SBI, ICICI, other banks see hike in suspicious transactions: Report

Top banks including SBI and ICICI banks in India have been witnessing a hike in doubtful cash transactions and overseas transfers by companies since the Covid-19 pandemic began.

State Bank of India (SBI), Bank of Baroda, ICICI Bank, and HDFC Bank have started marking transactions that flout the traditional pattern of their organisations. They are specifically keeping such companies on their radar that have been demonstrating a hike in deals with unrelated services and goods, as well as those that are demonstrating a huge outflow of money to foreign countries, according to a report by The Economic Times.

“Since April some of the top banks have seen a jump of around 30 per cent and in some cases even 50 per cent where they have come across as suspicious patterns,” a source familiar with the situation told the publication.

According to the report, the central agency, Financial Intelligence Unit (FIU), has been monitoring several such transactions and has pulled up a few large public sector banks (PSBs) for dealing with red flags ‘casually’. As per regulations, it is mandatory for banks, non-banking finance companies and insurance companies to report to the FIU directly in case they notice any kind of suspicious transactions. On an average, the FIU receives around one million suspicious transaction reports.

KV Karthik, partner, financial advisory services, at Deloitte India told the publication that it is easy to take advantage of the current situation to mask suspicious transactions due to the pandemic-related change in transaction trends and patterns. “With supply chains being altered, payment flows are also not following traditional transaction patterns and this can affect the current profiling rules for transactions monitoring,” he added.

Conventionally, banking systems raise an alert as soon as it notices a shift or change in consumer behaviour. However, when there is no change in consumer behaviour, the banks only red-flag transactions that they deem as suspicious.

“With increased volumes and the changing pattern of customer behaviour, detecting money laundering ‘red flags’ using traditional rule-based transaction monitoring solutions can be increasingly difficult,” Karthik of Deloitte added.