Monday, May 6, 2013

23 financial institutions including SBI, LIC violating KYC norms: Cobrapost


Several top financial institutions in the country, including State Bank of India BSE 0.39 % and Life Insurance Corporation, allegedly offered to launder money by sidestepping regulation, a sting operation has claimed. The sting operation, carried out by investigative website Cobrapost, caught on tape bank employees offering to put aside the know-your-customer (KYC) norms to open bank accounts and deposit cash in various investment instruments without proper documents.

KYC is one of several norms put in place to check tax evasion and money laundering. \"Twenty-three major Indian banks, both public and private, and insurance companies are running a nationwide money laundering racket, blatantly violating the laws of the land,\" Cobrapost said in a press release on Monday, nearly two months after making a similar accusation against three private banks.

The finance ministry moved quickly to issue a statement saying public sector banks and Life Insurance Corp, the country\'s largest insurer, have been asked to suspend any employee who can be identified in the Cobrapost video as appearing to advise potential customers in violation of existing banking norms.

\"The bank may initiate a detailed scrutiny of such officer\'s work and institute a special audit, if necessary, for this purpose. The inquiry must be initiated and completed expeditiously,\" the statement said.

The other banks named in Cobra post\'s latest expose are Bank of Baroda, Punjab National Bank BSE -1.04 %, Canara Bank BSE -0.77 %, Indian Bank, Indian Overseas Bank, IDBI Bank BSE -1.57 %, Oriental Bank of Commerce, Dena Bank BSE 0.88 %, Corporation Bank, Allahabad Bank, Central Bank of India BSE -0.29 %. The private banks named are Yes Bank, Dhanlaxmi Bank BSE 0.44 %, Federal Bank, DCB Bank. Besides LIC, the portal\'s list of erring insurers includes Reliance Life Insurance, Birla Sun life and Tata AIG.

The Cobrapost expose prompted financial services secretary Rajiv Takru to call for a detailed report on the matter. \"I have asked IBA (Indian Banks\' Association) to look into the Cobrapost allegations,\" Takru said.

Providing the details of the methods suggested by banks and insurers to convert black money into white, the portal provided a list of 23 banks and insurance companies that had offered help to investigators who were posing as clients. SBI chairman Pratip Chaudhuri said the bank has not suspended any employee named in the expose by the investigative portal.

\"We have to find out the real facts first. I have seen that (expose). It is quoted out of context by some manager. So we are holding a meeting in the afternoon. From our side, we are very clear that there is zero tolerance for any money laundering or working around the KYC,\" Chaudhuri said, adding that the bank reports all transactions to the financial intelligence unit (FIU).

In a statement issued the same day, IRDA said, \"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.\" Bank of Baroda BSE -0.18 % said that deviation from the bank\'s guidelines, if any, will be dealt with as per established procedure.

LIC said its IT system does not accept cash transactions over Rs 50,000 without a customer\'s permanent account number (PAN). \"In addition, regular reporting is made to the financial intelligence unit where cash is received beyond Rs 5 lakh.\"

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