In response to the Cobrapost's March sting alleging money laundering by certain banks, the Reserve Bank of India (RBI), having finished its own investigations, on Monday imposed penalties up to Rs 5 crore on top private banks citing negligence of ‘Know Your Customer' or KYC norms.
Axis Bank was charged with the highest penalty of Rs 5 crore, followed by HDFC Bank with Rs 4.5 crore and ICICI Bank with Rs 1 crore.
This also marks the increase in the upper limit of penalty amount from Rs 1 crore that was typically imposed on banks for KYC violations in the past.
The banking regulator denied finding any prima facie evidence of money laundering. “However, any conclusive inference in this regard can be drawn only by an end-to-end investigation of the transactions by tax and enforcement agencies,” said the RBI.
It further said that the three banks had violated a number of KYC norms. These include non-observance of safeguards in respect of arrangement of ‘at par’ payment of cheques drawn by cooperative banks, non-adherence to risk categorisation and periodical review of risk profiling of account-holders.
The RBI said that banks did not adhere to KYC norms or verification procedures in relation to walk-in customers for sale of third-party products and sale of gold coins.
Also, they failed to file cash transaction reports in some cases. They did not obtain permanent account number or PAN card details or Form 60/61 as required. The source of funds of a few non-resident ordinary accounts was not verified.
The RBI said that similar scrutiny was conducted at corporate offices of 36 other banks during the past two months. “The process of follow up action in respect of these banks is at different stages of its completion,” said the banking regulator.