Stung by Cobrapost second expose, the Finance Ministry today directed state-owned banks and LIC to take punitive action against erring employees.
The Ministry asked all state-owned entities named in the sting operation to initiate an inquiry and complete it quickly.
The names include State Bank of India, Life Insurance Corporation, Punjab National Bank, Canara Bank and private sector players such as YES Bank, Reliance Life, TATA AIA Life, and Birla Sunlife Insurance.
Revealing the findings of its operation codenamed Red Spider Part 2, Cobrapost alleged that 23 major Indian banks (public and private) and insurance companies are running a money-laundering racket.
Cobrapost has captured on video-tape how employees of banks and life insurers are helping customers launder unaccounted cash, bypassing KYC (know-your-customer) norms. They offer to invest unaccounted cash in products that form part of the regular financial system and help launder the unaccounted money, it alleged. The laws violated include the Prevention of Money Laundering Act, the Income Tax Act and the Indian Penal Code, it said.
Reacting to the expose, Financial Services Secretary Rajiv Takru advised public sector banks that any officer/employee who clearly appears to be advising potential customers along lines that could facilitate money laundering may be placed under suspension, pending inquiry.
Also, where an officer/agent fails to meet the required standards of conduct and behaviour and brings disrepute to the institution, the person may be divested of work and advised to proceed on leave while an inquiry is conducted, Takru advised. He also asked for a detailed report with the name of the employee/ designation and action taken.
State Bank of India Chairman Pratip Chaudhuri said an internal enquiry has already been initiated. He, however, said there was no indication of any violation of money-laundering laws although one would have to wait for the inquiry report.
Chaudhuri said SBI has “zero tolerance” for money-laundering and that severest action will be taken against erring employees. Yet, he made clear that SBI was not responsible for ensuring that the money deposited with the bank was “tax clear”.
As part of KYC, SBI looks at the depositors’ identity and residence proof. But it is the job of the I-T Department to see if the monies deposited in banks are ‘tax-paid’ or not, he noted. SBI was also regularly filing cash transaction reports and suspicious transaction reports to the Finance Ministry’s financial intelligence unit.
M. Narendra, CMD, Indian Overseas Bank, said the bank was inquiring about two lower-level officers identified in the Cobrapost expose. “However, no such instances or violations have occurred, as claimed by Cobrapost. Action can be taken once we identify any wrongdoing. Moreover, after this, we will reiterate the same guidelines across the bank branches.”
K.C. Chakrabarty, Deputy Governor, Reserve Bank of India, said the RBI had not found any irregularities as alleged by Cobrapost’s earlier expose.
“There are certain differences in reporting of KYC norms. We are seeing how banks are following up. Based on this, we will issue show-cause notices and action will be taken. We need to strengthen KYC guidelines and respective departments have to take action.”