NMC trial: bank executives ‘approved payments in bulk’

• Bank of Baroda co-defendant of NMC
• Lender ‘had to primarily believe client’
• ‘No motive to collude in fraud’

Executives from India’s Bank of Baroda told a UAE court they believed frequent high-value transactions involving accounts connected with the collapsed Abu Dhabi-based NMC Health were “commonplace” and “legitimate”.

Bank of Baroda, which is majority owned by the Indian government, is one of three defendants in the ongoing $5.4 billion fraud case brought against NMC by its administrator Alvarez & Marsal (A&M).

A&M alleges that NMC founder BR Shetty and former chief executive Prasanth Manghat participated in a fraud against NMC, and that Bank of Baroda knowingly facilitated the activity.

Shetty allegedly received more than AED4.1 billion ($1.1 billion) directly into his personal bank accounts from NMC, and further payments indirectly and through personal assets. Shetty has previously claimed he is the “victim of a large-scale” fraud and denies all culpability.

The trial began in March in Abu Dhabi Global Market (ADGM) Courts and is being heard remotely because of the Iran conflict.

The claimant, A&M, alleges that Bank of Baroda was grossly negligent by failing to follow proper anti-money laundering (AML) and Know Your Customer (KYC) procedures and continuing to process payments knowing that they were fraudulent, according to court documents seen by AGBI.

It also did not undertake proper due diligence on the set-up of bank accounts for alleged “sham” suppliers to NMC, through which “pass-through” payments were made to Shetty and others using fake invoices, A&M alleges.

The bank executives, who were called to give evidence during the past month, told the court they believed sufficient due diligence had been undertaken in compliance with AML rules and did not consider the transactions suspicious at the time.

One executive was asked by A&M’s barrister if they often resolved AML alerts flagged by internal systems “very quickly and in bulk…suggesting perfunctory, rather than considered, clearance”.

On one day in June 2014, the executive allegedly cleared 907 alerts within 75 minutes and on another in 2017 they closed 583 alerts in 121 minutes, the court heard.

Such alerts might have been examined over a period of three or four days, rather than being closed immediately as the numbers may suggest, the executive replied.

Another executive told the court it was not their responsibility to question the purpose of payments made to and from client accounts: “We had to primarily believe what the customer was saying was right, unless there were suspicious grounds.”

Lawyers for Bank of Baroda did not respond to AGBI’s request for comment. In its written opening submissions to the court, the bank denied A&M’s allegations, arguing that the “idea that the bank’s employees would have colluded in the frauds… over a number of years is inherently improbable”.

It continued: “The alleged conduct is serious criminal wrongdoing; the bank is one of India’s largest public sector banks, which did not depend upon Dr Shetty’s patronage, and the bank’s employees had no motive for such conduct.”

Manghat also gave evidence in April, telling the court he lacked “competent knowledge” of international accountancy standards, known as IFRS, while serving as NMC’s chief financial officer in the run-up to the company’s 2012 London Stock Exchange listing.

It was “not necessary” for him and his team to follow these standards as the UAE did not require it and NMC seconded executives from consultancies PwC and Deloitte to support the IPO preparations, he added.

Further reading:

• Secret records found of alleged NMC fraud, court told
• BR Shetty ordered to pay $106m to Indian bank
• NMC funds allegedly used for Shetty luxury assets, court hears

“I felt like I was failing at my job, that I was not doing the job justice… I am admitting I was not the best person for this position,” he said.

Earlier in the proceedings, Shetty told the court he passed responsibility for much of the decision making and financial management of NMC to senior leaders. Both he and Manghat deny the allegations against them and claim to be victims of a complex fraud that brought down the business in 2020.

At its peak in 2018, NMC was valued at £8.6 billion ($10.8 billion) on the London Stock Exchange (LSE). It was the UAE’s largest private healthcare company and the first Abu Dhabi company to list on the LSE in 2012.

The trial is scheduled to run until July. Expert witnesses are due to give evidence from Thursday, May 21.