Deceiving Banks: International Trade Finance Corrupt Practices (International Edition)

By Arko A

The book contains real acts of corrupt practices that have caused huge financial losses to Banks & Insurance sector across many countries. Although these practices originated from the Indian business community operating in India and overseas but have wide ramifications for all international banks. In fact, many global players might already be using the same methods – supplemented with documentary evidence in respect of case studies in the book. The issues also relate to money laundering through trade route which are so large and require adequate attention from regulators – steps for which have been suggested. If implemented effectively, it may bring some major changes in international trade documentation, mitigating the risk of future frauds/dubious methods.

• Language: English
• Publisher: Partridge Publishing Singapore
• Release date: Oct 7, 2021
• ISBN: 9781543766905

Arko A

Author, ARKO A is a retired bank executive from India having a wide experience of working in credit and international business for a public sector bank both in India and overseas. After serving for over three decades in the bank, he took over an overseas engagement in the private sector. During the course of this engagement, he came across large number of fraudulent/dubious activities performed by the Indian business community, motivating him to leverage his experience and studying aspects of these activities to bring this to the knowledge of bankers/regulators for taking suitable preventive action and protect bankers from fly by night operators

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Copyright © 2021 by Arko A.

All rights reserved. No part of this book may be used or reproduced by any means, graphic, electronic, or mechanical, including photocopying, recording, taping or by any information storage retrieval system without the written permission of the author except in the case of brief quotations embodied in critical articles and reviews.

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CONTENTS

Preface

1 Introduction

2 Corporate World Overseas

Hong Kong structure as an entrepreneur

3 Modus Operandi – Genesis of Corrupt Practices

Banking – Structured Balance Sheet

Structured Credit Rating

Structured Trade – Indian/International Letter of Credit Monetisation

Structured Treasury Functions

Real-Time Cases Overseas

Real Time Cases Used to Test

4 The Looters

Wrong Practices Case 1-3

Wrong Practices Case 4

Holding Company Structures

5 Other General Trading Activities Being Misused

Impact On the Forex Market

International Chamber of Commerce (ICC)

6 Summing Up

Epilogue

PREFACE

Author has served the banking industry for over thirty-seven years in a large Indian public sector bank with operations spread all over the world. During his stint in India and overseas, the author always wondered why banks have to suffer huge losses because of defaults in financing trade. Resultantly, on one hand, major financial centres face huge financial losses and the financial health of the banks and stake holders suffers, and, on the other hand, reputation of the bank management in handling affairs of the bank professionally gets a public beating. Besides, the human resources at the lower level become the easiest targets of wrong practices/procedural lapses used by trading community. Internal and external investigating agencies are also not able to identify the root cause but point out certain new steps in risk management only at the individual bank. This leads to new rules and regulations at all levels resulting in increased paper work across all levels. In the last decade, this author has observed that regulators, based on happenings in the financial market, have been adding new items of compliance every now and then. Although this has increased operational requirements at the bank, the trading / business community has found innovative ways to bypass these requirements.

In many countries, corruption in banking is prevalent. This is more prominent in top management of these countries including government-owned banks where board is also run by the government through proxy directors. However, these people are rarely penalised but when lot of hue and cry is seen then the person is removed or penalised in such a way that it is more an eye wash than actual punishment. Down the chain of authority, people are penalised, dismissed, or even terminated for trivial issues or are assigned to departments offering limited to no professional growth.

The author is sure that that bankers have moles among them, as people working in credit-related matters are more prone or can succumb to the temptation of corruption, while most of the other functionaries are totally public/non-public faces with full integrity and devotion to work. Service delivery comes with motivation and commitment, which can be created through teamwork by the leader. Frauds with staff involvement do happen, which can be checked with better control / technology and proper vigilance.

With his banking background and experience in credit, forex, international trade, and finance, the author started his second inning in Hong Kong as an adviser and entrepreneur with assistance from known business clients of the bank to help them in arbitrage business as well as structured trade throughout Hong Kong. This gave him the idea to find a working relationship with them to see the real action in international trade and structured trade finance.

The motivation in writing this book came mainly when he saw a huge deviation in banks and corporates. Initially, he did not think it as normal practice, but once in Hong Kong and on the other side of banking, working with corporates as an independent entity, he came across events which were eye-openers. Slowly and gradually, new things started unfolding. He became accidentally involved and then thought of converting this accident as an opportunity to learn. He did send anonymous feedback to the regulators/agencies on two occasions in India (attached at the end) so that they can become aware of what is happening in their backyard.

In his second year of coming to Hong Kong, he started to work on delving deep into the Indian business communities’ wrong practices and siphoning of banking funds to bleed the system. It was a time-consuming exercise as one had to be pally with people to get the complete picture, but ultimately, a