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There is sufficient evidence where bank relationship managers emerge out of clients’ residences with suitcases full of currency notes counted on the bank’s notes counting machines. What more evidence is the RBI waiting for?
Reserve Bank of India (RBI) deputy governor Dr KC Chakrabarty’s bland statement yesterday in seeking to downplay the sensational 14th March exposé by the online magazine Cobrapost on the sidelines of a bankers event on “Risk based Supervision”, seems to be the only official reaction from the banking regulator.
The deputy governor seems to be convinced. He 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 (thank God for conceding!)... RBI’s Financial Statement Reports highlight serious concerns over bank branches selling gold coins, mutual fund instruments, and insurance. RBI has undertaken a thematic (whatever this means?) studies of banks that are active in selling gold coins and wealth management products… We cannot take action on allegations. We go by evidence.”
Come on Mr deputy governor, what more hard evidence do you want other than the unedited footage of video tapes? Surely you are is not waiting for another Harshad Mehta or CR Bansali types to put on actual laundering acts to present you, the regulator, with harder evidence of bank relationship managers emerging out of clients’ residences with suitcases full of currency notes counted on the bank’s notes counting machines!
For the kind information of the RBI, the Mumbai-based daily Free Press Journal in a boxed article, in its business page, has listed some of the most common the modus operandi practiced for money laundering:
a. Accepting huge amounts of cash to invest in insurance products and gold.
b. Opening accounts to route cash into various investment schemes.
c. Doing it even without the mandatory PAN card or adhering to KYC norms.
d. Making use of benami accounts to facilitate the conversion.
e. Splitting money into smaller tranches to circumvent detection.
f. Using of accounts of other unsuspecting customers to channelize black money into the system with an incentive percentage of fees.
g. Investing black money in multiple instruments in different names, not necessarily drawn from the family.
h. Allotting of safe deposit lockers, including special large sized ones, for parking crores of illegitimate large value currency notes.
i. Relationship managers personally calling on the residences to collect cash bringing along note counting machines to take the deal forward.
j. Encouraging the misuse of Income Tax Form 60 to state that they are not tax assesses and/or do not have PANs.
k. Helping clients route black money parked abroad through NRE/NRO accounts or through other means other than normal banking channels.
If anyone in the banking regulator claims not to know any or all of the above, surely s/he is not fit to be to occupy the position!
(Nagesh Kini is a Mumbai-based chartered account-turned alert-concerned citizen activist. He was for long a RBI panelled bank statutory auditor and extensively practiced FERA/FEMA.)