After PNB, India's City Union Bank hit by $2m in fraud on SWIFT system

FT ONLINE

Days after the multi-crore Punjab National Bank (PNB) fraud shook the country, private sector lender City Union Bank on Saturday revealed that it too has suffered three fraudulent remittances of nearly about Rs 12.8 crore ($2 million).

Just like the fraud at state lender PNB, no entries of remittances were made in the ledgers of City Union Bank and transfers were pushed through the SWIFT financial platform.

"During our reconciliation process on February 7, it was found out that 3 fraudulent remittances had gone through our SWIFT system to our correspondent banks which were not initiated from our bank's end. We immediately alerted the correspondent banks to recall the funds," City Union Bank said in a regulatory filing on stock exchanges.

Of the 3 fraudulent remittances, one remittance was made through Standard Chartered Bank, New York, to a Dubai based bank for $500,000 which was blocked immediately and was returned to City Union Bank, it said.

The Chennai-based City Union Bank said the transfers had been made through correspondent banks even though it had not requested the transfers. The second transfer of €300,000 ($372,150) was routed through a Standard Chartered Bank account in Frankfurt to a Turkish account, while a third totalling $1 million was sent through a Bank of America account in New York to a China-based bank.

The private lender said that it was working with the Ministry of External Affairs (MEA) and officials in Turkey and China to repatriate the funds. "With the help of MEA through Consulate General of Shanghai and Istanbul and an office of the National Cyber Security Council (PMO) all possible efforts through diplomatic and legal channels are being taken to repatriate the money," it said.

SWIFT, whose messaging system is used to transfer trillions of dollars a day, said it did not comment on individual cases.

“When a case of potential fraud is reported to us, we offer our assistance to the affected user to help secure its environment,” SWIFT said.

Brussels-based SWIFT has been urging banks to bolster security of computers used to transfer money since Bangladesh Bank lost $81 million in a February 2016 cyber heist that targeted central bank computers used to move funds.

Banking security experts said Indian banks that rely on the SWIFT messaging platform needed to be more vigilant. Industry experts say more than 100 financial institutions in India are connected with SWIFT including the central bank.

The recent episode raises the question mark on the efficiency of the SWIFT network as of how secure it is.