Demonetization: 50 bank branches under scanner for money laundering, hawala dealings

The Enforcement Directorate is conducting inquiries on the records of atleast 50 bank branches across lenders in the country to check money laundering and hawala dealings in the aftermath of demonetization, a PTI alert said. 

"ED conducting enquiry of records in over 50 bank branches across country to check money laundering, hawala dealings," the alert said. 

The inquiries will ascertain if there have been any violations of the Foreign Exchange Management Act (FEMA) under the Prevention of Money Laundering Act (PMLA). 

There are suspicions that certain bank managers and employees have been helping hoarders of undisclosed income convert their black money into white. The ED has already arrested two managers of Axis Bank in New Delhi and 19 others were suspended by the bank for allegedly being involved in illegal activity after demonetization, another PTI report said. 

Now, Axis Bank has hired KPMG to run an internal forensic audit to check such activities. "Post demonetization, bank is working round the clock to enhance its processes so that rules are adhered to. As many as 125 senior level officials are monitoring activities across the country, Axis Bank Executive Director Rajesh Dahiya said. 

Sources said that the ED was keeping a tab on those account holders who deposited huge amounts at one time, ANI said. 

The government moved to de-legalise the use of Rs 500 and Rs 1,000 notes in a bid to clampdown on black money in the economy and to stem terror funding. The move took out Rs 14 lakh crore from the economy overnight, the value of the high-denomination notes in circulation. The government had expected that around Rs 3 lakh crore of the discontinued currency may not come back into the banks as deposits, rendering that much black money useless. However, according to the last estimates over Rs 11 lakh crore was already back into the banks, and it was now not unlikely that nearly all the currency may come back into the banking system, raising suspicions that black money hoarders had found a way to convert their illicit income into deposits. 

However, Revenue Secretary Hasmukh Adhia said on Tuesday that merely depositing black money into the bank account doesn't make it white. "Do you think that by simply depositing the money in a bank account makes black money into white? It doesn't. It will become white when we charge taxes, when the income tax department is able to reach to them and issue them a notice."

He was speaking to reporters on the sidelines of the two-day meeting of BRICS revenue heads in Mumbai. 

ED chief Karnail Singh, however, instructed his officers to ensure that the routine work of banks was not disrupted by the inquiries and customers were not inconvenienced.