Three public sector banks -- Bank of Maharashtra, Dena Bank and Oriental Bank of Commerce -- have been imposed with a monetary penalty of Rs 1.5 crore each by the Reserve Bank of India (RBI) for violation of know your customer (KYC) and anti money laundering (AML) norms.
Three public sector banks -- Bank of Maharashtra, Dena Bank and Oriental Bank of Commerce -- have been imposed with a monetary penalty of Rs 1.5 crore each by the Reserve Bank of India (RBI) for violation of know your customer (KYC) and anti money laundering (AML) norms.
dna was the first to report on the fixed deposit (FD) scam involving Dena Bank and Oriental Bank of Commerce on August 20, 2014, where branch managers mobilised FDs involving middlemen. The dna report had quoted a finance ministry document which said Oriental Bank scam involved FDs to the tune of Rs 256.49 crore from seven corporates and the Dena Bank FD scam involved a FD of Rs 180 crore.
RBI scrutiny trailed the modus operandi of the alleged frauds involving accounts of certain organisations in these banks, deficiencies and irregularities while opening Fixed Deposits (FD) and extending Overdraft (OD) facility. The scrutiny was based on the complaint received by the RBI from a private organisation.
An investigation into the fixed deposits opened in its name in Mumbai-based branches of certain public sector banks was undertaken in July 2014.
Eight other banks -- Central Bank of India, Bank of India, Punjab and Sind Bank, Punjab National Bank, State Bank of Bikaner & Jaipur, UCO Bank, Union Bank of India and Vijaya Bank -- have been cautioned to put in place appropriate measures and review them from time to time to ensure strict compliance of KYC requirements in future.
The central bank did not penalise these banks as they offered satisfactory explanations which the regulator found reasonable. RBI said in a release, "This action is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank and its customers."
Banks were violating RBI's instructions regarding opening of FD accounts and granting overdrafts without due diligence or process. The scrutiny also found weaknesses in the internal control systems, management oversight, use of internal accounts for parking customer funds and involvement of middlemen/intermediaries in opening of accounts as also subsequent operations in those accounts.
After considering the facts of each case and individual bank's reply, as also, personal submissions, information submitted and documents furnished, the Reserve Bank came to the conclusion that some of the violations of serious nature were substantiated and warranted imposition of monetary penalty.
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