Financial Intelligence authorities knew that fugitive businessman Nirav Modi's firms were committing financial irregularities much before the massive fraud of more than Rs 20,000 crore came to light a few weeks ago.
The Financial Intelligence Unit (FIU) had raised a red flag about Nirav's companies three years ago in a report which was distributed to all financial regulators. Sources said this warning was based on Axis Bank's STR (Suspicious Transaction Report), even as the bank continued to lend money to the 'Jewel Thief.'
In May 2014, Axis Bank supplied details of more than 500 suspicious transactions to the FIU. The Intelliegence Unit combed and linked this massive dossier around Delhi-based proprietorship firm Avoni Trader, which is being investigated over a suspicious Rs 1.5 lakh core money flow chain. Two of Nirav's firms, Stellar Diamond and Solar Exports, were found to have links with these transactions. Both firms had opened their accounts on April 24, 2010, with the same set of partners — Nirav Deepak Modi, Neeshal Diapkbhai Modi and two authorised signatories, Hemant Dahyalal Bhatt and Kavita Ravikiran Mankikar.
The Axis Bank report, seen by DNA, revealed that Stellar Diamond and Solar Exports transactions were not in line with normal business practices. Stellar's records showed high-value credits through foreign remittances followed by RTGS transfers in favour of firms to its account in the other bank — for almost same or equivalent amounts.
By the end of the day, the accounts were left with a nominal amount. "High volume/value of transactions being routed show that the account was possibly being used for funds rotation which aroused the suspicion about the source and end-use of these funds," the report said.
Solar Exports' account shows a similar trend. For instance, on May 7-8, 2014, inward remittances aggregating to Rs 13.82 crore from Eternal Diamonds Corp Ltd (Hong Kong) and Fancy Creations Company Ltd (Hong Kong), plus a transfer credit of Rs 1.10 crore from Diamonds R Us were followed by an outward remittance of Rs 14.92 crore to Auragem Company Limited (Hong Kong).
The report warned: "Significant fluctuation in terms of credit turnover and transaction pattern of high-value credits followed by funds leaving immediately appear inexplicable."
Axis Bank Response to DNA
When asked why Axis Bank continued to provide unsecured loans to Nirav Modi and Mehul Choksi-lined companies even after discovering financial irregularities being commited by these, the bank's official spokesperson said: "In the normal course of trade business, the bank through its overseas branches, undertakes transactions against letters of undertaking (LoUs) issued by other banks. In the referred matter, the amounts, as requested by the LoU- issuing bank, were credited into the LoU issuing bank's nostro accounts only and not into the account of any other third party. The bank adheres to the extant regulatory guidelines with respect to suspicious transaction reporting."
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