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Kiran Mazumddar

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About City BankAbout City Bank

CitibankCitibank, a major international bank, is the , a major international bank, is the consumer banking arm of financial services giant consumer banking arm of financial services giant Citigroup. Citigroup.

Citibank was founded in 1812 as the Citibank was founded in 1812 as the City Bank of City Bank of New YorkNew York, later , later First National City Bank of New YorkFirst National City Bank of New York. .

As of March 2010, Citigroup is the third largest bank As of March 2010, Citigroup is the third largest bank holding company in the United States by total assets, holding company in the United States by total assets, after after Bank of AmericaBank of America and and JP Morgan ChaseJP Morgan Chase..

Citibank has retail banking operations in more than Citibank has retail banking operations in more than 100 countries and territories around the world.100 countries and territories around the world.

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More than half of its 1,400 offices are in the United More than half of its 1,400 offices are in the United States, mostly in New York City, Chicago, Los States, mostly in New York City, Chicago, Los Angeles, the San Francisco Bay Area, and Miami. Angeles, the San Francisco Bay Area, and Miami.

More recently, Citibank has expanded its operations More recently, Citibank has expanded its operations in the in the Boston, Philadelphia, HoustonBoston, Philadelphia, Houston, , Dallas, Dallas, and Washington, metropolitan areas.and Washington, metropolitan areas.

In addition to the standard banking transactions, Citibank offers insurance, credit card and investment products. Their online services division is among the most successful in the field, claiming about 15 million users

Scam Shivraj Puri, who worked Shivraj Puri, who worked

at the Citibank Gurgaon at the Citibank Gurgaon branch in India as a branch in India as a relationship manager relationship manager from the past 7-8 years, is , is accused of siphoning accused of siphoning money from 20 accounts of money from 20 accounts of high net worth individuals. high net worth individuals.

He allegedly promised He allegedly promised clients high returns from clients high returns from investment schemes that investment schemes that didn't exist. didn't exist.

He then transferred the He then transferred the funds to fictitious funds to fictitious accounts. accounts.

The accounts are with different financial institutions The accounts are with different financial institutions including banks and brokerage houses spread across including banks and brokerage houses spread across Gurgaon, Delhi and Kolkata. Gurgaon, Delhi and Kolkata.

Religare, Bonanza and India InfolineReligare, Bonanza and India Infoline

Puri used to give fake receipts and bank statements to Puri used to give fake receipts and bank statements to his clients to mislead the investors.his clients to mislead the investors.

The banks include SBI, HDFC, Standard Chartered, PNB, The banks include SBI, HDFC, Standard Chartered, PNB, Axis and ABN-Amro. According to the police Axis and ABN-Amro. According to the police commissioner SS Deswal, notices have been issued to commissioner SS Deswal, notices have been issued to the banks to seize all the accountsthe banks to seize all the accounts

Fake Circulars of Securities and Exchange Board of India (Sebi) to indulge people into investing in a non-existent scheme and making people believe that the scheme was only available in that particular branch.

How scam discovered?

Firstly Religare Complain to the consumer banking division that there are fictitious transaction held in the bank

According to one of the sources, a senior official in the

consumer banking division was talking to a client who mentioned that he had recently purchased a product from the bank that could generate unusually high returns in a short span of time.

It was brought to the clients that the bank was not distributing any such product which is when an investigation into the matter was initiated.

The investigation may have triggered audits across several branches of Citibank in India according to another bank official.

HOW FRAUD WAS COMMITTED

Citibank’s relationship managers are said to have committed the fraud with the help of an external party, most likely a brokerage house that distributes investment products Funds generated by selling the product to some investment companies and individuals were transferred to accounts of some brokers, who utilised the money for their transactions.

The employees claimed the products were authorised by Citibank’s investment product committee and used forged bank documents and letterheads to prove the same.

WHO ARE AFFECTED?

Close to 40 clients, including some corporate treasuries, could be affected because of the fraud. It is unclear whether Citibank will compensate its clients for the losses.

The entities whose funds were diverted by Puri √Hero Corporate Services (Rs 13.75 cr)

√OKS Sapantak (Rs 2 cr) √Satyam Auto (Rs 25 cr)

They also include Mayar Infratech (Rs 24 crore), Spaid (Rs 62 crore), Karopat Pad (Rs 8 crore), Sunil Kant and Sons (Rs 3 crore) Aero Infratec (Rs 25 crore), Hero Exports (Rs 97 crore), Rekha Munjal (Rs 5 crore), Munjal Investments (Rs 2.5 crore) and Munab Braej (Rs 71 crore) etc.

Other Parties involved Hero Corporate Service said it has

identified two more cheating employees who could have colluded with its former Associate Vice-President Sanjay Gupta and Citibank employees in the Rs 400-crore fraud.

"Following an initial internal enquiry, two employees – Ganpat Singh and Gaurav Jain-- working in the accounts department have also been identified to have been in possible collusion with Sanjay Gupta and Citibank employees," Hero Corporate Service said in statement.

Contd…. According to the police, Gupta had invested around

Rs 250 crore from different Hero Group companies and their promoters.

Gupta had formed two finance companies – BG Finance and G2S, and took commission of Rs 20 crore from Shivraj Puri.

Puri had confessed that Gupta was aware of the forged SEBI letter, on which the amounts were lured from high networth clients.

The court of chief judicial magistrate D N Bhardwaj remanded Shiv Raj Puri, the alleged kingpin of the Rs 400-crore Citibank scam, in 14-day judicial custody.

Latest Updates

A senior official of Hero Corporate Services Sanjay Gupta , has also been named as a co-accused in the fraud for allegedly getting Rs 20 crore commission from Puri in lieu of arranging investments.

Vikram Pandit, the Indian-born global CEO of Citibank, and its Chairman William R Rhodes , were also named in a separate FIR by investor Sanjeev Aggrawal, who lost about Rs 33 crore.

Citibank said it is reconciling its accounts and working out a "fair compensation" for those customers affected by it and they Protest the interest of their HNI.

Contd….. The Income Tax department has already began

scrutinising the investments and tax payments of some high net worth individuals who were allegedly duped by Puri.

The Enforcement Directorate will soon file a case of money laundering in connection with the Rs 400 crore fraud.

Capital market regulator Sebi and the Reserve Bank of India (RBI) are working together to investigate the Rs 400-crore Citibank fraud.

The Reserve Bank of India (RBI) has asked select banks to share details of their wealth management businesses following the 400-crore fraud perpetrated by a Citibank employee.   

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Sebi making it mandatory for all the brokerage firms to allow their clients to trade in derivatives only after submission of valid income proof.

In cases of discrepancies or the income profile

not matching with the investment portfolio, the brokers are supposed to immediately inform the regulator.

It appears to be a case of misappropriation by an individual employee with or without the knowledge of the customers of the bank.

Foreign banks may downsize their investments in private equities or propriety investment, paving the way for pure play private equity firms to become more active in the country.

Industry circles see moves as effort to regain trust. It, however, did not spell out a timeframe by when the compensation process was likely to be completed.

Going by the findings—75% of respondents in the latest survey felt corporate fraud was on the rise—it’s not difficult to believe Shivraj Puri was running a solo operation.

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