BS :Sundaresha Subramanian | New Delhi May 15, 2013 12:06 IST
Bogus contract payments scam in a PSU unearthed after tip-off from a suspicious transaction report
At a time when banks have been accused of suppressing suspicious transactions, an instance of prompt reporting, has helped unearth a multi-crore fraud in a public sector undertaking (PSU).
The CBI and other central agencies are now investigating an elaborate bogus contracts payments scam in the PSU, wherein the company paid over Rs 231 crore over a period of three years to a web of 135 fake firms.
The Financial Intelligence Unit-India (FIU-IND), the central body that aggregates and disseminates information about money laundering and terrorist financing, has published this case study in its latest annual report showing how proper reporting and prompt follow-up can lead to big heists.
The Financial Intelligence Unit-India (FIU-IND), the central body that aggregates and disseminates information about money laundering and terrorist financing, has published this case study in its latest annual report showing how proper reporting and prompt follow-up can lead to big heists.
All banks and financial institutions are required to file suspicious transaction reports (STR) to FIU-IND as per the provisions of Prevention of Money laundering Act (PMLA).
The first STR filed in this case showed some unusual activity in an account owned by a minor. The payments were routed to the minor’s savings banks account operated by the mother and natural guardian. The suspicious transaction reports showed that the account received several high value credits totaling over Rs 8 crore, mostly through transfers from several current accounts maintained in the same branch. However, there were no debits made to this account.
Further probe revealed that several family members of the minor also had accounts in the branch and received similar credits totaling Rs 58.82 crore.
One of the key sources of suspicion was the fact that many of these accounts were in the names of housewives, who did not have any known source of income. In other cases, the sizes of the transactions were not proportionate to the declared business activity of the account holders.
Under the PMLA, FIU-IND is mandated to analyse the STR and disseminate the information to the relevant investigation agency or the regulator.
The income tax department swung into action and investigations revealed that the minor maintained accounts of some 135 firms operating the name of family members and close associates. Neither was there any book of accounts nor any evidence of any business activity undertaken. But search of the premises led to seizure of around Rs 130 crore, over half of this in cash. The agencies also found immovable property.
Further enquiries that the source of this huge wealth was misappropriated funds from the PSU on basis of fake bills and bogus contract works. It was not clear whether any staff of the PSU or government officials were involved in the bogus contract racket. “Matter also being investigated by CBI and Vigilance department of the PSU,” FIU said in its annual report.
Fruits of suspicion
Wealth seized from the minor and relatives
The first STR filed in this case showed some unusual activity in an account owned by a minor. The payments were routed to the minor’s savings banks account operated by the mother and natural guardian. The suspicious transaction reports showed that the account received several high value credits totaling over Rs 8 crore, mostly through transfers from several current accounts maintained in the same branch. However, there were no debits made to this account.
Further probe revealed that several family members of the minor also had accounts in the branch and received similar credits totaling Rs 58.82 crore.
One of the key sources of suspicion was the fact that many of these accounts were in the names of housewives, who did not have any known source of income. In other cases, the sizes of the transactions were not proportionate to the declared business activity of the account holders.
Under the PMLA, FIU-IND is mandated to analyse the STR and disseminate the information to the relevant investigation agency or the regulator.
The income tax department swung into action and investigations revealed that the minor maintained accounts of some 135 firms operating the name of family members and close associates. Neither was there any book of accounts nor any evidence of any business activity undertaken. But search of the premises led to seizure of around Rs 130 crore, over half of this in cash. The agencies also found immovable property.
Further enquiries that the source of this huge wealth was misappropriated funds from the PSU on basis of fake bills and bogus contract works. It was not clear whether any staff of the PSU or government officials were involved in the bogus contract racket. “Matter also being investigated by CBI and Vigilance department of the PSU,” FIU said in its annual report.
Fruits of suspicion
Wealth seized from the minor and relatives
- Cash - Rs 80 crore
- Fixed Deposit receipts - Rs 36 crore
- Kisan Vikas Patra – Rs 12 crore
- Immovable property - Rs 20 crore
- Investments in shares/MFs – Rs 80 lakh
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