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Neglect Is A Fraud’s Best Friend

Regulators didn’t merely fail to crack down on PNB’s violations—they gave it pats on the back.

Neglect Is A Fraud’s Best Friend
Seized | Photograph by PTI
Neglect Is A Fraud’s Best Friend
outlookindia.com
2018-02-24T11:28:41+05:30

It is ironic that technology relied on to check malpractices in the financial sector and improve the ease of doing business has again proved to be an easily manipulated tool. Harshad Mehta breached technol­ogy safeguards to milk the banking system 26 years ago, using bank receipts to ­fin­ance his deals. And now, Nirav Modi has taken advantage of loopholes and used letters of undertaking (LoU) iss­ued by Punjab National Bank (PNB) to acquire around Rs 11,400 crore from overseas branches of Indian banks.

The best systems can fail without adequate checks and balances, opine experts. In Modi’s case, safeguards failed in multiple areas. Can the scam be ascribed to a systemic problem in the operation of nostro accounts or a governance issue?  

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