Investigative website Cobrapost has taken strong exception to Deputy Governor KC Chakrabarty’s clean chit to private banks on allegations of money laundering, saying his statement is premature, presumptive and preposterous aimed at sweeping under carpet the alleged involvement of the banking majors in money laundering.
Cobrapost reminded RBI that India is a signatory to FATF (Financial Action Task Force on Money laundering) and has treaty obligations to block precisely the kind of money laundering that the Cobrapost expose shows, has been happening rampantly in the country’s leading three private banks.
The investigative website, which exposed the money laundering practices at HDFC Bank, ICICI Bank and Axis Bank took strong exception to remarks made by Mr Chakrabarty.
“The manner in which the RBI Deputy Governor has rushed to issue the statement, even before the central bank could complete the inquest it has initiated into money laundering practices by the three banks, even before these banks could complete their own investigations into the alleged misdemeanour of their officials, and even before the Income Tax (I-T) Department could come up with its own finding, is tantamount to be self-serving and is a brazen attempt on the part of the deputy governor to not only give these banks a clean chit but also mask the miserable failure of the banking regulatory mechanism of the RBI,” Cobrapost said in a release.
Earlier RBI Deputy Governor KC Chakrabarty’s on March 21, 2013, with regard to the Cobrapost expose on the money laundering practices of HDFC Bank, ICICI Bank and Axis Bank. Chakrabarty had said: “There is no scam (that) has happened ... As no transaction has taken place. let us not unnecessarily downgrade ourselves. Our system to prevent money laundering is perfect ... absolutely nothing (wrong with it).”
Refuting this statement the website said that Mr Chakrabarty’s statement is “premature, presumptive and preposterous aimed at sweeping under carpet the alleged involvement of the banking majors in money laundering.
“For the RBI to say that there is no offence as there was no transaction is a very novice reading of the law and a wilful ignorance of rules and regulations supposed to be crafted and implemented by the RBI itself,” added the release.
“India is a signatory to Financial Action Task Force on Money laundering or FATF and thus has treaty obligations to block precisely the kind of money laundering that the Cobrapost exposé shows has been happening rampantly in the country’s leading three private banks,” the website reminded Reserve Bank of India.
Cobrapost said its “Operation Red Spider” clearly showed that the RBI and the Financial Intelligence Unit of the finance ministry have failed in their jobs and instead of heads rolling there the RBI is intent on diluting the nature of what has been found and saving its own skin.
“Perhaps the banking regulatory and supervision functions should be taken away from the RBI and a new agency created for the same,” it added.
Cobrapost’s investigation conducted in five zones across several branches of these banks and their affiliates like insurance companies revealed following facts...
“These money laundering practices are part of a standard set of procedures within these banks; These money laundering services are being openly offered to even walk-in customers who wish to launder their illicit money; A variety of options for laundering ill-gotten cash are being offered brazenly; These money laundering services are being offered practically as a standard product across the country.”
Cobrapost said its investigation found that banks and their managements systematically and deliberately violate several provisions of the I-T Act, Foreign Exchange Management Act (FEMA), RBI regulations, know your customer (KYC) norms, the Banking Act and Prevention of Money laundering Act (PMlA) with utter disregard to consequences, driven by their desire to boost cheap deposits and thereby increasing their profits.
Post expose, ICICI Bank ltd suspended 18 employees pending investigation of their role in an ongoing money-laundering probe in the bank, while HDFC Bank ltd and Axis Bank ltd are conducting an internal investigation.