The company paid over Rs 231 crore over three years to a web of 135 fake firms.
Prompt reporting has helped unearth a multi-crore fraud in a public sector undertaking.
The Central Bureau of Investigation (CBI) and other central agencies are presently investigating the elaborate bogus contracts payments scam in the public sector undertaking (PSU), wherein the company paid over Rs 231 crore (Rs 2.31 billion) over three years to a web of 135 fake firms.
The Financial Intelligence Unit-India (FIU), the central body that aggregates and disseminates information about money laundering and terrorist financing, has cited the scam as a case study in its latest annual report, showing how proper reporting and prompt follow-up can lead to big heists.
According to the Prevention of Money laundering Act, financial institutions are required to file suspicious transaction reports (STR) to FIU.
The first STR filed in this case showed some unusual activity in an account owned by a minor. The payments were routed to the minor’s savings bank accounts operated by the mother and natural guardian. The transaction reports showed that the account received high value credits of Rs 8 crore, mostly through transfers from several current accounts maintained in the same branch.
However, no debits were made to this account. Further probe revealed several family members of the minor had accounts in the branch and received credits of Rs 58.82 crore (Rs 588 million). One of the key factors of suspicion was that many of these accounts were in the names of housewives, who did not have any known source of income.
The Income Tax Department’s investigations revealed that the minor maintained accounts of 135 firms operating in the name of family members and close associates. There was no evidence of any business activity. A search of the premises led to the seizure of Rs 130 crore (Rs 1.3 billion). The agencies also found immovable property.
Further enquiries revealed that the source of this huge wealth was misappropriated funds from the PSU on the basis of fake bills and bogus contract works. It was not clear whether any staff of the PSU or government officials were involved in the bogus contract racket.