Top officials of the Kolkata-based UCO Bank have some tough questions to answer this week.
The Mumbai Enforcement Directorate (ED) has summoned these officials to explain the delay in taking action against some exporters, accused in the Indo-Iran trade scam, believed to be around Rs 20,000 crore.
First and foremost, the ED wants to know why first information reports (FIRs) were not filed against these exporters, despite knowing their names.
"The case should be investigated under Prevention of Money Laundering Act (PMLA). But as per law, this cannot be done without FIRs being filed against the exporters," an ED official told dna.
"Bank officials are being called to explain the development in the case. They are also required to share the details of their internal inquiries," said ED officials.
ED has been probing the scam under the Foreign Exchange Management Act (FEMA) for seven months now.
dna had, on January 23, reported that the ED has been probing the multi-layered hawala scam under the FEMA. Their focus is on some export houses doing business with certain central Asian nations – especially in Iran and Azerbaijan.
ED has also taken details of accounts and transactions worth about Rs 800 crore from UCO Bank. Its officials had visited the regional branch offices of UCO Bank in Mumbai and Chandigarh and recorded statements of at least 5-6 officials a couple of months back.
Investigations so far have revealed that eight foreign nationals (seven Iranians and one from Azerbaijan) visited India on student visas, created bogus companies in Chandigarh and opened accounts with UCO Bank, in probable collusion with lower-rung officials. Their sole purpose was to divert funds to Dubai and Iran.
They acquired companies in India with the help of an accountancy firm, Agarwal Raman & Associates, and with the help of one UK Nair. They have their corporate office in Chandigarh. None of the key people from the firm nor the eight foreigners are traceable.
Prima facie, it was a clear act of negligence by bank officials while dealing with suspicious companies. However, it is not yet established whether it is a systemic failure within the bank, or a conspiracy by some officials, said a source.
Foreign nationals had created close to 70-80 companies under their network to divert the entire export proceeds from one layer to another. Most documents deposited with the bank for receiving money (invoices for domestic purchase as well as for exports) – the advance payment receipts – were fictitious. Once they received the money, it will be transferred to various individuals and firms through real time gross settlement (RTGS), where funds get transferred immediately.
dna has learnt that the Indo-Iran trade was settled through a payment mechanism called Asian Clearing Mechanism until December 2010, when it was suspended on account of sanctions by Western nations.
UCO Bank started the rupee payment mechanism through which part-payment of oil imports was settled. The mechanism became operational in February 2012. Under the mechanism, a few Iranian banks opened Indian rupee accounts with UCO Bank. The payment for crude oil imports were paid by Indian oil companies to this account. The payments for exports of goods to Iran were also paid from this account.
Under ED scanner
A&H General Exports, True Exports Services, Connect Export Traders, Centroid Exports, Genius Exporters, New Age Export Services, Star Elite Exports and Elite World Trading. The enforcement agency is probing the misuse of Rs 20,000 cr in export advances paid out by UCO Bank.
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