After shock of Cobrapost Sting Operation

Fines for non compliance of KYC norms !!

Date : 15 Jul 2013

RBI penalises 22 Banks

The Reserve Bank of India has imposed monetary penalty on the following 22 banks for violation of its instructions, among other things, on Know Your Customer/Anti Money Laundering. The details are: Monetary Penalty Sl. No. Name of the bank Penalty Amount (in ` crore) 1 Andhra Bank 2.50 2 Bank of Baroda 3.00 3 Bank of India 3.00 4 Canara Bank 3.001 5 Central Bank of India 3.00 6 Deutsche Bank A.G. 1.00 7 Development Credit Bank Ltd. 1.00 8 Dhanlaxmi Bank Ltd. 2.00 9 Indian Overseas Bank 3.002 10 ING Vysya Bank Ltd. 1.50 11 Jammu & Kashmir Bank Ltd. 2.501 12 Kotak Mahindra Bank Ltd. 1.501 13 Oriental Bank of Commerce 2.00 14 Punjab and Sind Bank 2.50 15 Punjab National Bank 2.50 16 State Bank of India 3.00 17 The Federal Bank Ltd. 3.00 18 The Lakshmi Vilas Bank Ltd. 2.50 19 The Ratnakar Bank Ltd. 0.50 20 United Bank of India 2.50 21 Vijaya Bank 2.00 22 Yes Bank Ltd. 2.00 In respect of seven other banks, as indicated below, where such scrutinies have been conducted and banks’ explanation called for, the banks’ written or oral submissions were found to be satisfactory or no violation of serious nature has been established. It has, therefore, been decided not to impose any monetary penalty but to issue only suitable cautionary letters. Cautionary Letter Sl. No. Name of the bank 1 Barclays Bank PLC 2 BNP Paribas 3 Citibank N.A. 4 Royal Bank of Scotland 5 Standard Chartered Bank 6 State Bank of Patiala 7 The Bank of Tokyo Mitsubishi UFJ Ltd. A similar scrutiny was also conducted in seven other banks during April and May 2013. The process of follow up action in respect of those banks is at different stages of its completion. The penalties have been imposed in exercise of powers vested in the Reserve Bank under the provisions of Section 47(A)(1)( c ) read with Section 46(4)(i) of the Banking Regulation Act, 1949. Background It may be recalled that the Reserve Bank of India had carried out a scrutiny of books of accounts, internal control, compliance systems and processes of these banks at their offices during April 2013. The scrutiny of these banks revealed violation of certain regulations and instructions issued by the Reserve Bank of India, namely, non-adherence to certain aspects of know your customer (KYC) norms and anti money laundering (AML) guidelines like customer identification procedure, risk categorisation, periodical review of risk profiling of account holders, periodical KYC updation; non-adherence of KYC for walk in customers including for sale of third party products, omission in filing of cash transaction reports (CTRs) in respect of some cash transactions, sale of gold coins for cash beyond ` 50,000; non-adherence to instructions on monitoring of transactions in customer accounts; non-adherence to instructions on classification of accounts as ‘in-operative’/dormant and lapses in monitoring of transactions in dormant accounts; non-adherence to instructions which prohibits acceptance of cash above ` 50,000 from customers for sale of gold coins and issue of Demand Drafts, etc.; non-adherence to instructions on the upper limit for remittances under Liberalised Remittance Scheme, upper limit for repatriation of funds from non resident ordinary (NRO) accounts; non-adherence to instructions on import of gold on consignment basis. The investigation did not reveal any prima facie evidence of money laundering. However, any conclusive inference in this regard can be drawn only by an end to end investigation of the transactions by tax and enforcement agencies. Based on the findings of the scrutiny, the Reserve Bank issued a show cause notice to each of these banks, in response to which the individual banks submitted written replies. After considering the facts of each case and individual bank’s reply, as also, personal submissions, information submitted and documents furnished, the Reserve Bank came to the conclusion that some of the violations were substantiated and warranted imposition of monetary penalty. The Reserve Bank penalised the first lot of three banks, on June 10, 2013. Alpana Killawala Chief General Manager The 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. It also gave cautionary letters Citibank, Standard Chartered Bank, Barclays Bank, BNP Paribas, Royal Bank of Scotland, Bank of Tokyo Mitsubishi and State Bank of Patiala A penalty of Rs. 3 crore each has been imposed on State Bank of India (SBI), Bank of India, Canara Bank, Bank of Baroda, Central Bank of India, Indian Overseas Bank and Federal Bank. The United Bank of India, Lakshmi Vilas Bank, Punjab National Bank, Jammu & Kashmir Bank and Andhra Bank were slapped a penalty of Rs. 2.5 crore each.  A penalty of Rs. 2 crore each was imposed on Yes Bank, Vijaya Bank, Oriental Bank of Commerce and Dhanlaxmi Bank. The other banks which were penalised by the RBI include Deutsche Bank, Development Credit Bank, ING Vysya Bank, Kotak Mahindra Bank and Ratnakar Bank. . Following probe into charges levelled by an online portal Cobrapost, RBI has earlier imposed fines totalling Rs. 10.5 crore on top three private lenders — Axis Bank, HDFC Bank and ICICI Bank. Although the investigation did not reveal any prima facie evidence of money laundering, the RBI said that “any conclusive inference in this regard can be drawn only by an end-to-end investigation of the transactions by tax and enforcement agencies.” RBI said it had conducted probe into allegations against seven other banks during April and May, 2013 and the follow up action were at different stages.  The penalty on 22 banks follows scrutiny carried out by RBI of books of accounts, internal control, compliance systems and processes of these banks at their corporate offices and some branches during April 2013. The scrutiny was conducted to probe allegations of contravention of Know Your Customer (KYC)/anti—money laundering guidelines against them following the expose. The violation also include non—adherence to instructions on import of gold on consignment basis, limits on remittances under Liberalised Remittance Scheme and repatriation of funds from non—resident ordinary (NRO) account. RBI had launched the investigation into the working of banks following the expose by Cobrapost which purportedly showed some bankers giving suggestions to customers on ways to bypass regulatory norms. The first expose had named ICICI Bank, Axis Bank and HDFC Bank. Later, many other public and private sector banks and insurance companies figured in the expose.