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Citibank considering 'fair compensation' for affected customers

January 15, 2011‐ New Delhi

Citibank which is on the blink of losing its reputation for the Rs. 400 crore fraud at its Gurgaon branch said that it has begun the process of reconciling its accounts of the customers who are affected by the fraud. The bank said it is working on providing a 'fair compensation' to the effected customers who include some big names such as the Hero Group (Rs. 250 crore), Helion Advisors Managing Director Sanjeev Aggarwal (Rs 33 crore) amongst others. About 40 high net worth customers are lured to invest in a fake scheme by an employee of the bank, Shivraj Puri, who diverted the funds to the stock market on the pretext of generating high returns. The fake fund is reported to be strong to a tune of Rs. 300 crores.

The bank said it has identified the fraud in early December 2010 and has immediately alerted the authorities. It said it will continue to support the investigating authorities fully until the matter is fully resolved.

With a mammoth compensation that the bank has to pay back to its affected customers, analysts say that Bank might have to put its hands on the global insurance policy to pay the compensation.

Meanwhile HDFC Chairman Deepak Parekh today blamed the lack of proper guidelines specifically for wealth management which allowed the fraud to happen. He said the incident would alert the regulator so that the loop holes be identified and fixed.

The Reserve Bank of India (RBI) would have already been investigating as to whether or not the bank has followed the KYC and STR norms that banks have to follow. KYC or Know Your Customer requires that the bank collect and verify customer details by cross checking with original documents of identity and residence proof with documents like PAN card, Passport, Utility bills etc. The STR or Suspicious Transaction Reporting requires that the bank has to immediately inform the regulatory and enforcement agencies about high-value and unusual transactions in any of its accounts.

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