“Account caching” was the way. The Reserve Bank of India (RBI), which had initially rubbished allegations by online portal Cobrapost.com about three of India’s largest private banks — ICICI Bank, Axis Bank and HDFC Bank — indulging in money laundering, has now found violations by banks in this regard.
A number of accounts were created without verifying the addresses of several people. “In some cases, accounts have been opened bypassing identification procedures,” said RBI Deputy Governor K C Chakrabarty, speaking to Deccan Herald from Mumbai on Thursday.
“We have found instances of banks having flouted know-your-customer (KYC) norms and certain other rules pertaining to creating Non-Resident Ordinary (NRO) accounts, but there is no money laundering. People of the country should continue to go to banks and carry out transactions,” he said.
An RBI source added that a report in this connection has been submitted to the Union Finance Ministry. “The said banks have been found to have violated several norms put in place to prevent money laundering,” the source said.
However, in line with what the RBI has been maintaining since the issue surfaced earlier this year, Chakrabarty ruled out any instance of money laundering.
When pointed out that the report had cited some private banks as failing to detect several large transactions, he retorted, “It is clear that there is no money laundering. Where has the money reached terrorists?”
However, sources pointed out that the RBI report found banks opening NRO accounts without enquiring into the source of funds, a mandatory norm while checking for laundering.
An NRO savings account helps manage local rupee earnings in India, even as the account holder lives abroad. And, banks provide an easy redesignation of the account in case one changes the status from resident to non-resident.
While RBI continues to maintain that there has been no money laundering activity by private banks, sources pointed out that the very norms alleged to have been violated by them were put in place by RBI to prevent money laundering.
Among the many circulars RBI has issued on the matter, one on April 1, 2013, while terming the KYC norm synonymously with Anti-Money laundering (AML) standards, reads, “...accordingly, KYC verification of all the members need not be done while opening the savings bank account”.
It also prescribes that these norms be followed for combating of financing of terrorism. “This is obligatory for banks to follow under the Prevention of Money Laundering Act, 2002,” the source added.
