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Money trail
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Mumbai, March 14: Three of the country’s top private banks today launched investigations into allegations that some rogue officials at their branches across the country were abetting money laundering operations.
ICICI Bank, HDFC Bank and Axis Bank said they had ordered an internal investigation to check the veracity of a sting operation by online magazine Cobrapost that caught some of their officials on hidden cameras suggesting ingenious ways to launder black money.
The Cobrapost reporters inveigled the banks’ officials to reveal ways to park large sums of money in bank accounts and funnel some of it out of the country without alerting the taxmen.
While none of the banks have denied the findings of the sting operation carried out over the past six months, all of them said they strictly adhered to various norms that include know-your-customer (KYC) and anti money laundering regulations.
ICICI Bank said while it complied with legal and regulatory requirements, it had ordered an inquiry committee to probe the matter and submit its findings in two weeks.
HDFC Bank said the matter was being investigated as a top priority. India’s second largest private bank went on to add that it already had procedures and controls in place to identify and prevent the types of transactions mentioned in the sting operation.
“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,” the bank said.
Axis Bank also said it had systems and processes that were robust and fully compliant with existing regulations. It said it would examine information brought to its notice and investigate thoroughly.
Cobrapost alleged in a press release that the “brazen” activity pertained to channelising vast amounts of black money into the regular banking system as laundered white money. It claimed that these money laundering services were being openly offered to walk-in customers and several methods were suggested.
These included accepting huge amounts of cash and investing it in insurance products and gold, splitting the money (black) into tranches and, thus, allowing it to get it into the banking system without detection.
It also included using the bank’s “sundry” accounts and getting demand drafts made for the client to facilitate investment without it showing up in the client’s account.
According to the online magazine, its investigations show violations of income tax act, foreign exchange management act, RBI regulations, KYC norms, the banking act and prevention of money laundering act.
Although there was no official word from the central bank, sources said the Reserve Bank of India was investigating possible KYC violations by certain lenders.
The Central Board of Direct Taxes is also believed to have launched an investigation into the matter.
Stocks of these three banks dropped on the bourses after the news broke. But they recovered after data showed lower core inflation, brightening the prospects of a rate cut by the RBI next week.
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