The decision was taken more than a year after the Department of Revenue Investigation concluded eight traders based in Birgunj used nine banks to transfer IRs 1.24 billion (Rs 1.98 billion) from the banking system by producing fake import documents, known as customs declaration form.[break]
“We have decided not to allow branch offices of these banks involved in misappropriation to carry out IC transaction as they have seriously violated banking norms,” Nepal Rastra Bank Spokesperson Bhaskar Mani Gyawali told Republica. “We will allow them to resume the business only if they show improvement in their activities.”
This means Birgunj branch offices of Citizens Bank, Laxmi Bank, Nepal Investment Bank, Nepal Bank Limited, Siddhartha Bank and Nepal Bangladesh Bank will not be able to trade IC from now on. The same applies to branch offices of NIC Bank located in Bhaktapur, Pepsi Cola and Birgunj.
Similar restrictions have also been put on branch offices of Everest Bank situated in Inland Container Depot in Birgunj and another in Birgunj city and branch offices of Nepal SBI in Rampur (Parsa) and Birgunj.
“We have also issued a circular to these banks to take action against staff members involved in the wrongdoing as per their company by-law,” Gyawali said.
The saga, which once rocked the financial sector, began in the end of 2011 after some fraud traders started producing fake customs declaration forms that confirm goods have entered into the country from foreign land. The plot designers then submitted these documents to banks based on which payments were released.
The offence came to light only after the Department of Revenue Investigation raided Birgunj-based Laxmi Traders, Rehan Traders, Maha Laxmi Enterprises, Shyam Galla Store, GS Traders, Maxwell Computers, Digital World and Jay Mata Di International. Further investigation revealed IRs 1.24 billion was siphoned off by producing 2,341 fake customs declaration forms that originally should have been issued by customs offices.
As truth unfolded, bankers and customs officials engaged in a heated debate pointing fingers at each other for committing the fraud.
Bankers argued that the misappropriations took place because of laxity at the customs offices, and customs staff and customs agents should take responsibility. At that time commercial banks even threatened to stop IC transactions, including issuance of demand drafts, if action was taken against staff of banks involved in the scam.
But the Department of Revenue Investigation, in a report submitted to the Ministry of Finance, held staff of banks responsible, stating that they had failed to cross-check the authenticity of import documents. What was more damaging was the department indicated possibilities of direct involvement of the staff members of nine banks in the scam.
Rajan Singh Bhandari, president of Nepal Bankers´ Association and CEO of Citizens Bank said: “The payments were made in line with provisions laid by the central bank. But we will soon hold a meeting to discuss measures that need to be taken.”
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