25 at 11 am, the same date on which Nirav has also been summoned by it under the Fugitive Economic Offenders Act.
The third public notice against Nirav Modi asked him to depose on the same date and time as it said that he is accused in a money laundering case and "as you have left India and are refusing to come back to face trial in that case, you should be declared a fugitive under the above-mentioned Ordinance (now the Act)."

Therefore, the judge said in the public declaration, "I issue notice to you (Nirav) to show cause as to why the said application for declaring you a fugitive should not be allowed and as to why the the properties mentioned in the application, in which you have pecuniary interest and/or otherwise, should not be confiscated under the said Ordinance (now the Act)."
"I, therefore, direct Nirav Deepak Modi to remain present before me... on or before September 25 at 11 AM falling which the said application shall be proceeded with as per the Ordinance/Rules thereafter," the notice said.
The notice bears two addressees of Nirav --4, Grosvenor House, 2nd floor on Peddar Road and four flats in Samudra Mahal apartments on Dr Annie Besant Road-- in Mumbai.
The same court had on July 25 issued the summons to Nirav Modi after the ED made an application seeking to declare the designer diamond jeweller a 'fugitive economic offender'.
It had issued a similar notice of appearance under the fugitive law against Nirav Modi's uncle and co-accused in the case Mehul Choksi and had asked him to appear before it the next day-- on September 26.
The agency had moved the court seeking to declare the diamond traders as 'fugitive economic offenders' and to confiscate their assets worth Rs 35 bn in the case.
The central probe agency, empowered to enforce the new law brought out by the Modi government to curb big economic crimes and to check the escape of perpetrators from India, had filed two separate applications against them.
The ED, earlier, had moved a similar application against businessman Vijay Mallya in the Rs 90-bn alleged bank loan fraud case and the court has summoned him for August 27.
In this case of the diamantaires, the agency seeks to confiscate assets, both movable and immovable, including those located in the United Kingdom and the UAE.
The move has been made on the basis of the two PMLA charge sheets filed by the agency against the two designer diamond jewellers on charges of alleged money laundering.
"Investigations have revealed that Nirav Modi and Mehul Choksi have committed the offence of cheating against Punjab National Bank (PNB) in connivance with certain bank officials by fraudulently getting the LOUs/FLCs issued without following prescribed procedure and caused a wrongful loss to the bank.
"They have further siphoned off the proceeds of crime so generated through layering through multiple dummy, related, connected entities in India and abroad," the agency had said in its application.
Nirav Modi and Choksi are being investigated by the ED and the CBI after it was detected that they allegedly cheated PNB of more than Rs 134 bn with the purported involvement of a few of its employees.
The scam, which reportedly began in 2011, was detected in January this year, after which PNB officials reported it to the probe agencies.
Two criminal complaints were filed by the ED in these instances after taking cognisance of CBI FIRs.
Non-bailable warrants were issued against the two, while an Interpol 'red corner' arrest warrant has been issued against Nirav Modi on the request of the ED.
The ED had conducted 260 searches in this case across the country.
The Fugitive Economic Offenders Act came into force from July 31.
Cases of frauds, cheque dishonour or loan default of over Rs 1 bn would come under the ambit of this ordinance.
The government has said the ordinance offers necessary constitutional safeguards in terms of providing hearing to the person through counsel, allowing him time to file a reply, serving notice of summons to him, whether in India or abroad and appeal before the high court.

Modi government creating a real-time master list of economic offenders

The government has asked all major federal investigative agencies to work together and create a master list of economic offenders in the country.
The move, which comes against the backdrop of high-profile financial scams and fraud cases, is expected to help the government crack down on economic offenders such as Nirav Modi, Mehul Choksi and Vijay Mallya, who have fled the country.

It is learnt that the Central Economic Intelligence Bureau (CEIB) will be making the list, with inputs from agencies such as the Enforcement Directorate, Directorate of Revenue Intelligence, Central Bureau of Investigation, tax and customs departments, and the Security and Exchange Board of India. The CEIB comes under the revenue department in the Finance Ministry.
Officials say that such a list, to be updated on a real-time basis, will serve as a ready reckoner in identifying those committing multiple economic offences. The government hopes that this will also lead to greater coordination among federal bodies which tend to work in silos. If any agency is investigating a person or entity, the list will help determine if another agency has also shown interest in the entity. For example, the DRI and the tax department had already been looking into fugitive diamantaire Nirav Modi's affairs since 2014 and 2017, respectively, much before he fled.
A threshold has been set for each agency and cases registered that involve amounts above that limit will be reported to CEIB. For example, customs will report cases registered for duty evasion of above Rs 10 million. In the case of the tax department, only raids conducted or authorised by the Central Board of Direct Taxes will be taken into account by CEIB.
The list of offences that make a person an economic offender include violations of laws such as the Central Excise Act, Customs Act, Prevention of Money Laundering Act, Negotiable Instruments Act, the Reserve Bank of India Act, Prohibition of Benami Property Transactions Act and, of course, provisions of the Indian Penal Code.

PNB fraud: ED to seek immediate confiscation of Nirav Modi's 70-bn assets

The ED is set to move a special court in Mumbai to seek permission for "immediate confiscation" of about Rs 70 billion assets of designer diamond jeweller Nirav Modi under the recently promulgated Fugitive Economic Offenders Ordinance.
The agency, empowered by the Union government to enact the new power in the country, will seek an official declaration to categorise Nirav Modi as a "fugitive" based on its prosecution complaint (charge sheet) filed before a special court in Mumbai last week under the Prevention of Money Laundering Act (PMLA).

On May 24, the ED had filed its first charge sheet in the over USD 2 billion PNB fraud case involving diamantaire Nirav Modi and his associates stating that over Rs 64 billion of bank funds were allegedly laundered abroad to dummy companies by him and others.
A total of 24 accused have been listed in the charge sheet, filed under section 45 of the PMLA, including Nirav Modi, his father, brother Neeshal Modi, sister Purvi Modi, brother-in-law Mayank Mehta and the designer jewellers' firms — Ms Solar Exports, Stellar Diamonds and Diamonds R Us.
The court is expected to take cognisance of the 12,000 page charge sheet tomorrow and the counsel for the agency will subsequently seek its permission to invoke the provisions of the Fugitive Economic Offenders Ordinance against Modi and immediately begin the procedure to confiscate all the assets "of and linked to" Modi in India and abroad, a senior official told PTI.
A court-issued non-bailable warrant is already pending against Modi and the ED has also moved the Interpol to get a global arrest warrant issued against him, sometime back.
The agency will initiate the same action against absconding liquor baron Vijay Mallya, against whom the Enforcement Directorate and the CBI had filed their respective charge sheets last year.
It is expected, the official said, that assets worth Rs 70 billion can be confiscated in the money laundering and the Punjab National Bank fraud corruption case against Nirav Modi, under the stringent fugitive offenders ordinance.
The central probe agency had recently begun the work to bring together the existing cases of high-value fugitives and bank loan defaulters for getting them notified under the new legislation.
As per the existing process of law under the PMLA, the ED could only confiscate the assets once the trial in a case finishes which usually takes a long time of many years.
The ordinance is aimed at deterring economic offenders from evading the process of law by remaining outside the jurisdiction of Indian courts.
The Modi government brought the ordinance last month as "there have been instances of economic offenders fleeing the jurisdiction of Indian courts, anticipating the commencement, or during the pendency, of criminal proceedings," the government said.
The rationale behind the law, the government had said, was the absence of such offenders from Indian courts which hampers investigation and wastes court time and undermines the rule of law.
"The existing civil and criminal provisions in law are not entirely adequate to deal with the severity of the problem," it had said.
The Fugitive Economic Offenders Bill, 2018 was introduced in the Lok Sabha on March 12 but couldnt be taken up due to logjam in Parliament over different issues.
With Parliament being adjourned sine die, an ordinance was proposed.
The Union Cabinet on April 21 approved the ordinance and the President gave his assent to promulgation of the same a day later.
The ordinance makes provisions for special courts under the Prevention of Money Laundering Act, 2002 to declare a person as a fugitive economic offender.
"A Fugitive Economic Offender is a person against whom an arrest warrant has been issued in respect of a scheduled offence and who has left India so as to avoid criminal prosecution, or being abroad, refuses to return to India to face criminal prosecution," the government statement said.
However, only cases of frauds, cheque dishonour or loan default of over Rs 200 crore would come under this ordinance.
The ordinance provides for necessary constitutional safeguards in terms of providing hearing to the person through counsel, allowing him time to file a reply, serving notice of summons to him, whether in India or abroad and appeal before the high court.
The government had said the new law would help banks and other financial institutions to achieve higher recovery from financial defaults committed by fugitive economic offenders, improving the financial health of such institutions.
The ED would take the same action of notification under the fugitive offenders ordinance after filing a second charge sheet against Modi's uncle and jeweller Mehul Choksi and his businesses, who are also accused in this case.
Nirav Modi, who is absconding and has not joined the ED probe in the case till now, and others are being probed under various criminal laws after the fraud came to light this year following a complaint by the Punjab National Bank that they allegedly cheated the nationalised bank to the tune of over Rs 13,000 crore, with the purported involvement of a few employees of the bank.
Both Nirav Modi and Choksi are said to have left the country before criminal cases were lodged against them.

Rs 140-billion PNB-Nirav Modi fraud case: How money changed hands

The Enforcement Directorate, on Thursday, filed its first charge sheet in the Rs 140-billion Nirav Modi scam. The charge sheet was filed against Modi and 23 others associated with him, including his siblings, and a number of his firms, namely Firestar Group of Companies, M/s Solar Exports, Stellar Diamonds and Diamonds R Us. ED said to date, the diversion of the proceeds of crime, to the extent of $629.21 million, had been traced to several group companies, relatives and other dummy companies under the control of Nirav Modi and his associates. Below are some details on the money allegedly laundered, provided by ED:
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Fraud-hit PNB posts biggest ever quarterly loss of Rs 134.17 billion in Q4

Punjab National Bank posted its highest-ever quarterly net loss of Rs 134 billion in the last quarter of 2017-18, owing to the fraudulent loans worth Rs 143 billion issued to group of companies belonging to Nirav Modi and Mehul Choksi.
PNB had posted a net profit of Rs 2.6 billion in the January-March period in 2016-17. PNB's net loss in 2017-18 stood at Rs 121.3 billion compared to Rs 11.9 billion profit in the previous financial year.

PNB's losses could have been much higher, had the Reserve Bank of India (RBI) not given some relaxations to the Delhi-based public sector bank for spreading its liabilities related to the fraud and wage bills.
In January-March, the bank's gross non-performing assets (NPA) rose sharply to 18.4 per cent, from 12.11 per cent in the previous quarter. Net bad debt assets also went up to 11.2 per cent from 7.5 per cent.
The bank's losses on account of the fraud related to letters of undertaking issued to group of companies belonging to Nirav Modi and Mehul Choksi was revised upwards to Rs 143.5 billion. The bank has made a 50 per cent provisioning against the fraud.
"RBI has permitted the bank to make provisions against this fraud at 25 per cent, without debiting 'other reserves' and provide remaining amount during first three quarters of the ensuing financial year. However, bank has made higher than required provisions at 50 per cent, amounting to Rs 71.8 billion,” PNB said. The remaining provisioning of Rs 71.8 billion will be made during the first three quarters of the present financial year, it added.
PNB had reported a Rs 143.5 billion fraud in January, wherein a few of its employees had issued letters of undertaking, in collaboration of Nirav and Mehul firms, in an unauthorised manner. Since the bank's SWIFT, an international messaging system, was not integrated with its core banking system, the fraud went undetected for seven years.
PNB has cleared dues of Rs 65.9 billion to foreign branches of Indian banks to which it had issued these LoUs. An LoU was a guarantee given by a bank to a foreign branch of an Indian bank to grant short-term credit to firms. The RBI has stopped the practice of issuing LoUs after the PNB scam came to light.
PNB has also created liability in its books for dues amount to Rs 69.6 billion, in respect of the liabilities related to the other LoUs.
The RBI also allowed PNB to spread its additional liability on account of increase in gratuity limits for employees from Rs 1 million to Rs 2 billion, over four quarters. As a result, PNB has deferred gratuity payment to its employees worth Rs 1.9 billion over the first three quarters of 2018-19.
PNB had to make provisioning of Rs 31.2 billion, after the Reserve Bank of India (RBI) scrapped all the restructuring tools lenders relied on in February this year. The February 12 circular from the RBI scrapped six stressed non-performing asset (NPA) restructuring mechanisms such as Corporate Debt Restructuring, Strategic Debt Restructuring (SDR), Scheme for Sustainable Structuring of Stressed Assets (S4A) and Framework for Revitalizing Distressed Assets, Joint Lenders Forum and the 5/25 loan scheme, among others.
Instead, the RBI has asked the banks to classify stressed accounts as 'special mention accounts', at three different levels depending on the extent to which payment of principal or interest on a loan has been delayed.
"As on 31 March 2018, 28 accounts were falling under the purview of this framework for which bank has made provision of Rs 31.2 billion," PNB said.

PNB Scam: Two bank execs removed; Allahabad Bank chief to step down

Two top officials of Punjab National Bank were removed from its board after the Central Bureau of Investigation (CBI) found their involvement in the Rs 140 billion fraud related to group of companies belonging to Nirav Modi and Mehul Choksi.
PNB executive directors Rajiv Sharan and KV Brahmaji Rao were removed, based on the directions of the government.

Allahabad Bank managing director and chief executive officer Usha Ananthasubramanian, who has also been named in the chargesheet filed by the CBI in a Mumbai court today, will also likely step down. Ananthasubramanian was the MD and CEO of PNB between August 2015 and May 2017.
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The action comes after the government asked the board of the two banks to remove these executives, based on the CBI’s chargesheet in the case.
PNB held a board meeting on Monday and decided to remove the two executive directors, requesting the government to replace them, finance ministry’s department of financial services secretary Rajiv Kumar said in a press conference here. He added that ministry has directed the Allahabad Bank to hold an emergency meeting to take action against Ananthasubramanian.
“For removal and disciplinary action, there is a set procedure, under Section 8 of the Nationalised Bank Schemes 1970. A show-cause notice to the bank executives was issued around 10 days back when we found out through initial assessment that there is some lapses. Today, after it was confirmed that there is a substantiative problem, we initiated the action immediately,” Kumar said.
In January, PNB had reported Rs 140-billion fraud related to letters of undertaking facility – a loan instrument that was used by trade companies – availed “fraudulently” by group of companies belonging to Nirav Modi and Mehul Choksi, who own and run their jewellery firms. The fraud has been going on since 2011, PNB has said.
“This is a clear message that we have to be responsible for what we do. We will only take action when there is a substantial proof,” Kumar said.
Asked why no action was taken against other chief executives of PNB, including the incumbent, Kumar said, “We will not take any action on hearsay or rumours…Three board-level executives were found to be involved and we have initiated action. The moment I have definite information either from the regulator (Reserve Bank of India) or the investigators, government will not hesitate in taking actions.”
The process of appointing vacancies in the boards of public sector banks has been initiated as the government has written to the Banks Board Bureau to convene a meeting soon for recommending replacements.

Nirav Modi fraud-hit PNB aims to grow its total business by 10.8%

Nirav Modi fraud-hit Punjab National Bank (PNB) aims to grow its total business by 10.8 per cent and close the current financial year with to Rs 12 trillion on the back of increased focus on CASA mobilisation.
The board of the bank in a meeting held last Saturday, deliberated on the future roadmap for the bank and implementation of the finance ministry's Enhanced Access & Service Excellence (EASE), PNB CEO Sunil Mehta told PTI.

"The bank will aim at growing by 10.8 per cent year-on-year to aim at total business of Rs 12 trillion in FY '19. Similarly, the bank has planned 13.7 per cent growth in CASA (current account savings account) to aim for an amount of Rs 1 trillion," he said.
ALSO READ: PNB scam: ED refuses to share details of Nirav Modi, Mehul's seized assets
Over the last few weeks, the bank has focused on changing and improving its systems and processes to reduce customers' risk and further strengthen the bank, he added.
This includes the increased intervention of technology, segregation of responsibilities, introduction of new verticals and realignment of processes, he said, adding that the bank's Mission Parivartan is helping drive this change to refresh business processes and better meet present day requirements, Mehta said.
ALSO READ: PNB's bad-loan woes mount to over Rs 151 bn on back of Nirav Modi fraud
"The response from the team to step up and face a new challenge as well as our customers who have placed their trust with us has been overwhelming. The business remodelling' brought alive by changes at PNB is essential to ensure that the bank continues to grow and compete with its peers better," he further said.
PNB has been actively working towards reducing people risk and improving internal systems over the past few weeks, the CEO noted.
To achieve the objectives, he said, the bank has undertaken various steps, including harnessing the power of technology and use of Artificial Intelligence (AI) for a reconciliation of accounts and incorporating analytics for improving audit systems.
ALSO READ: PNB Housing Finance net profit rises 36% to Rs 2.2 billion
Strengthened the process of underwriting of credit to minimize the possibility of fraudulent behaviour by splitting the process into four components with different employees focused on sourcing - appraisal, process and underwriting; documentation and disbursement; and recovery, he said.
Citing Gandhigiri, one of the innovative steps by the bank to accelerate NPA recovery, Mehta said, employees sit silently with placards outside offices and residences of defaulters as part of name and shame such borrowers to recover.
The state-owned lender has been at the receiving end of the over Rs 130-billion fraud involving diamond merchants Nirav Modi and Mehul Choksi.
He also said personnel development and training is being undertaken on a large scale by the bank to make it future-ready.

Cabinet clears ordinance to crack down on Nirav Modi, Mallya-type fugitives

The government has cleared the decks for the proposed law that seeks to crack down on the likes of Nirav Modi, Mehul Choksi and Vijay Mallya, who have fled the country after defaulting on loan repayments worth billions of rupees.
The Union Cabinet on Saturday decided to bring into effect the Fugitive Economic Offenders Bill as an ordinance, after the Bill could not be tabled in the Budget Session of Parliament owing to a logjam.
“The ordinance will lay down measures to empower Indian authorities to attach and confiscate the proceeds of crimes associated with economic offenders and their properties,” said an official after the decision was taken. The Cabinet meeting was chaired by Prime Minister Narendra Modi after his return from visits to Sweden, the United Kingdom and Germany.
“The ordinance has been approved in order to address the deficiency in present laws. It is expected that the special forum, to be created for expeditious confiscation of the proceeds of a crime, in India or abroad, will coerce the fugitive to return to submit to the jurisdiction of courts,” the official said.
The ordinance, which does not have any new provisions, needs to be converted into a law within six months. The government will now try and table the Bill in Parliament in the monsoon session.
The ordinance will cover those whose alleged proceeds from a crime are over Rs 1 billion.
Any person who does not appear before a special court or does not respond to summonses will be declared an economic offender. All the offender’s assets will be confiscated, not only those from the proceeds of the alleged crime.
According to the ordinance, a special court will have powers to declare a person an economic offender. An administrator will be appointed to manage and dispose of the confiscated assets, including helping banks recover any defrauded amount. The offender will not be able to file any civil claim in any Indian court to recover his or her assets.
The Fugitive Economic Offenders Bill was first proposed by Finance Minister Arun Jaitley in the 2017-18 Budget.
Currently, confiscation can be done through multiple laws, but is a complicated process. The laws under which such offenders are tried are the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, the Recovery of Debts Due to Banks and Financial Institutions Act, and the Insolvency and Bankruptcy Code.
The Noose Tightens
Ordinance comes after Fugitive Economic Offenders Bill could not be tabled in Budget session
Govt seeks to address cases involving the likes of Nirav Modi, Mehul Choksi and Vijay Mallya
A special court will declare a person an economic offender
Offenders’ proceeds from crime, properties, including benami assets, will be seized

ED finds 47 entities related to Nirav Modi doing Rs 60-bn 'round-tripping'

The Enforcement Directorate (ED) is investigating Rs 60 billion worth of round-tripping by 47 entities related to jeweller Nirav Modi (pictured).
According to enforcement sleuths, the transactions travelled through at least five banks — State Bank of India (SBI), Bank of India, Union Bank of India, Syndicate Bank and Axis Bank.

The agency is investigating alleged money laundering in the Rs 130 billion letters of undertaking (LoUs) fraud at Punjab National Bank (PNB), involving Nirav and his uncle Mehul Choksi.
A majority of such transactions took place between the UAE, Belgium and India, while some funds also found their way to New York. "Of these 47 entities, 10 are registered in Belgium, three in the US, 13 in the UAE, eight in the Netherlands and rest in India," said an ED official.
According to sources, the ED found the funds received by Nirav's firms through fraudulent LoUs travelled through these banks to reach the beneficiary. "It was done through multiple transactions and even those transactions were split," the official added.
ALSO READ: India's request to arrest Nirav Modi awaiting response from Hong Kong: MEA
The official added that the way the transactions were executed clearly showed that both Choksi and Nirav were working in tandem on all their business-related dealings.
Earlier, the Central Bureau of Investigation (CBI) had said that over 120 shell companies in India and overseas were used by the two jewellers and these transactions were under scrutiny. The income tax department has been roped in to investigate these shell firms, suspected to have indulged in routing illicit funds. The ED is working with the Reserve Bank of India (RBI) for further details of transactions made overseas. The information has helped central agencies to identify transactions in any electronic form like real-time gross settlement or national electronic funds transfer. Typically, this data is available with the remitting and receiving banks. These banks send monthly data of all such transactions to the RBI. Meanwhile, the CBI is in advance stages of filing a charge sheet, which would pave the way to arresting Nirav.

PNB scam and 20:80 gold scheme: CBI quizzes H R Khan, ex-dy governor of RBI

The CBI today questioned a former Deputy Governor of the Reserve Bank, H R Khan, in connection with alleged bank fraud cases involving diamond traders Nirav Modi and Mehul Choksi and relaxation of gold import policy by the erstwhile UPA government, sources said today.
He was questioned about the UPA government's 20:80 gold import scheme, which was cleared by then Finance Minister Chidambaram on May 13, 2014, barely three days before the counting of votes of the general election.

The central investigation agency, which is probing the alleged Rs 130-billion PNB fraud involving billionaire diamantaire Nirav Modi and his uncle Mehul Choksi, had yesterday questioned three Chief General Managers and one General Manager of the Reserve Bank of India (RBI), officials said.

PNB scam: ED, CBI raid Nirav Modi's Mumbai home, seize Rs 250-mn properties

The Enforcement Directorate (ED) on Saturday said that it has attached properties worth Rs 250 million (Rs 25 crore) of diamond jeweller Nirav Modi in connection with its ongoing probe into the Rs 135 billion (Rs 13,540 crore) PNB fraud case.
An ED official told IANS that the searches were carried out on Thursday at Nirav Modi's palatial residence 'Samudra Mahal' in Mumbai along with a Central Bureau of Investigation (CBI) team.
The official also said that the searches continued till Saturday morning and resulted in the seizure of antique jewellery worth Rs 150 million (Rs 15 crore), high-end watches valued at Rs 14 million (Rs 1.40 crore) and paintings worth Rs 100 million (10 crore) that includes artworks by M F Hussain, K K Hebbar, Amrita Shergil.
The ED also attached a diamond ring valued at Rs 100 million (Rs 10 crore).
3-day-long searches were conducted by CBI & ED at residential premises of #Nirav Modi at Samudra Mahal in Mumbai's Worli, starting from Fri.
Antique jewellery & paintings worth crores of rupees were recovered. Watch valued at Rs 1.40 cr & ring valued at Rs 10 cr were also seized pic.twitter.com/P6CnDt0aL7
— ANI (@ANI) March 24, 2018
ALSO READ: PNB scam: Why do we not talk about the whopping bank loan defaults?
The financial probe agency's action comes after it registered a separate case against the diamond jeweller and his uncle Mehul Choksi of the Gitanjali Group for defrauding the banks to the tune of Rs 135 billion (Rs 13,540 crore).
Till date, the ED has carried out searches at over 251 properties across the country and seized diamond, gold, precious and semi-precious stones, pearls.
ALSO READ: PNB issued over 41,000 LoUs since 2011; 1,590 of them to Nirav: FinMin
The ED has also attached immovable properties belonging to Nirav Modi Group and Mehul Choksi group to the tune of Rs 76.38 billion (Rs 7,638 crore).
Choksi, Nirav Modi and his family fled in January around a month before the PNB filed the first complaint against them about the fraud and they are still at large.
ALSO READ: PNB scam: Interpol seeks additional information on Nirav Modi, Mehul Choksi

Banks to adopt risk management system in 6 months to stop PNB-like fraud

Bankers on Thursday decided to put in place more robust and secure risk management mechanism within six months to check fraudulent activity by unscrupulous elements in the aftermath of the country's largest bank fraud of Rs 130 billion allegedly perpetuated by Nirav Modi.
All public sector banks have verified LoUs issued by them, and there are no other unauthorised authority letters except for those issued by PNB, State Bank of India Deputy MD M S Sastry said.

It is important to note that the major incident that took place recently in one of the branches of a public sector banks is one of its kind in about 5,000 branches, dealing in foreign exchange in the entire banking system in India, he said.
Addressing media after three-day deliberation, he said, banks will be putting up their action plan to respective boards and in three to six months action plan would be implemented by all the banks.
Action plans are drawn to further strengthen the controls in the areas of trade finance, SWIFT, credit risk, operational risk besides cyber and IT risk. Banks will now place these action plans with timelines for implementation and improvement before the respective boards, he said.
"Further controls have also now been put in place that includes additional layer of approval for all outward swift messages, integration of SWIFT with CBS latest by April 30, 2018 besides time restrictions for such transactions i e between 9 am to 8pm only," Sastry said.
"All the Chief Risk Officers, Executive Directors and Chief Technology Officers of the public sector banks came together to review what are the best practices from risk management we have and also compiled a list of best practices so that individual banks can go back and review where there is room for improvement," he said.
The meeting follows the finance ministry directives on February 27 to the state-owned banks to come out within 15 days a pre-emptive action and identify gaps/weakness to gear up for rising operation and technological risks.
The revised processes are robust and go a long way in checking fraud, said Bank of Maharashtra executive director R K Gupta.
"It was also agreed that all banks will henceforth follow the uniform approach for certain common covenants. In addition, banks will further strengthen their mechanism with regard to the early warning signals," Gupta said.
Speaking about the review of all the letters of undertakings and letters of comfort, Sastry said there are no other unauthorised fraudulent letters of undertakings and letters of comfort other than those which are already reported.
"This is one assurance on behalf of all public sector banks that we are giving that through review has been made and there are no other unauthorised fraudulent letters of undertakings or letters of comfort found except those which are already reported," he added.
During the workshop, Gupta said, participants also debated on the common areas for strengthening credit process.
Improving risk awareness and ethical awareness amongst staff, preventive monitoring and surveillance of transactions, strengthening Know Your Employee (KYE) through technological intervention are some of the action points identified to further strengthen operational risk management, he said.
According to Sastry, banks are in the process of establishing Onsite Cyber Security Operation Centre (C-SOC) wherever not in place to monitor all IT assets.
Banks are committed to provide Enhanced Access and Service Excellence (EASE) to all customers in a safe and secured environment, he added.
As part of a drive to clean the banking system, the finance ministry earlier this month had directed public sector banks (PSBs) to probe all NPA accounts of over Rs 50 crore for possible fraud and accordingly report the cases to CBI.
Besides, the ministry had asked banks to monitor loans above Rs 250 crore and red flags whenever the original covenants of the loans are violated. This was spelt out as part of 6-point-reform measures announced for PSBs in January.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

PNB scam: ED seeks Interpol arrest warrant against Nirav Modi, Mehul Choksi

The Enforcement Directorate (ED) has moved the Interpol for issuance of a Red Corner Notice against diamond traders Nirav Modi and Mehul Choksi in connection with the over Rs 120 billion PNB scam.
Officials said the agency had sought issuance of the Interpol (international police) warrant against the two, based on court-issued non-bailable warrants obtained by it in a money laundering case.

The agency is understood to have sent the request to the CBI for taking it up with the Interpol headquarters in Lyon, France.
A Red Corner Notice (RCN) is issued to seek the location and arrest of wanted persons with a view to extradition or similar lawful action in a criminal case probe.
Once an RCN is issued, the Interpol seeks to arrest the person concerned in any part of the world and notifies that country to take his or her custody for further action at their end.
A special court in Mumbai had issued non-bailable warrants early this month on the request of the Enforcement Directorate.
The ED had earlier issued summonses to Modi and Choksi -- the key accused in the scam -- asking them to appear before it in Mumbai. However, both of them expressed their inability to depose citing business engagements.
Both are accused on charges of money laundering (under the Prevention of Money Laundering Act) in alleged connivance with some employees of Punjab National Bank (PNB) and have been stated by probe agencies to have left India before criminal charges were pressed against them.
The CBI too is probing the case.

Govt clears Bill to deal with the likes of Nirav Modi; NFRA to regulate CAs

Aiming to deter economic offenders like Nirav Modi and Mehul Choksi from fleeing the country, the Union Cabinet on Thursday approved the Fugitive Economic
Offenders Bill, which provides for attaching properties of alleged fraudsters who do not respond to summons for questioning or trial.
The Cabinet also cleared a proposal, under Section 132 of the Companies Act, to set up the National Financial Reporting Authority (NFRA) to regulate chartered accountants (CAs). While the Bill will be sought to be introduced in the post-recess Budget session of Parliament, the NFRA will be notified under the existing Companies Act, Finance Minister Arun Jaitley told journalists after the meeting.
The fugitives Bill will cover those whose alleged proceeds from a crime are over Rs 1 billion. The NFRA will regulate accountants of listed companies and big unlisted companies. The Ministry of Corporate Affairs (MCA) will define the latter entities. Small unlisted companies will be regulated by The Institute of Chartered Accountants of India (ICAI).
“The person who does not appear in front of the special court or does not respond to a summons will be declared an economic offender,” Jaitley said. All the offender’s assets will be confiscated, not only those from the alleged crime’s proceeds.
“Even benami (concealed under other names) assets will be confiscated. The next step is a mechanism of international cooperation, which will enable the authorities to confiscate foreign assets of the person declared an economic offender. Which country the person’s assets are in, that country’s cooperation will be needed. We will make appropriate arrangements,” Jaitley said. He added the offender would not be able to file any civil claim in Indian courts.
ALSO READ: PNB fraud: Gitanjali Gems tanks 5% as ED attaches Rs 12 bn assets of Choksi
According to the Bill, a special court will have the power to declare a person an economic offender.
An administrator will be appointed to manage and dispose of the confiscated assets, including helping banks recover any defrauded amount.
As reported in Business Standard earlier, if the Bill does not pass in the Budget session, the government plans to issue it as an ordinance. “We will try and make sure the Bill passes in the Budget session. We cannot allow people to make a mockery of the law,” Jaitley said.
The second half of the Budget session starts on Monday and is expected to go on till April 6. Also on the agenda are the Finance Bill, the Triple Talaq Bill, stuck in the Rajya Sabha, and one to give the National Commission on Backward Classes a constitutional status.
ALSO READ: PNB auditor conspired with Nirav Modi in perpetrating $2-bn fraud: CBI
The Bill was first proposed by Jaitley in his 2017-18 Budget. Currently, confiscation can be done through multiple laws but is a complicated process.
Even existing cases could come under the proposed law, which means cases relating to Vijay Mallya, Nirav Modi and Mehul Choski should be covered.
The Bill also proposes more powers to investigative agencies. It allows quicker attachment and disposal of properties.
As of now, the laws under which such offenders are tried are the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest
ALSO READ: PNB fraud: ED seeks permission to search Nirav's house, NBW against Choksi
Act, the Recovery of Debts Due to Banks and Financial Institutions Act, and the Insolvency and Bankruptcy Code.
The rules for NFRA will be notified soon, while the establishment of the actual authority will take some time, said people in the know. It is felt that the ICAI has failed to satisfactorily regulate CAs.
The proposed authority will have a chairperson and 15 members. The NFRA will oversee the quality of service of professionals associated with ensuring compliance, monitoring and enforcing the compliance with accounting standards, and making recommendations to the central government on the formulation of accounting and auditing policies.
According to the Companies Act, the NFRA will have the same powers as vested with a court under the Code of Civil Procedure. These could be related to discovery and production of books of account and other documents, summoning and enforcing the attendance of persons and examining them on oath, inspection of any books, registers and other documents. Parliament’s standing committee on finance had in 2012 specified the need for a quasi-regulatory body to supervise audit quality.
Vishesh Chandiok, national managing partner at financial consultants Grant Thornton India, says: “India remains the only major economy where the audit profession is still considered self-regulated. The NFRA will help build reinstate trust in the profession, undoubtedly tarnished with recent events.”

Nirav Modi refuses to join CBI investigations in PNB scam case: Officials

Diamantaire Nirav Modi has refused to join CBI investigation in the Punjab National Bank (PNB) scam case, officials said today.
Modi was asked to appear before the agency in connection with its probe in the over USD two billion alleged fraud perpetrated in the PNB.
He was summoned through email but he refused to join the investigation saying he has "business abroad", the officials said.
The CBI today directed him to contact the embassy of India in a country where he is staying so that his travel to India can be arranged, they said.