The Enforcement Directorate on Tuesday conducted a raid at the home of former minister and CPI(M) Kerala state committee member A.C. Moideen MLA near Wadakkancherry. The 12-member team of the ED came with armed forces for the raid over a money laundering case related to the infamous Karuvannur Co-operative Bank fraud that rocked Kerala in 2021. The raid, which started at 7 am, lasted around 22 hours.
Karuvannur Cooperative Bank has been a CPI(M) controlled bank for over 40 years. A forensic examination of the accounts by three senior auditors over a period of two years has found that there was an embezzlement of Rs 300 crore from the bank. Various inquiries, including the one carried out by the Crime Branch, revealed extensive fraudulent activities under the two governing boards of the CPI(M) in the Karuvannur bank from 2014. However, until now, only members of the second governing board and bank employees have been listed as the accused in the case.
The ED’s move has surprised the ruling CPI(M) as this was the first time the ED made move a against a senior party leader of the stature of Moideen. The raid was reportedly based on a statement of one of the accused in the case; there has been an allegation against the MLA that four persons who received the Rs 25 crore loan were his benamis.
After the raiding of the house and office of Moideen, the Enforcement Directorate took action to freeze his two bank accounts on Wednesday. According to reports, these bank accounts have deposits worth Rs 31 lakh.
The Union government recently informed the Rajya Sabha that during the last 3 years, the frauds committed in the co-operative banks in the country amounted to Rs 3,313 crore; as many as 2,131 frauds were committed during this period. The number of frauds has more than doubled in 3 years but the amount involved has decreased. In 2020-21, fraud of Rs 1,985 crore was committed in 438 cases, while in 2022-23, fraud of Rs 791.4 crore was involved in 964 cases.
Kerala’s cooperative sector also suffered a trust deficit in recent years because of the financial frauds reported in a large number of institutions. The majority of these entities are governed or overseen by the political leadership.
According to the data revealed by the Kerala government in July last year, 399 cooperative banks and societies had committed financial fraud in the preceding six years. Numerous instances of fraud were detected, ranging from the approval of loans without adhering to government regulations to granting loans based on counterfeit fixed deposit receipts. Other fraudulent activities included the unauthorized hiring of personnel, improper calculation of deposit interest rates, disbursement of loans without adequate collateral, a scandal involving gold loans, discrepancies in the inventory at Neethi medical stores, irregularities in bank property auctions, embezzlement of funds, approval of loans exceeding the bank's prescribed limits against property, misallocation of government funds, and the illicit facilitation of loan repayment reductions.
The maximum number of frauds were involved in Thrissur district to which Karuvannur Cooperative Bank also belongs.
Types of fraud happened in Karuvannur
Under the control of CPI(M) for over four decades, the Karuvannur cooperative bank scam involved five major types of fraudulent activities:
Loan fraud: The bank officials tampered with the bank's software to approve loans without proper collateral documents. Loans were granted without the necessary verification and documentation.
Tampering with interest rates: The fraudsters manipulated the interest rates of fixed deposits. This means that depositors may not have received the expected returns on their investments.
Faked signatures: Documents and transactions were forged to deceive depositors and authorities.
Benami transactions: The fraudsters engaged in benami transactions, which involve the use of someone else's name to hold assets or conduct financial transactions.
Remortgaged properties: The fraud included remortgaging properties. This means that properties were used as collateral for multiple loans, potentially leading to disputes and complications for the legitimate owners. Many have been served with recovery notices by the Karuvannur Cooperative Bank for loans they have not taken.
