India’s central bank has fined 19 banks for failing to comply with its rules on the use of global payments system SWIFT, indicating that financial groups still have a cavalier attitude toward strengthening controls against fraud more than a year after the Punjab National Bank scam.
Banks were fined a total of more than 400 million rupees (US$5.67 million) by the Reserve Bank of India (RBI), with individual penalties ranging from 10 million rupees ($141,750) to 40 million rupees ($566,985). Targeted banks, which included heavyweights like State Bank of India and ICICI Bank, said the infringements were mostly minor, but the affair has raised questions over bank compliance with operating guidelines.
The RBI issued a circular in February last year instructing all banks to tighten transactions involving SWIFT, a messaging network used by financial institutions globally to carry out money transfers and other functions. One of the key directives was that banks must connect their SWIFT systems to core banking software by April 30 last year.
That intervention came after state lender Punjab National Bank (PNB) was caught out in a $2 billion scandal involving unauthorised credit guarantees to businesses linked to billionaire jeweller Nirav Modi and his uncle Mehul Choksi that were processed through the network. Inquiries revealed a security loophole where employees were expected to manually log SWIFT transactions because PNB’s internal software was not linked with the interbank network. They were not making entries, allowing transactions to go unrecorded.
Modi and Choksi were able to flee abroad and Indian authorities have attracted wide criticism for failing to bring them to justice. Choksi recently acquired citizenship in Antigua.
Other banks implicated this time include Canara Bank, Bank of Baroda, Yes Bank, Karnataka Bank, United Bank of India, Karur Vysya Bank, Dena Bank, IDBI, Indian Overseas Bank and Union Bank of India.