Three top private banks accused of money laundering

The country's three largest private banks were on Thursday accused of indulging in money laundering both within and outside with an online portal claiming that a sting operation conducted by it has revealed a scam.

New Delhi: The country's three largest private banks were on Thursday accused of indulging in money laundering both within and outside with an online portal claiming that a sting operation conducted by it has revealed a scam.

The portal Cobrapost played the contents of purported video recording of officials of HDFC, ICICI and Axis bank allegedly agreeing to receive unverified sums of cash and put them in their investment schemes and benami accounts in violation of anti-money laundering laws.

The footage taken in 'Operation Red Spider', purportedly shows a number of senior executives of the three banks verbally agreeing to take huge amounts of cash from the undercover reporter and putting them into a variety of long-term investment plans so that the black money ultimately is converted into white.

However, no account was opened nor any cash deposited in these banks.

As news of the story created flutters, Fiance Minister P Chidambaram said two of the banks have denied the charges and added government would not jump to conclusions.

The three banks issued statements saying they will investigate the charges. However, all the three banks claimed they conduct their business in compliance with legal and regulatory requirements of the highest standards.

The CBDT also said that it has taken cognisance of the sting operation and has begun a probe into it.

Addressing a press conference, Cobrapost Editor Aniruddha Bahal said that "Indian banks are behaving as Switzerland banks now. Our reporter gave calls to numerous branches of these banks spread across the country and they were ready to accept cash in clear violation of the Know Your Customer norms."

"Our sting shows the banks are ready to take cash and invest them in their numerous investment schemes and under benami names," Bahal said.

"The banks are in clear violation of anti-money laundering and Income Tax rules in the country. They are running a parallel economy and doing the criminal act of converting blackmoney into white," he claimed.

Bahal said the sting was conducted over a period of 5-6 months by a single reporter over dozens of branches of these banks in various cities of the countries.

The bank officials, the sting shows, were also not bothered to know the source of income of the cash even it was from ministers and politicians and would waive the requirements of KYC norms or PAN card.

Bahal said the undercover reporter approached the bank officials fronting as a politicians' man and the banks were even ready to send a agent to collect the cash from the house.

In his reaction, Chidambaram said he had spoken to CMDs of two banks who told him that "this is a completely incorrect story".

"They will issue statement by the end of the day and send me a copy. Both denied it and the third chairperson is out of the country," he said.

Asked whether the Enforcement Directorate would take action, the minister said "we are not media. We don't jump to conclusions in minutes."

CBDT Member (Investigations) K V Chowdary in Mumbai said the department has "taken cognisance of the Cobrapost story and have begun a probe in the matter."

The HDFC bank said in a statement that the matter will be probed on top priority.

"We are concerned at the allegations that have appeared in the media. The matter is being investigated on top priority. The bank has a well-defined Know Your Customer (KYC) and Anti Money Laundering (AML) policy which contains procedures and controls to identify and prevent the types of transactions mentioned in the Cobrapost press release.

"Segregation of frontline sales activities and back office operations and post transaction monitoring processes are in place to ensure independent checks and balances and adherence to all the laid down policies and procedures of the bank. Any deviation is viewed very seriously and stringent action is taken both at an organisational and employee level," the bank said in a statement.

HDFC added that they "would like to assure our customers and other stakeholders that the bank has always adhered to the highest standards of compliance and corporate governance and will continue to do so."

The ICICI bank said they have constituted a high-level inquiry and a report in this regard will be submitted in two weeks.

"ICICI group conducts its business with the highest level of compliance to legal and regulatory requirements. All employees of the group are trained and required to adhere strictly to the Group Code of Conduct, including AML and KYC norms.

"We have demonstrated our commitment to this by following a zero tolerance policy towards any violation. We are deeply concerned with the media reports. We want to assure our customers and all stakeholders that we are committed towards adherence to the high standards of business conduct, which is expected of us. We have constituted a high level inquiry committee to investigate into the matter and submit its findings in 2 weeks," ICICI said.

Axis bank also promised an investigation into the sting story.

"Axis Bank has systems and processes that are robust and fully compliant with extant regulations. We will examine whatever information that is brought to our notice and investigate thoroughly. The bank has built a strong customer franchise over the years and maintains high corporate governance standards.

"Any deviations to such standards are viewed very seriously. Best practises across businesses are followed by the bank and we are confident that all our businesses will live up to the high standards we have set for ourselves as a bank," it said in a statement.