Fraud charges hits EPFO: CBI initiates case against 3 officials

Incident: 3 EPF officials had allegedly forged numerous EPFO claim settlements during the critical period of the Covid pandemic (March 2020 to June 2021). Using the gaps in the system, the said officials fraudulently used the Aadhaar details of migrant workers, showing them as employed with a Mumbai based company and allegedly made 91 fraud claims, leading to fraudulent withdrawal of INR 2.71 crores.

Media URL link: https://www.indiatoday.in/india/story/cbi-probes-epfo-fraud-migrant-workers-aadhar-details-1851688-2021-09-11

Penal Action: The Central Bureau of Investigation (CBI) has booked the Employees Provident Fund (EPFO) on charges of committing a fraud of over INR 2.71 crore, while misusing the Aadhaar details of migrant workers.

Points to Ponder:

1. How often does your company audit unclaimed EPF deposits after employees leave?
2. Do you email ex-employees asking them to transfer/withdraw EPF within 60 days of leaving the company?

Fraudulent Trading Busted: SEBI bans 85 entities from Capital Market

Incident: Acting on a reference from the Principal Director of Income Tax (Investigation), Kolkata, SEBI has banned 85 entities from trading in the Capital market.

Based on an investigation to ascertain the violations of the provisions of the PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) Regulations by certain entities, the SEBI discovered that pursuant to allotment of shares under the scheme of amalgamation, one entity, Sunrise Asian and its then directors had framed an arrangement which led to price-manipulation and artificial price-inflation by 83 connected entities, thereby violating PFUTP norms.

In its order, the SEBI has also noted that the entities published fraudulent, inflated and deceptive financial results of the company during 2008-09 and 2009-10.

(Insert) Media URL link: https://www.business-standard.com/article/markets/sebi-bans-85-entities-from-capital-markets-for-fraudulent-trading-121090601222_1.html

Penal Action: SEBI has barred 85 entities from the capital markets for one year for indulging in fraudulent and unfair trade practices, by manipulating the company’s share price.

Points to Ponder:

1. Is the top management of your company undergoing Governance, Risk Management & Compliance training?

2. Is there an active whistle-blower policy to address such malpractices?

Rs. 1528 crore bank scam unearthed: CBI books Private Company, Others

The Central Bureau of investigation (CBI) has unearthed a huge bank scam to the tune of Rs. 1528 by a private company, in collusion with several private persons and government officials.

As per the CBI, the said private individuals, along with certain Govt. officials had hatched a conspiracy to defraud a consortium of 16 Government-owned banks, led by the Bank of India. The accused are manufacturers of ferrous and non-ferrous metals, who had obtained loans from the said consortium from the time period 2003 to 2008. However, the amount was diverted at a later date, which finally led to the loss of Rs. 1528 crores to the consortium.

The consortium banks included Bank of India, Union Bank of India, Andhra Bank, Punjab & Sind Bank, Indian Overseas Bank, State Bank of Hyderabad, Central Bank of India, Corporation Bank, HDFC Bank Limited, Oriental Bank of Commerce, Saraswat Co-operative Bank, State Bank of Patiala, UCO Bank, Allahabad Bank, Standard Chartered Bank and DBS.

(Insert) Media URL link: https://www.indiatoday.in/cities/delhi/story/cbi-books-delhi-based-firm-for-defrauding-consortium-of-banks-of-rs-1-528-cr-1853213-2021-09-15

Penal Action: CBI files FIR against Company, Directors and others for allegedly defrauding a consortium of 16 banks led by Bank of India to the tune of over Rs 1,528 crore

Points to Ponder:

1. Is your Vendor procurement team conducting enough checks to identify such delinquent companies before onboarding?

2. Is there a mechanism to identify any collusion between your Procurement Team & such companies?

ED cracks whip on Hawala Money: Foreign currency along with bullion recovered from private Firms

Incident: Entities had sent outward remittances over INR 475 crore to Singapore, Hong Kong and United Arab Emirates (UAE) on behalf of shell or dummy firms. These shell or dummy entities used fake identities of various persons for effecting outward remittances, under the guise of travel transactions, resulting in the accumulation of unauthorised Hawala money.

(Insert) Media URL link: https://www.indiatoday.in/india/story/ed-currency-raids-foreign-exchange-firms-delhi-punjab-fema-1853613-2021-09-16

Penal Action:

Premises of the offices and residences of the directors were raided by the ED which resulted in the seizure of Indian and foreign currency worth INR 3.88 crore and bullion worth INR 24.2 lakh. The ED has also seized documents, laptops, mobile phones and property documents, to establish the criminality of the act.

Points to Ponder:

1. Is your company maintaining records of such blacklisted organisations?

2. Are there frequent refresher sessions on GRC and the impact on business with all stakeholders?

Municipal Officials arrested in 5 crore fraud: 9 out of 37 in Police net 

Incident: Municipal officials had indulged in siphoning of funds, through revenue collection, irregularities in water connections and fraudulent water bills.  The accused officials include bill collectors, cashiers, revenue inspectors, public health workers, junior assistants and officials in supervisory role.

(Insert) Media URL link: https://www.thehindu.com/news/national/telangana/nine-nalgonda-municipal-employees-held-in-rs-5-cr-fraud/article36544043.ece

Penal Action: Police Officials of Nalgonda (Telangana) have arrested nine Nalgonda Municipality Officials on allegations of a 5-crore fraud in 2015. Based on reports of financial irregularities by the then Municipal Commissioner, the local Police swung into action by initiating an investigation and effecting the arrests.

Points to Ponder:

1. Do you implement strict ethical codes and activity-monitoring for your Business Licensing Partners?

2. Once aware of such demand for illegal pay-offs, is your company escalating the issues appropriately to Senior Govt. officers?     

3. When was the last review of the Risk Audit Report conducted?  How was it actioned?