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Punjab National Bank executives accused of misleading central bank in fraud case

Indian police charged senior executives at Punjab National Bank for allegedly misleading the central bank in 2016 over its handling of the financial messaging system and credit guarantees that led to a US$2 billion bank fraud, Reuters reported May 21, citing a charge sheet.

PNB accused jeweler Nirav Modi and his uncle, Mehul Choksi, of defrauding the bank and other lenders for years by raising credit using illegal guarantees issued by a PNB staff at a Mumbai branch.

PNB said the staff did not take note of the fake guarantees sent via the SWIFT financial messaging system in the bank's core accounting software.

However, Indian authorities accused PNB's senior executives of not taking measures even after the Reserve Bank of India had repeatedly alerted banks to take action following separate incidents of misuse of the SWIFT system elsewhere in 2016.

The executives were CEO Usha Ananthasubramanian, Directors K.V. Brahmaji Rao and Sanjiv Sharan, and a general manager, who are facing charges of criminal conspiracy and breach of trust by a public servant.

The Indian police accused the executives of misleading the central bank in their reply to RBI's request for details on how it complied with cybersecurity controls.

Ananthasubramanian, who was head of PNB until May 2017, was relieved as CEO of another state-owned bank, Allahabad Bank, following the charges, and so were the other executives, the report said.

The executives did not comment on the latest allegations from the Indian police.