FATF uses Yes Bank’s Rana Kapoor as case study; says he bought a painting as a bribe for Padma Bhushan

The Financial Action Task Force (FATF) used former Yes Bank Managing Director and CEO Rana Kapoor as a case study for buying art and cultural objects as a vehicle to transfer or hide illicit proceeds in its report 'Money Laundering and Terrorist Financing in the Art and Antiquities Market'. Rana Kapoor was arrested and an investigation is undergoing in connection with a Rs 466 crore money laundering case. 

The task force said that cultural objects are unique and their prices are subjective, and are used as a vehicle to transfer or hide illicit proceeds. High value artworks are bought with illicit proceeds without the use of formal financial instruments. In some cases, art is purchased with illicit proceeds or is used as a bribe or kickback and are then hidden to keep the illicit proceeds. 

In the report, FATF, without naming Rana Kapoor, spoke of one “Mr A” who was the managing director and CEO of an Indian bank and misused his position during his tenure by sanctioning loans of $628 million to business entities incurring losses or with negative credit, and thereby violating norms. 

It said that Mr A used his influence to sanction loans to loss-making Company B that diverted the loans to further 79 shell entities, including Company C, controlled by Mr A and his daughters. Company C received $79 million and used parts of the funds to purchase assets including art of famous artists. 

FATF, in its case study, said that investigators revealed that Mr A purchased 44 paintings. It also said that Mr A, in order to pay kickbacks for awards, bought “mediocre art” from politicians and paid them through banking channels, projecting them as genuine pieces of art. 

“In one such incident, Mr. A purchased a piece of art from the close relative of a member of the ruling political party at that time for USD 264,000. However, the investigation revealed that this was an over-valuation, and that the price paid was not for art, but rather was a bribe to influence the awarding of the prestigious Indian award ‘Padma Bhushan’ for himself. The trial is ongoing and Mr. A has been in judicial custody since March 2020,” the report stated. 

This is in line with what Rana Kapoor had said in his statement. The chargesheet filed by the Enforcement Directorate last year had quoted Kapoor who said that he was forced to buy an MF Hussain painting from Congress leader Priyanka Gandhi Vadra, and the proceeds were used for the treatment of Sonia Gandhi. 

Kapoor had said that Milind Deora made several visits to his August Kranti Marg residence to urge him to buy the Hussain painting. He was also messaged several times, but, as per Kapoor, he was reluctant to buy the painting. At a dinner party, the then Petroleum Minister and Milind Deora’s father, Murli Deora, threatened Kapoor and said that any delay in the purchase of the painting would have adverse repercussions on him and Yes Bank. Deora also said that any deviation on his part for lack of closure of the deal will definitely prevent him from being awarded the Padma Bhushan, for which he was deserving at that time, according to Kapoor’s statement. 

In the statement Kapoor had said that he paid Rs 2 crore for the painting, and was later informed by Milind Deora that the proceeds went in the medical treatment of Sonia Gandhi. Deora told him that he would be seriously considered for the Padma Bhushan and some non-political banking and finance assignments, claimed Kapoor, who also said that these commitments were never honoured. 

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