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Cobrapost expose: RBI penalises Axis, HDFC, ICICI banks for flouting anti-money laundering, KYC guidelines


Gopika Gopakumar, CNBC-TV18
Jun 10, 2013 at 07:47pm IST

Mumbai: Three private banks, caught in the Cobrapost sting operation, have been let off the hook with paltry penalties. The Reserve Bank of India on Monday imposed penalties on Axis, ICICI and HDFC banks after a sting operation by online magazine Cobrapost exposed many loopholes.

RBI imposed a penalty of Rs 5 crore on Axis Bank, Rs 4.5 crore on HDFC Bank and Rs 1 crore on ICICI Bank. The penalty follows scrutiny carried out by RBI of books of accounts, internal control, compliance systems and processes of these three banks at their corporate offices and some branches during March/April 2013.

ALSO SEE RBI probes Cobrapost report, reveals violations by banks: sources

The scrutiny was conducted to investigate into the allegations of contravention of Know Your Customer (KYC) anti-money laundering guidelines against them following expose by online portal Cobrapost.

Although the investigation did not reveal any prima facie evidence of money laundering, RBI said, "any conclusive inference in this regard can be drawn only by an end-to-end investigation of the transactions by tax and enforcement agencies." RBI further said that a similar scrutiny was being conducted at corporate offices of 36 other banks and "the process of follow up action in respect of these banks is at different stages of its completion."

ALSO SEE 23 banks including SBI and PNB engaged in money laundering: Cobrapost

Based on the findings of the scrutiny, the Reserve Bank had issued show cause notices to each of these banks, in response to which the individual banks submitted written replies. The penalty, it said, was imposed after considering the facts of each case and individual bank's reply, as also, personal submissions, information submitted and documents furnished.

The scrutiny of these three banks, RBI said, revealed violation of certain regulations and instructions issued by the central bank from time to time. The violations include non-observance of certain safeguards in respect of arrangement of "at par" payment of cheques drawn by cooperative banks, non-adherence to certain aspects of KYC and AML guidelines like risk categorisation and periodical review of risk profiling of account holders.

They did not adhere to the KYC norms for walk in customers for sale of third party products and failed to file cash transaction reports in respect of some cash transactions and sale of gold coins for cash beyond Rs 50,000. In certain cases, the banks failed to obtain permanent account number (PAN) card details or form 60/61 and verify the source of funds credited to a few non-resident ordinary (NRO) accounts.

RBI had launched the investigation into the working of banks following the expose by Cobrapost which showed some bankers giving suggestions to customers on ways to bypass regulatory norms. The first expose had named ICICI Bank, Axis Bank and HDFC Bank. Later scores of other public and private sector banks and insurance companies figured in the expose.

(With Additional Information From PTI)

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