23 financial institutions named by Cobrapost.
By R Chandrasekaran
CHENNAI: It appears that there are not many takers for Cobrapost’s allegations of money laundering by 23 financial institutions, going by the reaction of the stock market. A second sting operation conducted by the investigative news site has accused leading public sector banks and insurance companies of indulging in money laundering.
The latest revelations are similar to the one published in March, in which it accused three private sector banks, HDFC Bank, ICICI Bank and Axis Bank of money laundering. The second operations has named India’s biggest bank State Bank of India and Life Insurance Corporation of India, among 23 financial institutions.
The website has already indicated that it will expose other banks’ involvement in money laundering. However, this has failed to make any big impact on investors when the stock market opened on Monday. In fact, some of the banking stocks closed slightly higher. This is probably due to no evidence of money transactions in the first revelations but mere conversations. Also, the Reserve Bank of India has said that there was a perfect system in place to prevent money laundering and no transaction took place in the sting operations.
The latest exposure of 23 institutions include, Punjab National Bank, Indian Overseas Bank, Corporation Bank, Bank of Baroda, Federal Bank, Yes Bank, Development Credit Bank, Central Bank of India, Dena Bank, Allahabad Bank, Oriental Bank of Commerce, Canara Bank, Indian Bank, Tata AIG, Birla Sunlife, and Reliance Capital.
Though the RBI has initiated probe into the alleged money laundering following the first exposure in March, it gave more or less a clean chit to the three private sector banks as there was no transaction involved. However, there appeared to be some lapses among the three banks with regard to Know Your Clients (KYC) norms and raised some systemic issues, which are to be addressed.
The RBI Governor Dr. D. Subbarao also indicated last Friday that it was still investigating the issues and that show cause notices would be sent to these three banks. However, he also said there was no transaction of money laundering and that some ‘specific transgressions’ on KYC came to the fore.
Cobrapost’s alleged conversations involve banking executives’ eagerness to attract more business in violation of certain provisions. This includes, helping customers to invest alleged black money in insurance policies and also advise them as to how to avoid income tax scanner. The website expressed doubt whether the central bank will take any tough action against the banks and insurance companies for their alleged money laundering.
ICICI Bank has reportedly admitted instances of some errors and that it was tightening its belt to bring down those errors. While IOB has denied the allegations of Cobrapost, others have indicated that they are enquiring into the alleged exposure.
Meanwhile, RBI’s Deputy Governor K.C. Chakrabarty, said: “We are seeing how the banks are following up on the KYC norms. Based on this, we will issue showcause notices and action will be taken. However, we have verified and not found any irregularities. There are certain differences in the manner of reporting of KYC norms in banks. We need to strengthen KYC guidelines and respective departments have to take action”.
While the sting operations might not have made great impact, its exposure has alerted the banking system to be more transparent in rules in the quest to garner more business.