Banks fined for money laundering and violating norms
Statesman News Service
Mumbai, 15 July
Having found guilty of flouting know your customer (KYC) norms and anti-money laundering (AML) guidelines, the Reserve bank of India today asked 22 banks to shell out more than Rs 49.5 crore in fines even as it has sent warning letters to seven smaller banks to mend their business ways or face a similar penal action in future. The 22 major domestic lenders, including many big entities, the RBI says, are liable to be punished under section 47(A)(1)(c) read with section 46(4)(i) of the Banking Regulation Act 1949.
Although the central bank has detected several shady transactions at some branches, it prefers to stay aloof with regard to money laundering charges. The RBI says “any conclusive inference in this regard can be drawn only by an end-to-end investigation of transactions by the Income Tax and Enforcement authorities.”
Three top private lenders, ICICI Bank, HDFC Bank and Axis Bank, were already fined Rs 5 crore each on 10 June for identical violations. The central bank had initiated a probe following a sting by website Cobrapost in two tranches covering private as well as state run banks.The central bank, however, said a more detailed report on these banks’ systemic failure to stall misuse of regular banking facilities to help sly unaccounted wealth transactions would be available in due course.
Those fined include the country’s biggest lender, State Bank of India (Rs 3 crore), Indian Overseas Bank (Rs 3.002 crore), Punjab National Bank and Punjab and Sind Bank (Rs 2.5 crore each). Among private banks Federal Bank has been fined Rs 3 crore, Yes Bank has been asked to pay Rs 2 crore, J&K Bank Rs 2.5 crore and Kotak Mahindra Rs 1.501 crore. Other offenders of banking regulations include Bank of Baroda, Bank of India and Central Bank.
Between April-May, teams of central bank officers spanned out to scrutinise books of account of these banks following Cobrapost’s on- camera expose. The RBI confirms its officers have found corroborative evidence to substantiate charges of widespread violation of KYC and AML provisions. For two months, RBI teams pored over not only books of account but also examined internal control, compliance systems and processes of these banks at their “under the cloud” branches.
The RBI discovered many questionable banking practices deployed by these banks apparently to gain business. The most flagrant breach of the fiscal discipline or prudence has been ignoring the mandatory customer identification procedure and their categorisation. The bank branches waived mandatory KYC provisions for big net worth walk-in customers. The banks even accepted deposits and carried out transactions above Rs 50,000 without verifying the customer’s credential. Banks have failed in numerous cases to file cash transaction reports, or CTRs, and sale of gold coins in cash above Rs 50,000.The banks insist on PAN Card as a precaution to stall potential conversion of black money into white.