FSA gives clean chit to ICICI Bank’s UK unit on alleged fraud

FSA gives clean chit to ICICI Bank’s UK unit on alleged fraud
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First Published: Mon, Dec 21 2009. 10 27 PM IST

Testing times: A file photo of an employee entering the headquarters of the Financial Services Authority in London. Jason Alden/Bloomberg
Testing times: A file photo of an employee entering the headquarters of the Financial Services Authority in London. Jason Alden/Bloomberg
Updated: Mon, Dec 21 2009. 10 27 PM IST
Mumbai: ICICI Bank Ltd’s UK subsidiary ICICI Bank UK Plc’s legal woes continue as Grant Jones, a former employee of the bank’s UK arm, has petitioned the employment tribunal in London for unfair dismissal even as the country’s Financial Services Authority (FSA) gave ICICI a clean chit on a $1 million (Rs4.68 crore) fraud alleged by a couple of employees including Jones.
On 24 November, in a similar case filed by another ICICI Bank UK unit’s proprietary trading group (PTG) employee Siddharth Kapoor, the employment tribunal had accused the bank of mistreating him by transferring him to India for being a whistleblower. Jones, too, claims to be a whistleblower.
Mint could not reach Jones but an ICICI Bank spokesperson, responding to an email query, said: “These queries pertains to our subsidiary ICICI Bank UK Plc. It is not a new case and is the same whistleblowing incident which has already been reported in the newspapers.”
“ICICI Bank UK had made a business decision to close the entire PTG due to changed market conditions. Jones, like his colleague involved in the same whistleblowing disclosure, was impacted by that decision. FSA was kept informed at all times of these developments,” the spokesman added. “We have already clarified that there is no connection between the whistleblowing incident and the decision to close the PTG.”
Testing times: A file photo of an employee entering the headquarters of the Financial Services Authority in London. Jason Alden/Bloomberg
An FSA spokesperson declined to comment on the issue.
Kapoor had alleged that Mankash Jain, to whom both Kapoor and Jones were reporting, had booked a loss in excess of $1 million for the calendar year 2008.
In a letter to FSA, Kapoor had said that the trader (Jain) was allowed to trade even after Kapoor had complained to the bank.
The allegation was that the head of compliance Kiran Talwar at ICICI Bank UK neither “interviewed” the concerned trader nor directed him to stop trading. Jones had given evidence on behalf of Kapoor.
Not satisfied with the internal findings of ICICI Bank’s investigation of the alleged fraud, Jones had on 19 February made a telephone call to FSA about the misreporting done by Jain, and also sent an email the following day, detailing his version of the matter.
An internal investigation of the bank had concluded that there was insufficient evidence to conclusively state that Jain had deliberately acted to cause wrongful loss to the bank.
On 17 March, Kapoor and Jones were interviewed by FSA in regard to their complaints.
On 6 April, ICICI Bank UK Plc’s board in a meeting decided to close the PTG business as it was consistently making losses. Accordingly, Jones was dismissed on the grounds of redundancy on his return from holiday.
“After a number of suggestions made by ICICI Bank were rejected, it was decided that Deloitte would conduct this independent review,’’ said the employment tribunal’s judgement.
Deloitte Touche Tohmatsu Llc—also branded as Deloitte—is one of the largest professional services organizations in the world and one of the so-called Big Four auditors, along with PricewaterhouseCoopers, Ernst and Young, and KPMG.
When FSA asks a bank to conduct an independent review such as this, the cost of it is borne by the bank. In this case, ICICI Bank had to incur a cost of £100,000 (Rs75.6 lakh) to conduct the review.
The tribunal will again hear Kapoor’s case on 22 December to decide on compensation, if any, that ICICI Bank needs to pay to its former employee.
In the past, ICICI Bank had come under the regulatory scanner in Hong Kong for allegedly offering private banking products—mutual funds and insurance products—without approvals.
According to regulations, the bank is supposed to get product-specific approvals from regulators in Hong Kong to begin selling them.
ICICI Bank has subsidiaries in the UK, Canada and Russia and branches in the US, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai. It also has representative offices in the United Arab Emirates, China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. The UK subsidiary has established branches in Belgium and Germany.
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First Published: Mon, Dec 21 2009. 10 27 PM IST