RBI penalises 22 banks for money laundering, violating customer identification rules

The Reserve Bank of India has imposed penalties on State Bank of India,Punjab National Bank and 20 other lenders for violating requirements on customer identification, in probably the single biggest penalisation of the industry. 

The banking regulator found non-adherence to norms at these banks in a scrutiny of their books of accounts and internal control and compliance systems in April 2013. 

The money laundering charges levelled by online portal Cobrapost.com, initially againstAxis Bank, HDFC Bank and ICICI Bank and extended to many later, had prompted the central bank to investigate practices at banks. 

"After considering the facts of each case and individual bank's reply, personal submissions, information submitted and documents furnished, the Reserve Bank came to the conclusion that some of the violations were substantiated and warranted imposition of monetary penalty," it said in a statement issued on Monday. 

Based on the findings, RBI issued show-cause notices to these banks before imposing penalties ranging from Rs 0.50 crore to Rs 3 crore. 

RBI's inquiry did not reveal any prima facie evidence of money laundering. "However, any conclusive inference in this regard can be drawn only by an end-to-end investigation of the transactions by tax and enforcement agencies," it said. 

The central bank found flaws in banks' customer identification procedure, KYC practice for walk-in customers and sale of third party products such as insurance and mutual funds. There were lapses in monitoring of transactions in dormant accounts and in following instructions on import of gold on consignment basis. 

A dozen public sector and ten private banks were at the receiving end of the regulator's stick. Seven banks including Bank of Baroda, Bank of India and Federal Bank were fined Rs 3 crore each while Indian Overseas Bank faced the highest penalty of Rs 3.002 crore. Foreign lender Deutsche Bank was fined Rs 1 crore while Ratnakar Bank faced the lowest fine of Rs 0.50 crore. 

RBI had earlier imposed a Rs 10.5 crore penalty on Axis Bank, HDFC Bank and ICICI Bank, taken together. 

The central bank let off seven other lenders, including BNP Paribas, Citibank and Standard Chartered Bank, with just a warning as it found their explanation satisfactory.

Courtesy : http://economictimes.indiatimes.com