The Reserve Bank of India (RBI) today penalised the country’s top three private lenders – ICICI Bank, HDFC Bank and Axis Bank – for violating its instructions on know-your-customer (KYC) and anti-money laundering (AML) guidelines.

• Axis Bank has been fined Rs 5 crore,
• HDFC Bank Rs 4.5 crore and
• ICICI Bank Rs 1 crore.

RBI carried out a scrutiny of the books of accounts, internal control, compliance systems and processes of these three banks following allegations that these lenders were running a money-laundering racket in India.

“The scrutiny of these three banks revealed violation of certain regulations and instructions issued by the Reserve Bank of India,” the central bank said.

RBI said while investigations did not reveal any prima-facie evidence of money laundering, any conclusive inference can only be drawn by an end-to-end probe of the transactions by tax and enforcement agencies.

The central bank noted that ICICI Bank, HDFC Bank and Axis Bank violated instructions on non-adherence of safeguards on issuing ‘at par’ cheques through co-operative banks and did not adhere to certain aspects of KYC and AML norms. KYC of walk-in customers were not done for sale of third party products.

Also, the three banks did not file some cash transaction reports and sold gold coins by accepting cash beyond Rs 50,000. Details of customers’ permanent account number (PAN) card or Form 60/61 were not obtained while opening of accounts.

In some cases, source of funds was not ascertained in non-resident ordinary (NRO) accounts. The banks also failed to re-designate a few accounts as NRO accounts although it was required, RBI said.

None of the three banks commented on the fines imposed by RBI.

In a sting operation, online magazine Cobrapost had secretly taped employees of ICICI Bank, HDFC Bank and Axis Bank offering money-laundering as a product. Later, the portal accused 22 other banks (including public sector banks) and three insurance companies of indulging in money-laundering activities.

RBI said it conducted a probe at the corporate offices of 36-odd banks during April and May.

VIOLATIONS FOUND BY RBI
1. Non-observance of certain safeguards in respect of arrangement of “at par” payment of cheques drawn by cooperative banks
2. Non-adherence to certain aspects of know your customer (KYC) norms and anti-money laundering guidelines like risk categorisation and periodical review of risk profiling of account holders
3. Non-adherence of KYC for walk in customers, including for sale of third party products, omission in filing of cash transaction reports in respect of some cash transactions, sale of gold coins for cash beyond Rs 50,000
4. Not-obtaining of permanent account number card details or form 60/61 as required
5. Non-verification of source of funds credited to a few non-resident ordinary (NRO) accounts
6. Failure to re-designate a few accounts as NRO accounts though required, non-submission of proper information called for by the Reserve Bank

http://www.business-standard.com/article/finance/rbi-fines-axis-hdfc-icici-banks-113061000612_1.html