Global Fraud Footprint

South Asia follows parallel roads of burgeoning economy and escalating fraud

It’s a familiar story. A country or region finally is prosperous, but inevitably fraud and corruption increase. Here are some infamous South Asian cases and ways the region has battled what affluence wrought.

Multibillion-dollar frauds involving jewelers-to-the-stars, cryptocurrency scams and movie stars, sophisticated bank hacks, and real-estate scams linked with global hedge funds and prestigious university endowments invoke flashy Western socioeconomics rather than a region generally considered “developing.” Yet these fit-for-Hollywood headlines all represent recent scandals from South Asia and showcase the evolving fraud landscape in the region.

The scale of these schemes reflects the ambitious growth of South Asian economies (spearheaded by India), the embrace of globalization and the exploitation of technology — all of which likely wouldn’t have been associated with the region two or three decades ago in economies closed off from the rest of the world. Perhaps the largest of these frauds involved Punjab National Bank (PNB) issuing fraudulent loan guarantees to famous jeweler Nirav Modi and companies related to his uncle, Meul Choksi, in the form of “letters of undertaking” sent through the Society for Worldwide Interbank Financial Telecommunication (SWIFT) network.

The SWIFT network provides a secure environment for the international transmission of financial messages such as payment orders — or loan guarantees in the case of the PNB fraud — among more than 11,000 financial institutions in more than 200 countries. However, it’s not a means to transfer actual funds. A global member-owned cooperative of financial institutions founded SWIFT in Brussels in 1973. (See the Online Exclusive Preparing for a SWIFT message investigation, by Jim Bracken, CFE, May 2017.)

The seven-year, $2 billion fraud reflected poorly on government anti-corruption efforts led by Prime Minister Narendra Modi, especially when a picture of the two Modis (unrelated) posing together surfaced shortly after the fraud’s exposure. (See Modi Under Fire as Alleged $2 billion Fraud Hits Anti-Graft Image, by Iain Marlow and Archana Chaudhary, Bloomberg, March 18. Also see the “Big Frauds” column for more on the PNB fraud.)


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