SFIO for norms to vet bank accounts

SFIO for norms to vet bank accounts

Says RBI must lay out guidelines in this regard

“(The) RBI may examine this (the procedure for issuing BCC) and issue necessary guidelines to ensure that forged balance confirmation certificates are not used for perpetration of fraud,” the investigation arm of the Corporate Affairs Ministry said. In case of Satyam, the statutory auditor Price Waterhouse relied on forged balance confirmation certificates produced by the Satyam management to certify accounts of the IT company. The SFIO report further added that the auditors did not make any enquiry to ascertain the factual position on outstanding balance in current accounts and fixed deposits as required under ICAI directives.

“The... lapse on the part of statutory auditors has enabled the Satyam executives to perpetrate a massive fraud, as it was noticed that... many of the balance confirmation certificates were fake and forged,” it said.

Forged FD receipts

Satyam, under disgraced founder B Ramalinga Raju, relied on forged fixed deposit receipts and bank accounts to present a rosy picture of the company. The company even paid taxes on interest on non-existing fixed deposits.

The banks, SFIO said, were not aware of the forgery till reference was made by the investigating agency seeking the veracity of the accounts.

To prevent such frauds in future, SFIO suggested that each BCC should be issued by banks only after receiving a written request and should also contain a serial number. In respect of fixed deposit receipts, SFIO said FDR number and the date of issue should be specially mentioned. It said, RBI should make it mandatory for issuing banks to retain a copy of the certificate for atleast 10 years.