Mumbai: The recent case of Union Bank of India getting caught in the crossfire in the Madhu Koda episode has put banks on high alert and most are looking to tighten their scrutiny of transactions, especially those involving large cash movement, senior bank officials said.
"Banks are asking even long-time customers like us to now provide additional details on our cash deposits. In bullion trade it is common to have large cash dealings, but because of the recent Madhu Koda issue, our normal business operations have been slowed down," said Darpan Dalal, proprietor of Suvarna Jewellers.
Balaji Bullion was allegedly used as a front organisation by former Jharkhand chief minister Madhu Koda and his aides to deposit money that was allegedly made from scams. Even the Reserve Bank of India has spared no time to reiterate its know-your-customer and anti-money laundering norms.
On Thursday, RBI asked banks to furnish a suspicious transaction report (STR) to the Financial Intelligence Unit-India (FIU-I) within seven days of arriving at a conclusion that a cash or non-cash "transaction, including attempted transaction, or a series of transaction integrally connected, are of suspicious nature."
Banks are also bound to report any transaction of Rs 10 lakh and above to the FIU-I.
"In the view of the recent occurrence and controversy, we are going to enact a lot of measures to further tighten our security systems," S Raman, executive director at Union Bank of India said. He reiterated that the bank had adhered to all existing know-your-customer (KYC) and anti-money laundering guidelines in its dealings with the large cash transactions of nearly Rs 1,000 crore in the account.
Another official with Union Bank of India said it was looking at even hiring an external professional consultant for evaluations of all its systems and processes when conducting both cash and non-cash transactions.
Bankers pointed out that such large cash transactions were commonplace in bullion trade, but scrutiny over these needs to be tightened after the Koda episode. Andhra Bank CMD R S Reddy said there were enough safeguards in place and "systemically there is no way a bank can hide such suspicious dealings." "All banks, including us, now have robust monitoring systems.
All KYC and AML norms are followed and robust vigilance is employed. In case of minor defects, these issues can be handled by the banks as the existing norms are fairly strict," he said.
Andhra Bank is also working towards sensitising its branch-level staff, especially those dealing with bullion traders, in terms of norms necessary for such dealings, Reddy said.
"We have systems of automatic reporting of any transaction over Rs 10 lakh and the systems are already in place to throw up any suspicious dealing," S C Gupta, CMD of
United Bank of India, said.
Some bankers said government's diktat to Union Bank for conducting an audit of all its accounts for such dealings was a little harsh as it would be difficult to accurately study very old transactions. "Banks do adhere strictly to KYC norms. This is not a serious concern," said K R Kamath, CMD at Punjab National Bank.
"It becomes difficult in case of old accounts. Bullion trading mostly happens in cash. But that doesn'tmean norms are not followed," he said. Kamath said such cases were one-off and all banks have adequate systems in place to prevent such acts.


