The Reserve Bank of India has asked banks to carry out better customer due diligence and maintain details of third party products sold by them, on the back of allegations, by online magazine Cobrapost, of money laundering by three top private banks.
“The RBI recently undertook investigations in the light of reported allegations that certain banks were involved in structuring transactions to aid tax evasion and fraudulent transfer of funds. The investigations revealed the need for better regulatory compliance by banks,” the central bank said in its annual monetary policy statement.
Cobrapost had claimed that ICICI Bank, HDFC Bank and Axis Bank and their insurance affiliates laundered money as part of their standard operating procedures.
“During the investigations…it was observed that banks are not carrying out customer due diligence as required under KYC/AML/CFT guidelines while marketing and distributing third party products as agents. Some banks are also not filing Cash Transaction Reports (CTRs) or Suspicious Transaction Reports (STRs) in such cases, wherever required,” the RBI said.
The RBI has asked banks to ensure segregation of the marketing function from the approval/transactional process at bank branches and ensure that its employees do not receive cash/non-cash incentives directly from insurance companies, mutual funds and other third party product providers. It has also asked banks to maintain a board-approved policy to avoid mis-selling and conflict of interest in marketing and distribution of own or third party financial products.
The regulator will also issue guidelines on wealth management services offered by banks in June.