When Citi was Found Sleeping

When Citi was Found Sleeping

Suresh Chandra Bihari
Copyright: © 2014 |Pages: 20
DOI: 10.4018/978-1-4666-4357-4.ch021
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Abstract

“Citi never sleeps” is the famous signature claim of Citi bank. But their claim was made a mockery in a high profile branch in India where several depositors and high-net worth individuals were duped in a fraud to the tune of Rs 460.91 crore, engineered by their Global Wealth Manager Shivraj Puri who was working at Gurgaon branch of the bank. Corporate houses like the Hero group and 20-odd people invested in schemes which were sold to them by showing them a forged letter of the market regulator, Sebi. The clients were offered super normal returns and were lured by the Relationship Manager who enjoys a special relationship of trust and confidence with the clients. The clients were cheated understandably for their lack of understanding of the nuances of the product. But the greater issue at stake was the onerous practices of Wealth Management by banks in India and the lack of regulatory control in this fast developing area that allowed the incident to happen in the first place.
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Learning/Teaching Objectives

  • 1.

    To examine the various underlying issues relating to the fraud that took the industry observers, market players and regulators by surprise and shock.

  • 2.

    To understand the various issues relating to Wealth Management in general and the practices in India, in particular.

  • 3.

    To understand the implications of the case for the future of Wealth Management, with special reference to India, in the greater interests all the stakeholders, particularly the investors at large.

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Full Case Study-The Gurgaon Fraud At Citibank

The Incident

Gurgaon police on 30th December 2010 arrested Citibank Relationship Manager Shivraj Puri, who allegedly masterminded a major fraud in the Gurgaon branch of the Bank. Puri was alleged to have opened 78 accounts in his name and in the names of his grandparents, Premnath Puri and Sheela Premnath Puri besides an account in the name of his mother, Deeksha Puri. These accounts are with different financial institutions including banks and brokerage houses spread across Gurgaon, Delhi and Kolkata among which Religare, Bonanza and India Info line also figure in the list. The banks include SBI, HDFC, Standard Chartered, PNB, Axis and ABN-Amro (IBTimes Staff Reporter, 2010). According to sources (SmartInvestor.In., 2010), Shivraj Puri used to seek deposits from high-net worth customers in lucrative schemes. However, he used to transfer the funds to some other accounts. Funds amounting to Rs 400 crore belonging to about 20 customers, according to sources, were transferred to fictitious accounts. Shivraj is charged with selling investment products to clients claiming that these would generate unusually high returns. It has been alleged that the employee also showed a forged notification of market regulator Securities and Exchange Board of India for garnering funds from customers. Shivraj also claimed that the products were authorized by the banks investment product committee. The incident almost stirred the entire financial sector in India and the regulators including the Securities and Exchange board of India (SEBI), the Reserve Bank of India(RBI) and the Ministry of Finance are seized with the matter and the Bank in question has geared up the process of damage control by taking action against the erring employees.

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