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Updated: July 15, 2013 23:45 IST

RBI fines 22 banks for violating KYC, anti-money laundering norms

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Reserve Bank of India (RBI) on Monday imposed fines totalling Rs 49.5 crore on 22 private and public sector banks including SBI, PNB and Yes Bank for violating KYC/anti-money laundering norms. File photo: P.V. Sivakumar
The Hindu
Reserve Bank of India (RBI) on Monday imposed fines totalling Rs 49.5 crore on 22 private and public sector banks including SBI, PNB and Yes Bank for violating KYC/anti-money laundering norms. File photo: P.V. Sivakumar

The Reserve Bank of India (RBI), on Monday, penalised 22 banks by imposing fines for violating Know-Your-Customer (KYC) norms and anti-money laundering guidelines. The list includes banks such as SBI, Bank of Baroda and Canara Bank all of whom were fined Rs.3 crore each.

The RBI said that it “came to the conclusion that some of the violations were substantiated and warranted imposition of monetary penalty.” The central bank also issued “cautionary letters” to seven other banks including Citibank, Standard Chartered and Barclays as no violation of serious nature by them was established.

The violations by the public sector banks were revealed in a sting operation by online portal, Cobrapost, reported in May.

Though it imposed penalties, the RBI said that its investigation did not reveal any prima facie evidence of money laundering. Any conclusive inference in this regard can be drawn only by an end to end investigation of the transactions by tax and enforcement agencies, the central bank statement said.

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22 Banks have flouted the laid down guidelines under KYC & AML. It
shows that banks simply bury the RBI guidelines and try following who-
cares-for-all-these-things attitude. Every year when RBI reviews the
performance under KYC and AML, many banks are penalised.Poor branch
managers in order to reach business targets imposed on them do err
under pressure and ultimately these are the poor souls who become
victims when top level senior officers get escaped. The instructions
issued by RBI for KYC norms are crystal clear and when the banks
violate, they take cent percent risk. Periodical customer
categorisiation according to nature of risks attached, periodcal
monitoring of such categorisation taking into account volume of
transactions in their account vis-a-vis the business, internal
reportings and monitoring of money laundering activities need thorough
overhauling. Banks should adopt full system-driven AML mechanism to
report to RBI without any human intervention is the need of the hour.

Posted on: Jul 16, 2013 at 08:14 IST

RBI is doing commendable job. This can be an example for the government
to take it further.

from:  sanjay
Posted on: Jul 15, 2013 at 20:25 IST

What happened to money laundering activity by HSBC which was caught red-handed and evidence provided by US to Indian Govt?

Is Indian Govt and RBI scared to act against HSBC?

from:  praveen kumar
Posted on: Jul 15, 2013 at 20:12 IST

What is the earthly or heavenly purpose in penalising the banks? A bank is, after all, an inanimate entity and it cannot commit any crime by itself. If the bank is penalised, the penalty will fall ultimately only on the share-holders in the case of private banks and on the share-holders as well as the taxpayers in the case of the PSU banks. Natural justice demands that the top managers of the banks, including their Chairmen/CEOs, should be penalised instead. Their fat salaries must be docked and promotions and annual increments of other concerned senior managers must be denied. In the case of the recent LIBOR manipulation scandal in the UK, both the Chairman and the CEO of Barclays Bank which was involved in the scam, were both asked to resign forthwith. Both the honchos, of course, claimed total ignorance of the fraudulent activities of their subordinates but that did not cut any ice with the Bank of England authorities.

from:  V Nagarajan
Posted on: Jul 15, 2013 at 19:56 IST

On what basis the fine has been made? Is there any relation with the value of the transaction? Why no action on personnel involved?

from:  M Subbramanian
Posted on: Jul 15, 2013 at 19:35 IST

this does mean that there is some big problem in the banks... this further means that the banks have committed terrible mistake. Now this further means that the banks have to clear the penalty and it will have to do it from their own funds. They should not be using the the money of the public to pay the penalty, neither it should be remitted through the funds availiable with the bank or the profits. but every officer - whether psu or other banks, shud be hunted down for the mistake and the penalty collected from their pockets.... the names of the officers and the penalty collected shoud be made public - the real justice to the faith of the of the investors

from:  Satish
Posted on: Jul 15, 2013 at 19:28 IST

What steps RBI is going to take to ensure that these things are not repeated instead of waiting for another cobrapost sting operation?

If RBI thinks it job is done, it is really fooling itself and the public

from:  Vijay
Posted on: Jul 15, 2013 at 18:44 IST

super action taken by RBI.

from:  muruganandhan
Posted on: Jul 15, 2013 at 16:33 IST

Reserve Bank of India is able to detect the act of money laundering by nationalized banks, private and foreign banks and slap fines only after Cobra Post, an online portal exposed the wrong doings of the banks. Money laundering is very serious. It should be fully stopped, condemned and very heavy fines must be levied on the banks. The officers who are found guilty in commission of this act must be summarily dismissed and punished. Regulatory bodies like RBI must exercise effective control on matters like this.

from:  Nathan
Posted on: Jul 15, 2013 at 16:31 IST

The financial sector mainly the banks have the least respect for the Rules laid down by RBI or the finance ministry. The penalty imposed is so weak that other banks might consider jumping inot the bandwagon since the returns are much higher.
The internal and external auditors should be taken to the court and their professional memberships cancelled.
The managing directors and the chief accountants have to make good the loss by paying the penalty out of their pension, PF or personal assets. It goes without saying they have to be sacked forthwith.

from:  mani sandilya
Posted on: Jul 15, 2013 at 15:40 IST
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