Cobrapost has alleged that RBI is acting as a protector, and not as a regulator or enforcer. The RBI is loath to admit that there exists a massive money laundering racket in our financial institutions across the board, because if it were to admit, it would strip the RBI of its halo as a 'one of the best banking regulators in the world', Cobrapost says
Cobrapost.com continues with its exposure of money laundering taking place in banking system. In its latest episode, Cobrapost has named 10 banks, IndusInd Bank, Bank of Baroda, ING Vysya Bank, Allahabad Bank, Bank of India, Central Bank of India, Bank of Maharashtra, HDFC Bank, ICICI Bank and Axis Bank involved in money laundering.
"In this edition, codenamed Operation Red Spider Part III, we bring you 10 banking institutions and the murky world that exists within their walls, with junior to top level officials at dozens of branches admitting on camera their complicity in crime. The videos, across the large spectrum of such illegal activity, clearly prove that this is not simply the design of some criminally oriented officers, or for that matter, some young, and front office executive succumbing to performance pressures. It proves without doubt that this corruption is endemic, and spread through the Indian banking and insurance system," Cobrapost said in a release.
Earlier on 14 March 2013, Cobrapost named private sector lenders ICICI Bank, HDFC Bank and Axis Bank as facilitating money laundering. Later on 6th May, it named 23 entities including Life Insurance Corp of India (LIC), State Bank of India (SBI), Bank of Baroda (BoB), Punjab National Bank (PNB), Canara Bank, Indian Bank, IDBI Bank, Yes Bank, Federal Bank, Reliance Capital, Birla Sunlife and many others, who together manage assets worth thousands of crores of rupees and have equally staggering deposits at their disposal.
Cobrapost said today, "The RBI continues to act as a protector, and not as a regulator or enforcer. The RBI is loath to admit that there exists a massive money-laundering racket in our financial institutions across the board, flourishing under its very nose, simply because if it were to admit to this deep-rooted malaise, it would strip the RBI of its halo as a “one of the best banking regulators in the world.”
All banks have been asked to strictly adhere to KYC norms. Even older account holders’ antecedents are being verified. The banks involved in money laundering have punished their staff members – 50 so far – with suspension. The Finance Ministry has asked the Banking Association of India to launch a thorough probe into the functioning of all banks, while individual banks have announced their own probe, and punishing the staff involved with suspension.
"Whether such inquiries are followed up with visible and effective action on ground or not, only time will tell. However, if the RBI and the Finance Ministry are waiting for more clinching evidence to finally act on it, we here present yet more shocking videos that should normally awaken any law enforcement authority. We hope that the authorities wake up to the ground realities and start the requisite legal procedures," Cobrapost said.
Here are the snippets from Cobrapost's latest Operation Red Spider III...
Ironically, its motto is: We make you feel richer. Now let us tell you what lessons our reporter learnt at this bank:
At one of the branches of IndusInd Bank in an upscale area of South Delhi, its personal banking head N Anand customizes the family income builder scheme, in tie-up with AVIVA – a maximum yearly deposit of Rs5 lakh – which means Rs15 lakh for three investors and Rs1.5 crore in 10 years. It also means that you are depositing less than Rs10 lakh a year in an account. Cash in lockers is okay, and you can count your money ‘araam se’ (in comfort) inside the branch.
At the bank’s branch in Hyderabad, Branch Manager S Mishra and operations manager Amita are bolder. It is the same family income builder scheme, and when we talk about how to put in cash, they say “woh to hum baad me karenge (We will do that part later).” She has full co-operation of the bank: “Hum bank ke through kuch na kuch alternative bana sakte (We can arrange for some alternative through the bank).”
She actually solves the Rs5 lakh investment limit issue. Take out another policy a month later, without PAN card.
She throws light on the 7-year life of an Income Tax notice. She also advises the reporter on the Streedhan clause that can move a large portion of the black money out of the reach of the law for good.
At another branch of the bank in Hyderabad branch manager TJ Reddy and customer services manager Srikanth K offer great ideas.
Srikanth explains the ‘pattadar passbook’ or a passbook for agricultural income. The bank will do that. In this way we can get away even after we provide the PAN. When we want more accounts and more account holders, the bank offers to make these ‘benami’ accounts for us, with only us having the authority to withdraw. The bank even provides these faceless people for the accounts.
Bank of Baroda
The bank calls itself ‘India’s international bank’. Now let us tell you what lessons our reporter learnt at this bank:
For RC Verma, senior manager and S Kamran, manager at its Gurgaon branch, slow and steady wins the race. But be sure: they do win. Kamran says: “Aur toh aap humare touch mein aaoge toh aapka sub number ek mein aise hi convert kara denge … aapko pata bhi nahin chalega (If you keep in touch with us, we will convert all your money into white … you will not even know it).”
The hubris is amazing. Both managers are okay with cash in lockers. In fact, they want it that way, so they can slowly route the cash to investments.
D Singh, senior manager at BB’s South Delhi branch gives us a fine idea: “Aise aadmi ke naamdaal doonga jo return file na karta ho (I will put in the name of a person who doesn’t file the return).”
Or, “Joint account kar lo, pahla naam uska rakhlo jiska tax nahin hoti hai, doosra apna rakh lo jo monitoring karni hai … monitoring karenge to woh nikal hi nahin payega … paper bhi apne paas rakhna…. bagair papare ke waise hi nahin niklega (Do it through joint account. Put his name first, then for the second account holder put the name of the one who will be monitoring it. If you are monitoring then he won’t be able to withdraw money … keep the papers with you … without papers it won’t be withdrawn ).”
RR Bhaskar, Senior Branch Manager of BoB, South Delhi, says: “Actually ikkatthe nahin karna chahenge... ekdum se light mein aa jate hain [Actually, it has not to be done in one shot… (it) may bring it to light immediately].”
Bhaskar also sees the agricultural income route: “Usme kya hai ki you can justify … agriculture land pakka hogi inki … agriculture land ka paisa is mein dekhayenge … income tax walon se bachne ka ek ye tarika hai (The thing is that you can justify … I am sure he owns agriculture land … we can show agricultural income… this is one method to stave off the Income Tax people).”
ING Vysya Bank
The following are the lessons our reporter learnt at this bank:
A Bhaskar, Deputy Manager of the bank in Chandigarh, is not exactly in the category of a serious banker, but is still conversant with most underhand dealings that the system incorporates. In bringing cash from the minister’s house, he is careful to take his own car, not the bank’s, and though he has not been to see the lockers, he can surely arrange for cash to be stashed there.
Manager P Saha and Relationship Manager S Das of the bank’s Kolkata branch have been there, done it. Saha explains the goodness of insurance policies: “This is the only product jahan par government haat nahin laga sakta... Yeh government bond debenture me jaata hai... aur 10 saal, 12 saal baad jo maturity hota hai, government has no right to touch LICs. Because it’s related to the life of an individual... (This is the only product that the government cannot touch. These are invested in government bonds and debentures that mature in 10-12 years... The government has no right to touch LICs, because it’s related to the life of an individual).”
SS Sudhir, the Branch Head at the bank’s another branch in Hyderabad explains when an account is tracked by authorities: “Cash aap... dal sakte.. isme tracing nahin ata. Tracing ap ko tab hoga jab agar aap ko ... kuch transactions hua. Matlab aapko transactions ka track kahin pe hua... Matlab yeh Hyderabad mein aap transaction kar rahe hain... if you do any transaction with anybody... that particular account is called for any explanation, then you check from there where it has been routed... In that sense if they to track all that then it comes... (You can put in cash. There is no tracing in this. Tracing happens when you have some transactions. That means any of your transactions are tracked anywhere. Say, this is Hyderabad, you are doing transactions...if you do any transaction with anybody... that particular account is called for any explanation, then you check from there where it has been routed... In that sense if they to track all that then it comes...)”
Basically the probability is low, she says.
Regarding transferring money out of the country, she sheds light on certain dealings: “Most of the people are doing, you know, they are taking out the money and sending it ... and then setting up the business...” And banks are complicit in this.
This is one of the leading public sector banks of the country. Established in 1865, it prides itself in its ‘Tradition of Trust’. This trust, however, is now in doubt.
Chief Manager A Sharma and Senior Manager RM Ahuja of the bank’s South Delhi branch form a cozy coterie within the bank, greasing paths for all the black money available.
Even a retired officer, Khanna, is among the coterie. Says he about a benami account: “Account khologe aap ... agar uske naam pe jama karna hai toh usko mat lao ... aap khud jama kar do uske naam pe (If you want to deposit money in his name, don’t bring him, you deposit).”
Central Bank of India
Another leading public sector banking behemoth, this bank has more to hide despite its glorious past.
SK Garg, Chief Manager of the bank’s upscale branch in Central Delhi provides a way out to move cash into accounts. “Main aapko ek cheez sahi bata deta hoon ... jo LIC karwani hai wo toh cheque se karwaiye ... aur baaki jo main aapko jo hai ... ya toh alag alag bank pe jo hai ... pachaas pachaas hazar rupaye ki DD bana dijiye ... naam mein jismein bhi account aap kholte hain ... baad mein wo clearing mein daal ke ... wo jama ho jayega (Let me tell you one thing ... do the LIC [policy] by cheque ... and with the rest of the cash ... get several DDs for Rs. 50,000 each from other banks in the names you will open the accounts here ... later on you can put them all into clearing ... that [money] will be credited [in those accounts]).”
Here are some excerpts of confessions of past criminality:
Chief Manager A. Sharma of the bank’s Defence Colony branch in New Delhi makes his apathy for the system clear: “Pehle kahte ki jisko TDS katata hai unke naam do ... ab jinka bhi tax katta hai, TDS kate ya na kate ... unka naam mangne lag gaye department ... pehle to hum log kaafi manage karte the (Earlier they [the Income Tax Department] used to ask for the names of people whose TDS is deducted ... nowadays, they have started asking names of all who are taxable, no matter if there is TDS or not ... earlier we could manage a lot).”
RM Ahuja: “Abhi to proof aur ye sab hone lag gaye hain ... humare paas ... humne ... benami humne ... kitne hi customers ka lakhon rupaya ... aaj se bees saal pehle, jis samay lakh ... aaj ka crore se bhi jyada hoga unke keemat ... wo de jaate the ... humne apne driver ke naam account khole ... yun hi sign mar diye (Now they have started asking for proofs and all that ... 20 years ago ... we had many customers who will just give us lakhs of rupees ... a lakh on those days is worth more than a crore today ... we used benami accounts ... in the name of our own drivers ... we signed for them just like that).”
National security threat
On 17 December 2012, Parliament gave its nod to a bill, which seeks to enlarge the definition of Money Laundering offences that could help the funding of terrorist operations. The Prevention of Money Laundering (Amendment) Bill was passed by the Rajya Sabha by voice vote.
It may be pointed out that the Cobrapost undercover reporter was never grilled about the origin of the money, or what it was intended for, by any banker. The bankers were simply not interested. Methods adopted in Operation Red Spider could easily be utilized by any terror organization to move huge amounts of money. This, thus, becomes a case of National Security, and the perfunctory and dismissive nature with which the RBI, the Finance Ministry and the banks have been treating this only makes the situation extremely dangerous.
Cobrapost reiterates India’s responsibility as a signatory to FATF (Financial Action Task Force on Money Laundering), because the republic has treaty obligations to block precisely the kind of money laundering that the Cobrapost expose shows as rampant in the 10 banks mentioned. Operation Red Spider Part III again conclusively shows that the RBI and the Financial Intelligence Unit of the Finance Ministry have failed in stemming the systemic rot in the banks.
The gold and insurance connections
The other surprising thing observed in this huge undercover investigation by operation is the incredible urgency with which officials are pushing the sales of the banks’ gold coins/ biscuits. While the coins/ biscuits present an easy option for laundering black money, this policy could have certainly helped in triggering the huge spike in retail gold prices in the country before the worldwide slump in this metal happened – not to mention, be the cause behind India’s ballooning Current Account Deficit (CAD).
Yet another unholy alliance that has come unstuck is the liaison or tie-ups these banks have with the insurance companies, including the public sector behemoth Life Insurance Corporation of India. When the banks fail to provide a smooth channel to launder the cash, they quickly call upon their insurance company ‘buddies’ and fix a deal that suits our objective the most.
It is imperative to point out here that the financial institutions of the country, as a whole, are answerable to the people of the Republic of India. They need to explain to the average tax-payer and even to the daily wage earner, who deem these behemoth institutions as upholders of the trust they place in them, how such brazen acts of crime have been perpetuated for so long.
Our modus operandi
We used the same method as before. Our undercover reporter, Associate Editor Syed Masroor Hasan simply walks into a bank, armed with a fabricated story of a fictitious minister’s ill-gotten wealth, in cash. He asks the officials for a way to ‘invest’ this imaginary unaccounted money – starting with amounts as large as Rs50–Rs60 lakh or even Rs1 crore, leading up to amounts often as huge as Rs37 crore – in legal schemes in the long term, with not only the sole purpose of laundering the black money but also to get handsome returns on that.
Logically, any official of any established bank should immediately distance himself/ herself from such a story and its blatantly illegal consequences. These set of bankers and insurers, as in those we exposed in our last two episodes, welcomed our reporter and offered several innovative ways to channelize the cash. They were eager to accommodate the offer at any cost.
The following were the methods suggested most frequently by the banks:
Bankers are at pains to remind you of three very important aspects of underhand dealings:
(a) The government does not have the right to touch insurance policies, because these deal with the life of an individual.
(b) If the women in a family have insurance policies bought with black money, they can sign a form that labels this as Stree dhan or Women’s Wealth. As a banker helpfully put it, even if there is an Income Tax raid at your home, they will not be able to touch this particular policy.
(c) Nobody can question the source of income for gain from an insurance policy after seven years.
Be informed that the above is not even an exhaustive list.
What the Law of the Land has to Say on Money Laundering?
The videos, through Cobrapost’s undercover investigation in Operation Red Spider Part III, clearly show the gross violation of rules and regulations, framed under various laws of the land, namely, the Prevention of Money Laundering Act of 2002, the Income Tax Act and the Indian Penal Code, among others.
The first exposure from Cobrapost triggered a series of muted reactions actions from banks, the finance ministry and the Reserve Bank of India (RBI), although committees have been set up to investigate the sting operation and a few bank managers and junior officials were suspended. Reacting to Cobrapost exposure on 21 March 2013, RBI's deputy governor Dr KC Chakrabarty said, “No scam has happened... Allegations don’t mean that KYC norms have been flouted... If KYC is made more stringent then the opening of bank accounts for the finally excluded may become tough... Allegations do not mean flouting norms. There is not a single transaction (of money laundering as alleged by the exposé)...These are transactional issues that have nothing to do with money laundering (!)... I am not saying that there is no problem. I know there is a problem in the system... RBI’s Financial Statement Reports highlight serious concerns over bank branches selling gold coins, mutual fund instruments, and insurance. RBI has undertaken thematic studies of banks that are active in selling gold coins and wealth management products… We cannot take action on allegations. We go by evidence.”
No, we are not talking about an offer from the German Bank. This is a new corporate bond scheme from Deutche Group, whose name resembles with Deutsche Bank AG, which promises lavish returns on its Facebook page. Savers are advised to ignore the scheme and stay away from the namesake
There is no end to sight to the number of dubious investment schemes these days, while regulators blissfully sleep. A ‘global’ firm known as Deutche Group PLC has made a sensational offer to the public: 24% annual return on its debentures and corporate bonds, in which interest will be paid every month to investors around the world (India included).
‘Deutche Group’ whose name resembles with ‘Deutsche Bank AG’, the well-known German banking and financial services company, has come up with the too-good-to-be-true scheme to lure gullible investors. Incidentally, Deutsche Bank has no relation whatsoever with the Deutche group.
In addition, the offer by Deutche Group not only sounds outright fishy but also reeks of fraud that evokes unpleasant memories of past Ponzi and multi-level marketing (MLM) schemes, which have robbed savers of their lifetime earnings.
More pertinently, it calls itself a “public limited company” when it actually is not. Its Facebook page (http://www.facebook.com/DeutcheGroup), emblazoned with the golden letters DG evoking similarities to the German Bank, says, “Our debentures are issued for our group holding company Deutche Group plc which is a public limited company authorized to issue debentures by the Companies House, UK.”
However, we did a search on the website of Companies House, UK, where all limited companies in England, Wales, Northern Ireland and Scotland are registered. We found out that Deutsche Group Ltd incorporated in 2006 is, in fact, not a public limited company as claimed but a private limited company.
What is even fishier is that, being “headquartered in London” the information on its website discloses only its US address instead and even misspelt United States as ‘United State’. The Facebook page mentions that Duetche Group’s American arm “Deutche Group Inc” will be going public on the NASDAQ stock exchange and is currently awaiting regulatory approvals from the Securities Exchange Commission (SEC). However, we tried to search for their filings on the SEC website but could not locate it.
The company claims itself as a multinational conglomerate, with presence in UK, US, Thailand and India, that deals with nearly everything, from investment banking to hospitality and even pharmaceuticals. It seeks to raise money from this dubious scheme to fund their so-called “expansion” of their business group.
Its Facebook page says, “This is a high yield, regular interest, generation debenture since we are raising funds for further expansion of our businesses in the field of travel, retail, pharmaceuticals, pharmacy, healthcare, IT, education , hospitality & hotels, e-commerce, merchant acquiring, merchant services, merchant/ retail/ investment/ corporate banking, financial services, IT security & forensics, private equity investments & venture capital.” That is pretty much a business one can conjure up.
However, when we checked their actual website (http://www.deutchegroup.com/index.html), we were surprised to find that it was bare and minimal, lacking in detail. Neither was the information pertaining to the company’s founders nor could we found the information relating to its debenture scheme. Its website stops short of describing the whole gamut of services and businesses mentioned above that is supposedly wants to expand in to. According to the company’s website, it is supposedly into travel and technology, retail, manufacturing, hospitality, equity investments. That is it. Even more mysterious is there is no further detail of its products being offered and how one can avail them.
There was no detail about its founders except that on its website it was found by a ‘renegade’ entrepreneur. It states, “Deutche group was founded by renegade entrepreneur 10 year ago and since then there is no looking back.”
Its Facebook page is administered by a person known as Abhishek Joshi. Though it is not known if he’s the actual founder of the group.
The mode of subscription is not mentioned on either the website or Facebook page, but it is safe to say that savers should stay away from the scheme. With the advent of social media, companies like these are taking advantage of the internet medium to lure gullible investors, where they can escape regulatory scrutiny to fool investors. An investment scheme like this, which is too-good-to-be-true, especially whose name resembles that of a leading global investment bank, should be avoided at all cost.
Following a complaint under the RTI, the Horticulture department at MCD issued instruction to all the zones for carrying out inspection and keep registers of the work plan. This is the 88th in a series of important judgements given by former Central Information Commissioner Shailesh Gandhi that can be used or quoted in an RTI application
The Central Information Commission (CIC), while disposing penalty proceedings against the Public Information Officer (PIO) of Horticulture department at Municipal Corp of Delhi (MCD) lauded the effort of an alert citizen to bring out changes in the governance structure of the government.
While giving this judgement on 18 November 2009, Shailesh Gandhi, the then Central Information Commissioner said, “Thanks to the complainant bringing it to their notice, the department has now decided to work as per rules, and instruction has been issued to all the zones under the Horticulture Department in MCD to carry out inspection and keep registers of the work plan at supervisor/ chaudhary level.”
New Delhi resident AN Prasad, on 4 January 2008, sought certain information from the PIO of Horticulture department at MCD under the Right to Information (RTI) Act. Since he did not receive any reply from the PIO within mandated 30 days, he filed a complaint before the Commission as per Section 18 of the RTI Act.
On 16 February 2009, the Commission issued a notice to the PIO asking him to supply the information and also provide explanation for not furnishing the information within mandated 30 days.
The Commission neither received a copy of the information sent to the complainant (Prasad), nor did it receive any explanation from the PIO for not supplying the information to the complainant. "Therefore, the only presumption that can be derived is that the PIO has deliberately and without any reasonable cause refused to give information as per the provisions of the RTI Act. His failure to respond to the Commission's notice shows that he has no reasons for the refusal of information," Mr Gandhi the then CIC noted.
While allowing the complaint, the Commission on 6 April 2009 directed the PIO to send complete information to Prasad before 1 May 2009. The CIC also said, "The PIO's action clearly amounts to denial of information without any reasons. The PIO is therefore, asked to submit a written explanation showing cause as to why penalty should not be imposed and disciplinary action be recommended against him under Section 20 (1) & (2) of the RTI Act before 6 May 2009."
Later, the Commission has issued a notice on 30 July 2009 directing the PIO to appear before the CIC on 18 November 2009 to clarify why penalty should not be imposed for defying its order.
During the hearing, the Commission noted that the First Appellate Authority SK Midha had not conducted any hearing. "The information has been provided late and effectively the PIO stated that there was no schedule of inspection being followed by the Horticulture Department in MCD. Because of this he could not give any schedule of the inspection being followed by the department to the complainant," Mr Gandhi noted.
He said, "Thanks to the complainant bringing it to their notice the department has now decided to work as per rules and instruction has been issued to all the zones under the Horticulture Department in MCD to carry out inspection and keep registers of the work plan at supervisor/ chaudhary level. This is a good example of how an alert citizen can bring about an improvement in the governance structure of his government."
"In view of the fact the problem was with the whole department not following any rules nor having a schedule which is the basic requirement as per CPWD Manual. The Commission is not able to fix the responsibility on any individual for the lapse in providing the information," Mr Gandhi said while dropping the penalty proceedings.
CENTRAL INFORMATION COMMISSION
Decision No. CIC/WB/C/2008/00617/SG/2649Adjunct
Complaint No. CIC/WB/C/2008/00617/SG
Complainant : AN Prasad
New Delhi - 110087
Respondent : Public Information Officer
Dy. Director (Hort.),
MCD (South Zone)