Bank of Baroda scam: CBI, ED arrest six including HDFC official

New Delhi: CBI and Enforcement Directorate have arrested six persons including two officials of a Bank of Baroda branch here in connection with Rs 6,000 crore alleged illegal remittances to Hong Kong through the bank.

CBI sources said AGM S K Garg and Jainish Dubey, who headed the Foreign Exchange division at BoB's branch in Ashok Vihar here were arrested for criminal conspiracy, cheating and provisions of the Prevention of Corruption Act.

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On the other side, Enforcement Directorate arrested four persons, including an HDFC bank employee, in connection with the case.

The Directorate arrested arrested Kamal Kalra, working with the foreign exchange division of HDFC bank, Chandan Bhatia, Gurucharan Singh Dhawan and Sanjay Aggarwal after marathon questioning at its office here.

Emails sent to HDFC bank for its reaction did not elicit a response.

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The sources claimed the agency has prima facie information about their alleged involvement and pecuniary gains in facilitating these transfers which are still being probe.

Both of the officials were arrested after detailed questioning in connection with the case, they said.

The CBI FIR had alleged that "59 current account holders and unknown bank officials conspired to send overseas remittances, mostly to Hong Kong, of foreign exchange worth approximately Rs 6,000 crore in illegal and irregular manner in violation of established banking norms under the garb of payments towards suspected non-existent imports".

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CBI sources had found that the Ashok Vihar branch of the bank was a relatively new one which had got the permission to entertain forex transactions only in 2013.

The agency had said these remittances were sent by splitting them into amounts below one lakh USD to avoid automatic detection by software used by banks to alert them about such transactions.

CBI found that an estimated Rs 6,000 crore was transferred through nearly 8,000 transactions done between July, 2014 and July, 2015. While CBI is probing the corruption angle in the funds transfer case, ED is looking at the case to check money laundering and hawala.

Enforcement Directorate sources have termed it to be a

case of trade-based money laundering, where accused traders evade custom duties and taxes to generate slush funds.

All the accused arrested by it, ED sources said, were alleged middlemen for at least 15 fake companies, out of the total 59 which were involved in the perpetrating of the economic crime unearthed recently.

Sources said the four allegedly connived with each other in "forming" fake companies and business entities in Hong Kong by "over valuing" the export value and subsequently claiming duty drawbacks.

While ED investigations under the Prevention of Money Laundering Act (PMLA) claimed that the HDFC employee was allegedly helping Bhatia and Aggarwal for remitting the amount through BoB against a commission of 30-50 paise per US dollar remitted abroad, Bhatia was allegedly instrumental in forming the companies in India and used to remit money to companies based at Hong Kong and was working with Dhawan, an exporter of ready-made garments.

They alleged Aggarwal was successful in sending tainted foreign remittances worth Rs 430 crore through the BoB branch in Ashok Vihar in a short span of time.

Sources said more arrests of similar middlemen and other operatives, including BoB employees, could take place in the near future.

ED is also probing the case for forex contraventions under the Foreign Exchange Management Act (FEMA).

The Directorate said BoB yesterday informed it that "the total amount deposited in the 59 accounts is Rs 5,151 crore and only 6.66 percent (Rs 343 crore) of this amount has been deposited in cash in the bank while remaining amount of Rs 4,808 crore came through other banking channels."

The agency said Dhawan allegedly obtained "duty drawback to the tune of Rs 15 crore in a short period of 6-7 months" and was in the process of putting in similar applications before the act was caught.

ED is now investigating further to check the activities of the remaining suspected 44 fake firms which pumped in money to overseas locations in a similar manner.

Directorate sleuths had participated in a search operations conducted on accused BoB executives last week and had seized a number of documents.