business

Timeline to the Discovery of India's Biggest Ever Bank Fraud

  • Scam dates back to 2011, and could have been detected in 2016
  • Authorities have expanded a crackdown to contain the fallout

A Punjab National Bank branch in Mumbai.

Photographer: Dhiraj Singh/Bloomberg

India’s second-largest state-run lender this month disclosed it has been hit by the nation’s biggest ever bank fraud.

Billionaire jeweler Nirav Modi and his associates colluded with a rogue employee at Punjab National Bank to obtain fraudulent guarantees worth $1.8 billion dollars over seven years, PNB alleges. They then used these documents to obtain loans from lenders abroad, according to PNB’s complaint, which has been made public.

As authorities try to contain the fallout from the scam, here’s a look at key dates in the road to discovery:

DATES

EVENTS

2011PNB employee allegedly starts providing fraudulent letters of understanding to Modi and associates
February 2016Hackers make off with $81 million by sending fake messages through the Bangladesh Bank’s Swift interbank messaging system
August 2016Reserve Bank of India sends a circular to all Indian lenders, advising them to make sure their internal software -- core banking solution or CBS -- is properly integrated with Swift
November 2016RBI issues stronger circular, citing “decentralized” operations that hinder compliance and a “high number” of Swift user IDs at banks that increased the risk of misuse, according to a document seen by Bloomberg. RBI asks banks to “explore” straight-through processing of CBS and Swift
Feb. 28, 2017Banks were due to complete an RBI-mandated verification of all their Swift messages, especially those pertaining to trade finance, to ensure all were “supported by genuine underlying transactions,” according to a document seen by Bloomberg
March 15, 2017Banks were due to report the results of this verification to the RBI
May 2017PNB employee who was allegedly colluding with Modi retires
Jan. 16, 2018PNB alleges that billionaire jeweler Nirav Modi’s associates sought fresh funds from PNB; PNB begins digging into transaction history
Jan. 25, 2018PNB says it found first evidence of fraud
Jan. 25, 2018PNB tells customers it will immediately start updating its CBS to the latest version, which will be used starting Jan. 29
Jan. 29, 2018PNB submits report on fraud to RBI and files complaint with federal investigators
Feb. 14, 2018PNB discloses $1.8 billion fraud 
Feb. 15, 2018RBI tells banks to revisit controls outlined in 2016 advisories, according to document seen by Bloomberg
Feb. 21, 2018Banks due to report to RBI on implementation of these controls, according to document seen by Bloomberg
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