Discovery of Fraud from Iran's Multi-Billion Dollar Reserves in India

Following the discovery of a fraud involving Iran's monetary deposits in a state bank in India, the Central Bank of India has urged all financial institutions and banks in India to closely monitor financial transactions related to Iran and the laws concerning money laundering. Reuters reported on Tuesday, February 21, citing Indian government investigators, that a group of Iranian citizens who entered India on student visas formed several shell companies and provided false documents for the export of goods to the Islamic Republic, aiming to exploit Iran's multi-billion dollar financial resources held in UCO Bank. According to Indian laws, payments related to exports are made after the goods are shipped and within a maximum of 12 months, upon presenting necessary documents such as transfer and shipping documents, insurance policies, and customs permits. Government officials are currently investigating violations of foreign exchange laws and may extend their inquiries into money laundering as well. According to Reuters, a fraudulent transaction involving $150 million with eight shell companies has been uncovered, and the actual figure may rise to $3.2 billion. In Washington, it has been announced that Jack Lew, the U.S. Treasury Secretary overseeing the sanctions process, is scheduled to visit India on February 22 and 23. A spokesperson for the U.S. Treasury declined to comment on the recent discovery of fraud in India. An Indian official told Reuters that the amount of this suspicious misuse exceeds $3 billion and is related to advance payments for Iranian exports made by UCO Bank. The directive from the Central Bank of India was issued following the discovery of significant fraud in advance payments for several categories of goods exported to Iran. Although the directive does not mention the extent of the fraud or the name of the offending bank and accused individuals, a source from the Central Bank attributed it to the state-owned UCO Bank. The directive specifies that banks must adhere to anti-money laundering principles with due diligence and caution. Under U.S. banking and financial sanctions, the Iranian government can store revenues from the export of oil to Asian countries in foreign banks and only use them for purchasing essential goods such as food and medicine and other items not under sanctions. In India, Iran's financial reserves are saved in UCO Bank. According to Reuters, Indian refineries purchase about 220,000 barrels of crude oil from Iran daily, and 45% of the payment is held in rupees—not in U.S. dollars—in the account of the National Iranian Oil Company at UCO Bank. The remainder is transferred to Iran in U.S. dollars in installments with the agreement of Western powers, especially the United States. Official withdrawals by the Iranian government in India are from the rupee reserves, which are used for food and other goods outside the scope of sanctions. In the last fiscal year ending March 31, 2014, the Islamic Republic purchased about $5 billion worth of goods from India. In conclusion, following the issuance of the Central Bank of India's directive, UCO Bank has informed exporters via email that it will no longer accept documents from companies with foreign managers.