‘Nirav Modi-PNB fraud a familiar rerun, not the last’

By Vishnu Makhijani

New Delhi, June 25 (IANS) The Rs 14,000 crore Nirav Modi-PNB scam is not the first and certainly not the last despite elaborate checks prescribed by the regulators, says a new book by B.V. Kumar, a former head of the Directorate of Revenue (Intelligence) who was in the thick of the struggle against scamsters, smugglers and underworld during his 35 years in the Indian Revenue Service (IRS).

"The case of (diamantaire) Nirav Modi and the Punjab National Bank has thrown up the issue of vulnerability of banks to frauds. This was not the first case, tragically and unfortunately, despite several such cases having been detected by the enforcement agencies and even after all elaborate checks prescribed by regulators, such frauds will continue and this will not be the last case," Kumar writes in the exhaustive "DRI & The Dons - The Untold Stories (Konark/pp 448/Rs 525).

"Nothing can prevent human ingenuity from breaching those barriers in order to commit financial fraud," Kumar writes, pointing to a similar case with international ramifications detected by by DRI Mumbai that was "a pointer to many such frauds that might have been committed and have gone undetected for many years".

That fraud, detected in September 1998, involved Mumbai-based Hamco Mining and Smelting Ltd and its associate companies remitting "huge amounts of foreign exchange ostensibly against imports made by them - without actually receiving the goods".

"Several rules, regulations, checks and controls have since been put in place to prevent the repetition of such frauds. Alas, the more things change, the more they remain the same. Such frauds continue to this day. And enforcement agencies continue to have their hands full," Kumar writes in the book which was released here on Friday evening.

In the present instance, then Finance Minister Arun Jaitley informed the Rajya Sabha in March that Nirav Modi obtained his first fraudulent guarantee from PNB on March 10, 2011 and another 1,212 such guarantees till May 23, 2017.

Nirav Modi, his wife, his uncle Mehul Choksi and other members of the family flew the coop in January just before the scandal broke. He has been jailed in London and his fourth bail plea was rejected last week.

That's one aspect of the book, which, through its 48 chapters, details the DRI's attempts to counter the likes of Haji Mastan, Iqbal Mirchi, Dawood Ibrahim, Vicky Goswami, Mustafa Dossa, Sukar Naran Bakhia, Alamzeb and a host of others.

"An endeavour has been made to record some of the most important cases detected by various DRI officers at great personal sacrifice, sometimes even at the cost of their own personal wellbeing and life. A few officers have been disabled and some of them were shot or killed by anti-national elements," Kumar writes.

The book paints a grim picture of the scenario ahead.

Kumar writes that with burgeoning inflation, widening balance of payment deficit and a weak rupee against the dollar, the demands for goods of conspicuous consumption - including gold, luxury goods and electronic goods with the latest technology - would create its own supply.

The tariff barriers raised by the Donald Trump administration and the counter-measures by the Chinese and Indian governments will naturally raise the cost of such goods and "create the required environment for organised crime to enter the fray".

"It should also be kept in mind that organised crime would take over all connected operations since there is a close nexus between organised crime, economic crime, drug trafficking, terrorist activity and money laundering - ultimately resulting in subversion of the democratic political process," Kumar writes.

Noting that banks and financial institutions "are a vital link in facilitating international trade in goods and services", he warns that they "are also vulnerable to organised crime, drug traffickers, terrorists and white-collar criminals".

Thus, the evolving scenario "needs a coordinated response from the law enforcement agencies to combat organised crime. The political establishment should also recognize that the law enforcement agencies should be well-equipped for greater engagement to give a fitting response".

"For this, their intelligence apparatus, should be upgraded and wherever necessary, with the latest technological tools. It should also be remembered that the effectiveness of any measures taken will succeed only when there is political will and direction to combat this menace," the author concludes.

(Vishnu Makhijani can be reached at vishnu.makhijani@ians.in)