Page 49 - Banking Fiannce March 2018

FEATURE

PNB’s Seven Seadly Sins IT department did not detect their delinking in certain
1. When a company involved in trade finance seeks funding cases. That this went on for seven years indicates
the bank in India fixes a credit limit, and the process of connivance or gross neglect. The very issuance of LoUs-
issuance of an LoU (which can be presented at a bank even before the SWIFI' stage - for such huge amounts
branch overseas) begings. Requests for loans or LoUs without red flags going up is a major internal failure.
for large amounts have to be approved by the senior
management. It is not clear what exactly happened in 5. Whenever such huge amounts are Sent through SWIFT,
PNG’s case. daily reports are generated. Its not known why officials
at no level received a report in the case of Modi and
2. A swift message is sent to the overseas branch by a Choksi. The bank’s vigilance department fraud
three stage process that usually involves three officials: management committee, internal and external audits,
maker, verifier and authoriser, each with different logins one seems to have noticed.
and passwords. In the PNB case, the same person
carried out two functions, initial investigations indicate. 6. SBI Chamnan Rajnish Kumar has said that an official is
not kept in position for more than three years and some
3. Swift transactions are linked to the bank's Core Banking sensitive positions are monitored very closely. one of
Solution (CBS), which has the transaction histories of all the bankers who has been arrested was reportedly
customers and can be accessed by all branches where handling transactions to provide credit to Nirav Modi’ s
a customer has an account. This is automatically seen firms for seven years. It is baffling how this played out
by senior officials whenever the amount is big. The for so long, with a handful of staffers seemingly gaming
scamsters allegedly delinked Swift from the CBS for all the system.
companies linked to Nirav Modi and Mehul Choksi, even
though LoUs of other firms went routed through the 7. When an LOU is issued, the receiving bank sends a letter
Swift-CBS system. Thus, instructions went through of continuation to the issuing branch and its controlling
without being recorded in the CBS. offices such as the regional or zonal office. It is not clear
whether receiving banks in this case sent such letters
4. The SWIFT-CBS integration is natural and seamless in a and, if they did, why the receipt of the letters not raise
bank’s computer network. It is unusual that the bank's an alarm in PNB. (Source : Ind. Exp.)

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BANKING FINANCE | MARCH | 2018 | 49