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RBI suspects banks violating KYC norms, orders probe


Karma Paljor,CNN-IBN
Mar 14, 2013 at 03:06pm IST

New Delhi: The Reserve Bank of India (RBI) suspects some banks are involved in KYC violations, sources said. The RBI has sent showcause notice to one bank and a probe is on in the NCR region.

The probe comes after online magazine Cobrapost's sting operation on private banks shows brazen money laundering across various branches of private financial institutions, including HDFC Bank, ICICI Bank and Axis Bank. The sting operation shows how bank employees are accepting black money from customers to convert them into white money.

ALSO SEE HDFC Bank, ICICI Bank, Axis Bank involved in money laundering: Report

Cobrapost claims that the nationwide operation shows how private banking and insurance affiliates launder money as part of standard procedures. Services that amount to money laundering are easily offered even to walk in customers. The Cobrapost sting shows that a variety of options are being offered.

RBI suspects banks violating KYC norms, orders probe

The probe comes after a sting operation on private banks shows brazen money laundering across various branches of HDFC Bank, ICICI Bank and Axis Bank.

Meanwhile, ICICI Bank, HDFC bank and Axis Bank have ordered also a probe and the Opposition has demanded an explanation from the government. Cobrapost Editor Anirudh Bahal said that even senior management is involved in the practice. "Our investigation shows HDFC Bank, ICICI bank and Axis Bank rolling out the red carpet for our reporters proposing money laundering. This is with active connivance of the senior management of these banks. It is not one off employee who is doing this," said Bahal.

In the wake of these claims ICICI Bank has stated that the company conducts business with highest level of legal compliance. "A high level committee has been constituted to investigate the matter. We are deeply concerned about the media reports on money laundering. The committee will submit its report in two weeks."

HDFC Bank too has issued a statement on the issue. "We are concerned at the allegations that have appeared in the media. The matter is being investigated on top priority. The bank has a well-defined KYC and AML policy which contains procedures and controls to identify and prevent the types of transactions mentioned in the Cobrapost press release. Segregation of frontline sales activities and back office operations and post transaction monitoring processes are in place to ensure independent checks and balances and adherence to all the laid down policies and procedures of the bank. Any deviation is viewed very seriously and stringent action is taken both at an organisational and employee level. We would like to assure our customers and other stakeholders that the bank has always adhered to the highest standards of compliance and corporate governance and will continue to do so," said the bank's statement.

Meanwhile, the Bharatiya Janata Party (BJP) has demanded that Prime Minister Manmohan Singh looks into the matter. "If the bank is directly involved in the money laundering then it is very serious matter. The Prime Minister should look into the matter. We will raise the issue in Parliament," said party spokesperson Mukhtar Abbas Naqvi.

CPM Polit Bureau Member Sitaram Yechury said that his party will raise the issue in Parliament. "Had raised these apprehensions when banking was privatised itself. If found to be true, these banks should shut operations. Will raise the issue in Parliament."

The sting shows that a variety of options for laundering ill-gotten cash are being offered brazenly to customers.

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