Fraud undetected as non-fund based deals not linked to swift

MUMBAI: Punjab National Bank’s core banking system (CBS) failed to trigger alerts during the allegedly fraud transactions in favour of jeweller Nirav Modi because non-fund-based transactions were not aligned to Swift messaging system, allowing a few employees to change entries manually, people in the know said.

Except for transactions relating to letter of undertaking, letter of credit, stand by letter of credit, and bank guarantees, all other transactions happening over the Swift system was aligned to PNB’s CBS, raising doubts whether the fraud could have been perpetrated with the help of a few junior officials, they said.

“In PNB’s case, the CBS was not aligned to Swift for some transactions because of connivance among a few employees,” said a banker privy with the matter. “There was no entry, hence there was no reconciliation. No technology can help you if manual intervention is allowed and which is why these kinds of frauds go undetected,” the person said.

CBI sources said Nirav Modi’s associates may have secured illegal access to PNB’s computer systems in connivance with a few employees. Modi’s staff was allegedly logging into the Swift system using passwords of PNB officials in the capacity of verifier. PNB officials in return secured commission on every LoU that was issued, the sources said. CBI is further investigating the matter.

According to PNB’s second complaint to CBI in the Rs 11,400-crore Nirav Modi case, the accused bank officials deliberately omitted in entries of the LoUs issued in favour of accused companies in the core banking system of the bank to avoid detection, sources said.