Citizens' Issues
Cobrapost counters RBI's attempt to defend banks in money laundering charge

In a stinging response to RBI deputy governor Dr Chakrabarty's shocking and sweeping denial of a money-laundering scam, Cobrapost points out that as signatory to Financial Action Task Force on Money Laundering, India and the RBI have a treaty obligations to block precisely the kind of dubious deals exposed by it

Cobrapost.com, which exposed the money laundering practices at HDFC Bank, ICICI Bank and Axis Bank, has taken strong exception to remarks made by Dr KC Chakrabarty, deputy governor of the Reserve Bank of India (RBI) regarding the exposé.

 

“The manner in which the RBI deputy governor has rushed to issue the statement, even before the central bank could complete the inquest it has initiated into money laundering practices by the three banks, even before these banks could complete their own investigations into the alleged misdemeanour of their officials, and even before the Income Tax (I-T) Department could come up with its own finding, is tantamount to be self-serving and is a brazen attempt on the part of the deputy governor to not only give these banks a clean chit but also mask the miserable failure of the banking regulatory mechanism of the RBI,” Cobrapost said in a release.

 

Earlier on 21st March, speaking about the exposé, Dr Chakrabarty had said, “There is no scam (that) has happened... As no transaction has taken place, let us not unnecessarily downgrade ourselves. Our system to prevent money laundering is perfect ... absolutely nothing (wrong with it).”

 

Refuting this statement, Cobrapost.com alleged it (Dr Chakrabarty's statement) as “something premature, presumptive and preposterous aimed at sweeping under carpet the alleged involvement of the banking majors in money laundering”.

 

“For the RBI to say that there is no offence as there was ‘no transaction’ is a very novice reading of the law and a wilful ignorance of rules and regulations supposed to be crafted and implemented by the RBI itself,” it said in the release.

 

India is a signatory to Financial Action Task Force on Money Laundering or FATF and thus has treaty obligations to block precisely the kind of money laundering that the Cobrapost exposé shows has been happening rampantly in the country’s leading three private banks, it said.

 

Cobrapost said its “Operation Red Spider” clearly showed that the RBI and the Financial Intelligence Unit of the finance ministry have failed in their jobs and instead of heads rolling there the RBI is intent on diluting the nature of what has been found and saving its own skin. “Perhaps the banking regulatory and supervision functions should be taken away from the RBI and a new agency created for the same,” it added.

 

Cobrapost's investigation conducted in five zones across several branches of these banks and their affiliates like insurance companies revealed following facts...

 

“These money laundering practices are part of a standard set of procedures within these banks;

These money laundering services are being openly offered to even walk-in customers who wish to launder their illicit money;

                A variety of options for laundering ill-gotten cash are being offered brazenly;

These money laundering services are being offered practically as a standard product across the country.”

 

Cobrapost said its investigation found that banks and their managements systematically and deliberately violate several provisions of the I-T Act, Foreign Exchange Management Act (FEMA), RBI regulations, know your customer (KYC) norms, the Banking Act and Prevention of Money laundering Act (PMLA) with utter disregard to consequences, driven by their desire to boost cheap deposits and thereby increasing their profits.

 

It took just a cold call by the Cobrapost reporter to the branches of the banks, mentioned above, to put a grossly illegal proposition on the table:  A politician wants to launder a huge sum of black money. The purpose: make it white. Would the bank officials help? And the lid came off the murky world of money laundering in the Indian banking sector, as the officials of these banks rolled out the red carpet for Cobrapost's associate editor Syed Masroor Hasan.

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COMMENTS

nagesh kini

4 years ago

The RBI Governor was extremely candid in admitting in so many words unlike his Deputy who threw all caution to the winds despite overwhelming video evidence.
The RBI should collate and put in the public domain all the Reports on each of the Banks' investigations and come out with a comphrensive Action Taken Report as soon as possible and list out steps at putting an effective end to all nefarious deposit mobilization practices now that the 'year end' is over, thankfully!

CA PRADEEP AGARWAL

4 years ago

It is really shocking that RBI wants to influence the probe by releasing denials, which should not have been, should waited for the probe to finish and then issuing denials.

GOPAL

4 years ago

There are bad eggs in every system. I would like to know if cobrapost got the same response in all cases or in a select few. Also when customers come to the Bank they do come with various propositions. In many cases the Bank officials try to help. Banks are subject to various audits and in each of these reports we do have serious, medium and low type of irregularities. This is the case in all Banks. If Cobrapost gets them it will read like a horror story. These are taken up and rectified and systems put in place. Cobrapost seeking heads to roll, in this case,is unjustified.

REPLY

nagesh kini

In Reply to GOPAL 4 years ago

Unfortunately the heads that roll will be those of the front office much smaller fry and not the Big Guns who threaten them with targets and pick slips for not meeting the targets!

CA PRADEEP AGARWAL

In Reply to GOPAL 4 years ago

As far as audit is concerned they are being scuttled as is being done now and special audits are conducting sparingly and that to with predetermined notions.

Vinay Joshi

In Reply to CA PRADEEP AGARWAL 4 years ago

FYI, Mr.Nagesh Kini, is FCA, a senior & he knows audit inside out.

Rgds,

nagesh kini

In Reply to Vinay Joshi 4 years ago

Thanks Mr.Joshi!

nagesh kini

In Reply to Vinay Joshi 4 years ago

Thanks Mr.Joshi!

Ubaldo C DSouza

4 years ago

If you can't beat them, join them! That is what the RBI is doing even if it amounts to foolish wisdom.

M G WARRIER

4 years ago

Mature comments viewing the expose seriously and expressing intention to take action where warranted once reports of investigation are available have come from RBI Governor Dr Subbarao. Chakrabarty is known for off the cuff remarks and people have not forgotten how he was handled by Governor for a 'dissenting observation' on a Monetary Policy announcement sometime back.

RAVINDRANATH

4 years ago

What RBI's Special audit team should do is to simply check all major non-interest income earned by these banks and see whether they were legitimate and the transactions which generated those income were genuine and did not violate any norms.

Vaibhav Dhoka

4 years ago

Here in our country all rules and regulations are imposed on middle class and they are regularly flouted by high and mighty.A small time investor is harassed to open a savings account in name of KYC meaning Know Your Customer in all petty transaction in banks mutual fund insurance etc.All this is happening because banks are permitted to broker other financial products like Mutual Fund,Insurance all this helps in money laundering as banks are not accountable to regulators as they DEFY them.But it takes toll in banking standard.

Babubhai Vaghela

4 years ago

Dr KC Chakrabarty need to be summarily dismissed from RBI for the sinister efforts to save skin of 3 leading Private Sector Banks.

Brian Gerard Dsouza

4 years ago

When people have vested interests,they would try to shield just anyone to save their own skin.

Brian Gerard Dsouza

4 years ago

so

A BANERJEE

4 years ago

Well yes, it is suggestive that a high official of the RBI should give a certificate of innocence to the subject banks whereas it is public knowledge that money laundering for the mighty is quite permissible and is done in the system. As noted by MK Gupts, why the Dy Governor felt impelled to--or was he compelled?--argue for the named banks will perhaps remain shrouded in mystery. But, is it not suggestive that not a single political leader has yet not issued a statement or raised this issue? This in itself speaks volumes of the volume and extent of the menace. Not for nothing the Govt has not decided to take steps to bring back the wealth of the country stashed away abroad. It is well nigh impossible, given the political compulsions of our political leaders.

MK Gupta

4 years ago

But, then, this is all well known. Why the Dy Governor of RBI offered his services to plead for these erring banks is a different matter that requires to be taken up at higher echelons of power lobby-in case someone is interested at all. But, this is the ground reality. And, there must be no doubt that the CBDT and its field offices have indeed been aware of this, as I had stated some time earlier. Will the CBI join the issue?

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