RBI likely to penalise top 3 private banks--Business Line 6th April 2013
MUMBAI, APRIL 5:
Lapses in adherence to the know-your-customer guidelines and sales staff encouraging customers to buy gold, mutual fund and insurance products in cash are believed to be among the findings of a central bank scrutiny of India’s top three private sector banks.
Based on the findings of the scrutiny, which covered the head-office and branches of ICICI Bank, HDFC Bank and Axis Bank, the central bank may penalise these banks.
Following its findings, the RBI, at the systemic level, is likely to tighten know-your-customer (KYC) guidelines and put in place norms to curb sales-driven incentives to bank sales staff to push third-party products.
Besides lacunae in adherence to KYC norms, authentication of permanent account number details in cash transactions were unsatisfactory, said a senior central bank official.
Further, the central bank has flagged the issue of drafts for large sums issued by co-operative banks being accepted by bigger banks without carrying out the usual KYC-PAN authentication. The view is that a bank cannot depend on the verification of documents done by other banks.
The RBI initiated comprehensive scrutiny of the three private sector banks, covering both their head-office and branches, after an online media firm Cobrapost.com, on the basis of its sting operations across some branches of these banks, alleged that branch officials were offering products to convert unaccounted money into legitimate money.
The media firm, which alleged violation of several provisions of the Reserve Bank of India Regulations, Foreign Exchange Management Act, etc, had uploaded some videos on the Internet relating to the three private sector banks as well as ICICI Prudential Life Insurance and HDFC Life Insurance.
Apart from the scrutiny, the Reserve Bank had also undertaken a thematic study in respect of banks that are active in selling gold coins/wealth management products to examine whether there are systemic issues and to plug deficiencies and legal loopholes, if any.
Meanwhile, the central bank is taking stock of the KYC implementation across the banking system, including the public sector banks. The RBI wants banks to eliminate multiple accounts held by customers in a bank by giving them unique customer identification number.
Reserve Bank probe into alleged money laundering case delayed-- The Financial Express news
After promising to complete the final investigation report on allegations of money laundering by ICICI Bank, HDFC Bank and Axis Bank by March 31, there’s no sign of the report from the RBI.
On March 18, while announcing “comprehensive scrutinies” covering the head offices and branches of of the three banks, the RBI had said, “The final reports on all the three banks will be completed by March 31, 2013 and thereafter further course of action as necessary will be initiated.”
The scrutinies were initiated after web portal Cobrapost.com, on the basis of its sting operations across some branches of these banks alleged money laundering and violation of several provisions of the RBI Regulations and the Foreign Exchange Management Act guidelines.
When contacted, the RBI spokesperson refused to comment on the investigation report.
However, a person in the know of the developments said, “After the completion of the ongoing probe, the RBI will make it public only when it announces any penalty after another round of show-cause notices and replies. It can take weeks or even months. Even if the RBI completes the probe tomorrow, it won’t reveal the findings.”
If the RBI doesn’t find any lapses, the probe report may not even come out in the public domain, he said. “If there’s a delay in the investigation, that doesn’t mean it is deliberate. It can also mean the scope for probe has widened,” he said
Cobrapost rubbishes RBI deputy governor's clean chit to private banks
NEW DELHI: Investigative website Cobrapost on Saturday said RBI deputy governor KC Chakrabarty's clean chit to private banks on allegations of money laundering was premature and preposterous "aimed at sweeping under carpet the alleged involvement of the banking majors in money laundering."
Referring to the recent undercover operation by the website showing executives of three major private banks—ICICI, HDFC, and Axis— willing to wash black money into the banking system, Chakrabarty had on March 21 said: "There is no scam (that) has happened...Let us not unnecessarily downgrade ourselves. Our system to prevent money laundering is perfect."
For the RBI to say that there is no offence as there was no transaction is a "very novice reading of the law and a wilful ignorance of rules and regulations," the website said.
Referring to the recent undercover operation by the website showing executives of three major private banks—ICICI, HDFC, and Axis— willing to wash black money into the banking system, Chakrabarty had on March 21 said: "There is no scam (that) has happened...Let us not unnecessarily downgrade ourselves. Our system to prevent money laundering is perfect."
For the RBI to say that there is no offence as there was no transaction is a "very novice reading of the law and a wilful ignorance of rules and regulations," the website said.
"The manner in which the RBI deputy governor has rushed to issue the statement, even before the central bank could complete the inquest it has initiated into money laundering practices by the three banks, even before these banks could complete their own investigations into the alleged misdemeanour of their officials, and even before the income tax department could come up with its own finding, is tantamount to be self-serving and is a brazen attempt on the part of the deputy governor to not only give these banks a clean chit but also mask the miserable failure of the banking regulatory mechanism of the RBI," the website said.
Being a signatory of FATF ( Financial Action Task Force on Money Laundering), India has treaty obligations to "block precisely the kind of money laundering that the Cobrapost expose shows has been happening rampantly in the country's leading three private banks," the statement said.
"Operation Red Spider by Cobrapost clearly shows that RBI and the Financial Intelligence Unit of the Finance Ministry have failed in their jobs and instead of heads rolling there the RBI is intent on diluting the nature of what has been found and saving its own skin," the website said.
In its expose, executives of the three private banks offered alleged assistance in investing black money in the banking channel through various means. Some of them offered to accept huge amounts of cash and invest it in insurance products and gold, open an account to route the cash into various investment schemes of the bank, and do it all without even PAN card or adhering to the KYC norms of the banks.
Being a signatory of FATF ( Financial Action Task Force on Money Laundering), India has treaty obligations to "block precisely the kind of money laundering that the Cobrapost expose shows has been happening rampantly in the country's leading three private banks," the statement said.
"Operation Red Spider by Cobrapost clearly shows that RBI and the Financial Intelligence Unit of the Finance Ministry have failed in their jobs and instead of heads rolling there the RBI is intent on diluting the nature of what has been found and saving its own skin," the website said.
In its expose, executives of the three private banks offered alleged assistance in investing black money in the banking channel through various means. Some of them offered to accept huge amounts of cash and invest it in insurance products and gold, open an account to route the cash into various investment schemes of the bank, and do it all without even PAN card or adhering to the KYC norms of the banks.
Anti-money laundering system is perfect, says RBI
The Reserve Bank of India has downplayed the money laundering allegations against top three private sector banks- ICICI Bank, HDFC Bank and Axis Bank, saying that the country has a "perfect" system to prevent such offences and no such transactions took place in the sting operation.
Last week, top three banks were accused of indulging in money laundering, both within and outside by an online portal Cobrapost claiming that the sting operation conducted by it had revealed a scam.
"Allegations do not mean flouting norms. There is not a single transaction which has taken place. KYC (Know Your Customer) violations will happen in any system. These are all transactional issues and have nothing to do with money laundering," said deputy governor, Mr. K C Chakraborty.
Mr. Chakraborty was responding to a question on the issue and said, "There is no scam (that) has happened... As no transaction has taken place. Let us not unnecessarily downgrade ourselves. Our system to prevent money laundering is perfect ... absolutely nothing (wrong with it)."
Mr. Chakraborty also said that the central bank will further tighten the anti-money laundering norms if needed. "If we find there is a need to further tighten any guidelines, we'll do that."
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