Money laundering charge: FinMin asks banks, LIC to act tough

‘Initiate a detailed scrutiny and institute special audit if necessary’

Updated - November 16, 2021 10:16 pm IST

Published - May 06, 2013 11:55 pm IST - NEW DELHI:

The Finance Ministry, on Monday, asked public sector banks and the Life Insurance Corporation of India (LIC) to take immediate action against employees ‘appear to be advising’ customers on ways of violating KYC (know-your-customer) and other regulatory norms.

“An inquiry must be initiated and completed expeditiously,” Financial Services Secretary Rajiv Takru told the heads of the state-owned banks and LIC.

He asked the CMDs of banks to place under suspension with immediate effect officers and employees “who clearly appear to be advising potential customers along lines that would be an infringement of the legal process/could facilitate money laundering/could defeat the KYC norms or the norms of due diligence prescribed by the RBI and the law.’’

The banks, the Ministry said, should also “initiate a detailed scrutiny of such officers’ work, and institute a special audit, if necessary, for this purpose.’’

Mr. Takru also asked the banks to divest the officials concerned of their current portfolio, and advice them to proceed voluntarily on leave pending investigations.

Seeks report from FIs

Besides, the Finance Ministry has sought a detailed report from financial institutions about the names of erring employees, their designations and action taken against them.

IRDA swings into action

The Insurance Regulatory and Development Authority (IRDA) said it was examining the allegations of money laundering against LIC, Reliance Life, Tata AIA and Birla Sunlife and action would be taken against the guilty at the earliest.

“The insurance companies concerned have been asked to file a report on the allegations. The matter is under examination and appropriate action will be taken at the earliest,” the IRDA said in a release.

LIC said it had effective system for compliance of all statutory and regulatory norms, but added that “in case violation is noticed at any level necessary action will be taken by the corporation.’’

Reliance Life too denied the allegations saying that it adheres to strict internal controls, processes and best practices and is in full compliance with KYC norms and regulatory framework.

It further said: “As part of its ongoing compliance efforts, Reliance Life will continue to examine any specific instances that come to light for appropriate remedial action, if any.”

Tata AIA said: “We have initiated an internal inquiry into this incident and will take appropriate necessary action. Lapses in judgment and deviations from the rules are dealt with strictly.”

No response could be obtained from Birla Sunlife.

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