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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