The Enforcement Directorate may soon write to all the banks to report any fraudulent transaction, similar to those detected in the Punjab National Bank case, for speedy action against those involved.
Alarmed by the manner in which Letters of Undertaking (LoU) were fraudulently issued to importers in connivance with certain PNB officials, the agency suspects that the same modus operandi could have been adopted in other banks to raise funds illegally in the name of settling import bills.
LoU is a bank guarantee generated on behalf of importers for payments abroad. Under this arrangement, the issuing bank agrees to unconditionally repay the principal amount and interest thereupon. It remains valid for three months.
SWIFT system
In the PNB case, the accused officials misused the Society for Worldwide Inter-bank Financial Telecommunication (SWIFT) system to verify the fraudulently issued LoUs, confirming to the overseas branches of several banks that they could extend foreign exchange credit to the beneficiaries.
The SWIFT system is mainly used for clearing international wire transfers.
The PNB has also issued a note to all the banks cautioning them against the modus operandi adopted in the fraud. The bank found that the beneficiary companies were maintaining only current accounts with the branch and had not been sanctioned any credit limit.
The Directorate’s searches in the PNB case will continue on Friday, even as more seizures are being reported from Jaipur.
