Letters: Citi scam

This refers to the report “Citi employee in Rs 400-cr fraud” (December 29). It is surprising that high net worth customers as well as some well-known industrial groups were simply lured by a Citibank executive into parting with cheques worth crores of rupees. It is intriguing that a bank that is expected to have foolproof systems in place was blissfully unaware of what had been happening under its nose.

Also, the argument that money was not invested in the bank’s own products, but in a third-party product, holds no water, since no product is involved. It is a clear case of operational risk to the bank by an insider so the bank should compensate the customers. According to the Basel-II definition, an operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events.

Moreover, It has been reported that Religare had “alerted” the Financial Intelligence Unit (FIU) about the transactions when it exceeded Rs 10 crore. Under the Prevention of Money Laundering Act 2002, every banking company, financial institution and intermediary should report to the FIU, among others (a) all cash transactions of the value of more than Rs 10 lakh or its equivalent in foreign currency; and (b) all suspicious transactions whether or not made in cash. It is not clear whether routine reporting by a financial intermediary triggered the unearthing of the fraud or it was because some customers found something amiss and complained to the bank.

In this context, It is worth recalling Ravi Subramanian’s novel If God was a Banker. He narrates an identical case involving a Relationship Manager of a foreign bank in India. She invested in mutual fund products without the customer’s mandate to earn hefty commissions.

S Ravindranath, Chennai