On Thursday, ED conducted raids at three places of Kotak Mahindra Bank Manager Sumit Kumar in connection to Rs.31.93 crore fraud. In relation to this, his brother Saurabh Kumar has been arrested and sent to judicial custody till 12th January.
What is the Fraud all about?
The Enforcement Directorate (ED) has initiated a comprehensive investigation into a case involving 13 fraudulent transactions that took place between November 4 and December 15, 2020. The illicit movement of Rs 31.93 crore from government accounts has raised concerns about financial mismanagement and malpractice.
The case came under scrutiny after the Patna police registered a First Information Report (FIR), prompting the ED to delve into the matter. The focus of the investigation is on unauthorized transactions and potential money laundering activities.
Misappropriation from CALA cum DLAO Account
The funds in question were unlawfully transferred from the bank accounts of the Competent Authority for Land Acquisition cum District Land Acquisition Officer (CALA cum DLAO), Patna. These accounts held funds belonging to the National Highways Authority of India (NHAI), designated for land acquisition for government projects.
One of the primary beneficiaries of this fraudulent scheme is alleged to be Nita Singh, the wife of Sumit Kumar. Investigations reveal that Nita’s account received a substantial credit of Rs 9 crore since July 2019. These transactions are suspected to be indicative of money laundering practices.
Bank’s Oversight Lapses
Kotak Mahindra Bank, where the fraudulent transactions occurred, had previously received a money laundering alert in September-October 2019 concerning Nita’s account. However, the bank failed to detect the connection between Sumit’s personal email ID and the registered email ID in Nita’s account. This oversight allowed the manipulation of documents, including the forging of the Aadhaar card of Patna DLAO Pankaj Patel.
How Fraud was discovered?
The fraud came to light when an individual named Subham Kumar Gupta attempted to withdraw/transfer Rs 11.73 crore on January 2, 2021, using forged documents. Kotak Mahindra Bank officials became suspicious, alerted the police, and subsequently, Gupta was arrested. Upon further investigation, it was revealed that Rs 32 crore had already been siphoned from the same account in 2020. This raises questions about the internal checks and balances of the bank, as the fraud remained undetected for weeks until Gupta’s arrest.
Sumit Kumar, in collusion with accomplices, is alleged to have orchestrated the unauthorized transfer of funds from the CALA cum DLAO accounts. The misuse of his position allowed payments to be cleared without proper verification, highlighting a lapse in the system.
Kotak Mahindra Bank is supposed to be a well managed bank with lot of checks and counter checks. When the fraud took place in 2020,
the fraud came to light in 2024. All were sleepy including the branch staff, inspection wing, internal audit section . NHAI , a Government organisation the account holder was never bothered to reconsile their accounts and least bothered about when crores of its funds were disappearing.
Who is accountable? Reshuffling the branch staff, frequent transfer of top 2 positions like branch manager and sub-manager is essential to quick detection of such frauds.
Just because few persons are fraudulent. You are suggesting to frequently transfer every bank employee. Think about there families and kids school. If you’re being transferred frequently then you can understand the implications of such actions.
अब बैंक स्टाफ ऐसे काम करने से नहीं डरते।ऐसे बैंक स्टाफ को एकदम जेल में डाल दें।
What about the checks and balances, reconciliation of accounts with NHAI. How they could not detect such amassive transactions through three audit process. No doubt Bank should have proper internal.controls, alert mechanism.while handling such transactions involving substantial amount. May be involvement of insiders on both sides can not be ruled out.
Job rotation is a must particularly for officers of a bank since they deal in public money. Taking into account sensitive nature of every transaction, transfer atleast once in 3 years is suggested by the Regulators.It is shocking that such a big transaction went unnoticed ,despite internal inspection, external audit RBI audit etc.Something is lacking in this private bank.
Previously There was a system of sending balance confirmation letters to customers randomly by inspection departments regularly specifically covering high-value accounts. Now days although banks are sending sms for every transaction and update about balance outstanding seldom they are not attracting attention in case of official / organizational accounts. May be due not updating phone number / mail id of the officials concern. Also there may be collusion between bank staff and officials of the department. An official exchange if confirmation to be taken regularly and the process to be followed systematically and seriously
There must be a system / procedure to cross check the huge amount i.e in crores of rupees transactions in personal accounts particularly once in month time. So that happening of these type of frauds can be detected fast.
Doubt if you can hold Bank responsible for corporate account fraud.. NHAI internal control lapses seem apparent.. and about the monitoring of high values..corporate are all about high values .. probably these transactions happened at different points in time. Not sure if any collusion was warranted or the payments were straight pass thru 🤔
When the fencing of the garden started eating the vegitables, the best possible safeguards failed. At least the penalty for wishful wrong doing for bank officials should be stringent and deterrent enough.
What about the concurrent audit at the branch ? Is this procedure not followed by banks these days or are the concurrent auditors staff of the same bank ? Is the big amount transaction statement not sent to the RBI ? Is there no Rbi check ? Everything happens in connivance between the staff and the agencies . It also means that the bank isn’t keeping track of the transactions of higher value.
No job rotation will help, what is needed is pre-audit check for all transaction over 2 crores, not by bank staff but by external auditors, if internal audit was effective, how frauds are committed so often and not detected for long. Perhaps AI systematic check of pre or immediate post transfer of funds over certain high value must be initiated.
I tried to withdraw an amount of 25000 rupees and I was called twice by the staff to confirm the transaction.
Forget the previous golden days of banking and procedures followed.Now with the advent of improved technology frauds are bound to appear.
I have time and again harped that learn traditional banking first and then resort to technology.
Now kotak mahindra bank has to pay Rs.32 crores with interest to nhai and file a case on their employees as well as the beneficiaries who ever involved in this whole fraud
Banks are bound to reimburse the customers for fraudulent transactions done as they are the custodians of public money
They have to recover this amount from fraudsters as well as their employees involved in this scam by filing cases on them in court of law