Indo-Iran trade scam: Top UCO Bank officials in dock

Three top officials of Kolkata-based UCO Bank are alleged to be the main conspirators of the Indo-Iran trade scam, believed to be around Rs 20,000 crore.

The Enforcement Directorate (ED), which is investigating the case under the provisions of Foreign Exchange Management Act (FEMA), is working on a tip-off from external sources that officials who worked on Indo-Iran business scheme made provisions for anti-national elements and terror outfits to divert funds to Dubai and Hong Kong in the guise of advance remittance for export.

CBI is doing a preliminary enquiry in the case after ED wrote to the Special Investigation Team (SIT) on black money to look into a case where eight foreign nationals (seven from Iran and one from Azerbaijan) were found to have entered the country on student visas and set up 70-80 fake companies to gain access to funds held by Iran's UCO Bank account.

The information received from the external sources highlights the role of three officials who were given the mandate to prepare modalities of the scheme. It was alleged that they had hurriedly prepared the same and circulated the circulars for implementation in the branches. It also alleged that they had manipulated the Iran fund figures for the window dressing in the balance sheet of UCO Bank.

The scheme had a lot of flaws, the reason why foreign nationals approached various branches of UCO Bank across the country. They also offered attractive business proposals with an assurance that they would maintain substantial deposits with branches once funds from Iran are credited in their accounts.

Knowing that the proposal was against various provisions of forex laws and know-your-customer (KYC) guidelines, an official offered additional interest rates for the deposits made out of Iranian fund that came as advance remittance for exports.

The information said that the advance inward remittances were credited to the accounts of said foreign nationals by producing receipts of fake remittances. Also, several consolidated statements submitted by the branches of the bank about irregularities in export remittances were neither taken seriously nor reported to any external agencies as mandated by the RBI.

According to the officials, the information is quite crucial to take the probe forward as bank has been reiterating that it has not suffered any financial loss. "The probe agency has now sought a forensic audit report from bank," an ED source told dna.

UCO Bank has handled Iranian business to the tune of above Rs 1 lakh crore since 2012, when it got government permission. Bank started the rupee payment mechanism through which part-payment of oil imports were settled.

UCO Bank, to an email query from dna, said: "Our bank has not given any sort of credit facilities to the exporters under investigation. We do not have any information/knowledge with reference to the diversion of money to Dubai/Hong Kong as referred to in your email. All payments related to Iran were through proper banking channels and in Indian rupee only."

The exporters involved in the scam include A&H General Exports, True Exports Services, Connect Export Traders, Centroid Exports (P) Ltd, Genius Exporters P Ltd, New Age Export Services, Star Elite Exports (P) Ltd and Elite World Trading. Under current norms, advances for exports, or for re-export of goods imported, should be covered within a year by proof that an actual delivery is made.

"So far, we have established that around Rs1,500 crore remittances were fictitious. While working on evidences showing around Rs 8,000 crore diverted by the fake companies were received by Gujarat-based firms, we stumbled upon their links with the Afroz Hasan Fatta case," said an ED source. Fatta was the accused in a Rs5,000 crore hawala transaction, carried out through diamond trading firms.

At least 3-4 layers were created to divert the entire export proceeds. "In the third layer we found certain significant transactions to companies related to a big bullion trader. Some of these names may soon be out," said the source.

"We are investigating the case under FEMA to bring in the provisions of anti-money laundering Act, and are waiting for the CBI to register case," said another ED official.

dna was the first to expose the scam in January this year. Following the dna expose and ED probe, the Reserve Bank of India (RBI) told banks to exercise due diligence and ensure compliance with KYC (know your customer) and AML (anti-money laundering) guidelines so that only bonafides export advances flow into India.