Cobrapost expose: RBI concerned over non-compliance with KYC norms-Business Line 3rd May 2013
MUMBAI, MAY 3:
Amid allegations of money laundering by top three private banks, the RBI today said that its probe into their activities revealed the banks did not follow KYC norms while selling third party products.
“The RBI recently undertook investigations in the light of reported allegations that certain banks were involved in structuring transactions to aid tax evasion and fraudulent transfer of funds. The investigations revealed the need for better regulatory compliance by banks,” the central bank said in its annual monetary policy statement.
ICICI bank, HDFC Bank and Axis Bank were accused of indulging in money laundering both within and outside with an online portal, Cobrapost, claiming the sting operation conducted by it had revealed a scam. The RBI statement, however did not name the banks.
“During the investigations...it was observed that banks are not carrying out customer due diligence as required under KYC/AML/CFT guidelines while marketing and distributing third party products as agents.
“Some banks are also not filing Cash Transaction Reports (CTRs) or Suspicious Transaction Reports (STRs) in such cases, wherever required,” RBI said.
RBI advised banks to carry out customer due diligence as a measure of abundant precaution, maintain details of third party products sold and their records and file CTRs and STRs.
RBI observed that in some cases, banks did not have clear segregation of duties of marketing personnel and bank employees were directly receiving incentives from third parties.
Banks have been asked to ensure that their employees do not receive cash/non-cash incentives directly from insurance companies, mutual funds and other third party product providers.
Cobrapost expose: Audit report finds "aberrations"
No risk of systemic failure: Financial Services Secretary
MUMBAI, APRIL 18:
Echoing the statements of Reserve Bank of India Deputy Governor H.R. Khan on cobrapost.com’s findings on alleged money laundering by three private banks, Financial Services Secretary Rajiv Takru said that the issues will be fixed at a systemic level and action will be taken at an individual level.
Online magazine, cobrapost.com, had last month unearthed financial activities not permissible by law by bank officers of three major private banks.
Through its series of sting operations, cobrapost exposed bank officers at ICICI Bank, Axis Bank and HDFC Bank offering to convert tax evaded money of customers into clean money using various investment options.
Takru, however, ruled out the risk of any systemic failure.
“There is no risk of systemic failure. There are certain aberrations which we have discovered. These would be addressed both in terms of systemic factors as well as individual cases.
“Whatever responsibilities would have to be fixed will be fixed and whatever rectifications have to be done would be done,” Takru said.
He met the top brass at RBI but said that he did not recommend anything to the apex bank.
“We don’t need to recommend anything, we discuss and everybody does whatever he is supposed to do after that. RBI would be doing what they are required to do,” he clarified.
Downplaying the incident last month, K.C. Chakrabarty, Deputy Governor in-charge of banking supervision, had said, “Allegations don’t mean know-your-customer (KYC) norms have been flouted. There is not a single transaction (relating to money laundering as alleged by cobrapost) which has taken place…These are transactional issues, which have nothing to do with money laundering.”
The Financial Services Secretary also said that banks will be asked to give their version of the story on the basis of an audit report, before any action is taken against them.
“At the moment let’s understand things properly. An audit report has come. On the basis of the report, banks would probably be asked for their version. Once their version comes in, then we would decide what is to be done” Takru said.
One thing we all need to understand is there is absolutely no tearing hurry to run into some kind of hasty decision-making and in the process do something foolish, he said.
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