ICICI, HDFC and Axis Bank in the clear.
R. Chandrasekaran
CHENNAI: The Reserve Bank of India (RBI) has given a clean chit to three private sector banks, ICICI Bank, HDFC Bank, and Axis Bank, charged with money laundering by a sting operation conducted by cobrapost.com. However, its final report would be completed by March 31 and decide about the future course of action thereafter.
The central bank also disclosed that it has a “perfect” system in place to prevent any such money laundering as alleged by the web portal. The RBI said that there was no transaction in the sting operations to suggest money laundering.
Last week, cobrapost.com alleged money laundering scam in a sting operation conducted by it in three private sector banks. The website, which initiated ‘Operation Red Spider’ and recorded the conversations on video, showed its conversations with a number of senior executives on the question of managing black money or investing in the banks’ or holding cash in lockers. But their operations failed to indicate whether any account was opened with the concerned branches of the three banks or cash has been deposited or kept in lockers.
Speaking on Know Your Customer or KYC, the RBI’s deputy governor K.C. Chakrabarthy told the press, “Allegations do not mean flouting norms. There is not a single transaction which has taken place. KYC violations will happen in any system. These are all transactional issues and have nothing to do with money laundering.”
He preferred not to downgrade the system and believed that the current system is perfect to prevent money laundering. However, the central bank is not averse to tightening the money laundering norms if the need arises, he cautioned.
The sting operations allegations have forced all the three banks to take some actions against its staff. While ICICI Bank has suspended 18 of its staff pending enquiry, Axis Bank has moved the staff alleged to have been involved in money laundering by cobrapost.com, to administrative roles. HDFC Bank has also followed suit in a similar action and has appointed Deloitte Touche Tohmatsu India to conduct a forensic audit into the alleged money laundering.
Knowledgeable sources in the banking operations had earlier said that though the exposure was a concern for any bank involved in the sting operations, the conversations of the sting operations looked to expose the loopholes that currently exist in the overall financial system. For instance, a bank may be required to inform the Income Tax office in case a customer deposits more than a specified amount in cash. In the purported sting operations, a branch manager suggests the ‘customer’ or the undercover reporter to deposit cash in installments.
While the management of the banks has taken the sting operations exposure seriously to fix the root cause, it was quite clear that the loose talk engaged by the concerned bank staff might open a Pandora’s box.
Meanwhile, all the private sector banks have also asked their staff to comply with the rules and regulations framed by the central bank and that no deviations will be tolerated.