Citizens' Issues
Voila! HDFC Bank, ICICI Bank and Axis Bank named facilitator in money laundering

While Moneylife exposed how a MoF official asked govt banks to emulate HDFC Bank, Cobrapost exposes HDFC Bank helps money laundering!

According a sting operation conducted by online magazine Cobrapost, HDFC Bank, ICICI Bank and Axis Bank, three of India's top private sector lenders, are running a nationwide money laundering racket. Moneylife has been constantly pointing out the mis-selling and overcharging by banks. Earlier, this week we published a story Now, penalty for paying credit card dues by cheque! that shows how an under-secretary in the finance ministry by using HDFC Bank as a model asking chairmen of all public sector banks (PSBs) to levy charges on credit card dues paid through cash or cheque.

 

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

  1. These money laundering practices are part of a standard set of procedures within these banks;
  2. These money laundering services are being openly offered to even walk-in customers who wish to launder their illicit money;
  3. A variety of options for laundering ill-gotten cash are being offered brazenly;
  4. 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 Income Tax (I-T) Act, Foreign Exchange Management Act (FEMA), regulations of Reserve Bank of India (RBI), 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.

 

Taking an alias of Rajeev Sharma, Masroor visited dozens and dozens of branches across the length and breadth of the country, including many major cities and state capitals, across all five zones. Nowhere was he disappointed. Nowhere was he turned away. Almost every banker that he came across was willing to help launder the black money of the fictitious politician Masroor was supposedly working for. The discussions on how to launder the money went up the management hierarchy.

 

How these banks launder black money

The ways HDFC Bank, ICICI Bank and Axis Bank suggested to transform the black money into white were both imaginative in their range and brazen in their approach, says Cobrapost. This brought to the fore a modus operandi that is tailored to rake in vast amounts of black money in the form of illegal deposits, insurance and investment products, sold by these banks. All these creative methods are used to convert the dirty money into squeaky clean without the regulatory authorities ever getting a whiff of what they are doing.

 

Here is a gist of what the various bankers suggested to help the politician launder his illegitimate money:

* Accept huge amounts of cash and invest it in insurance products and gold.

* Open an account to route the cash into various investment schemes of the bank.

* Do it even without the mandatory PAN card or adhering to the KYC norms laid down by the RBI.

* Split the money into tranches to get it into the banking system without being detected.

* Use ‘benami’ accounts to facilitate the conversion of black money.

* Use accounts of other customers to channelize the black money into the system for a fee.

* Get demand drafts made for the client either from their own banks or from other banks to facilitate investment without it showing up in the client’s account.

* Keep the identity of the investor/depositor secret.

* Open multiple accounts and close them at will to facilitate the investment of black money.

* Invest black money in multiple instruments in the names of different individuals, not necessarily drawn from among the family.

* Allot lockers for the safekeeping of the illegitimate cash, including special large size lockers to accommodate crores of hard cash.

* Personally come to the residence of the client to take the black money deal forward and collect the cash, even bring along counting machine.

* Use provisions like Form 60 to deposit the illegitimate cash into the account to route it into investment.

* Help the client to transfer black money abroad through NRE (Non-Resident External)/NRO (Non-Resident Ordinary) account; transfer the money telegraphically or through means other than regular banking procedures.

 

Cobrapost said, other than these ways, bank officials suggested further innovative methods unique to their banks. For instance, HDFC Bank’s officials offer such convenient cash laundering services like the operation of lockers (with cash in them) outside regular banking hours to ensure the secrecy of these customers’ identities and to mask the nature of the transactions, the report said.

 

“To stay one step ahead, ICICI Bank officials were ready to make a suitable profile for the client, such as showing him as an agriculturist or engaged in some business, so as to make the investment unquestionable,” the report said.

 

On the other hand, Axis Bank officials proved to be a notch above in inventing fraudulent means, Cobrapost said. “Use ‘sundry’ accounts of the bank, they (Axis Bank) suggested, to deposit all the illegal cash from where it is to be routed into investment. Either use accounts of other customers, for a fee, to transfer money abroad, or use some shell company and take away a chunk of foreign currency as expenses toward business-cum-leisure trips,” the report said.

 

In a statement, Axis Bank said, "We will examine whatever information that is brought to our notice and investigate thoroughly".

 

Cobrapost said they (these banks) would pamper you, offering you privilege banking or priority banking, pulling out all stops to make the deal happen. At least, after this expose, the ministry of finance should stop using private banks as models of efficiency.

 

User

COMMENTS

MK Gupta

4 years ago

As far as I know, and on the basis of a very senior ex-IRS retired officer, this is NOT a revealation and both the Income-tax and RBI have been well aware of these incidents which are going on for years with the connivance of and under the patronage of the top management and as part of corporate strategy! Just look at the audacity of these banks while dealing with retail customers with SB a/cs in these outfits! And, the companies which "force"their employees to open their "SALARY ACCOUNTS" with these banks stand to gain grom these clandestine but well established practices. Does the govt have the courage to constitute a team of honest retired officers with unblemished record to investigate?

REPLY

CA PRADEEP AGARWAL

In Reply to MK Gupta 4 years ago

I had told previously that these sort of transactions only take place with political patronage and I have proved to be correct

Mrs Kokila Mani

4 years ago

We have a NRI account with ICICI Bank. I am the mandate holder. We have asked our son to close the same, offering help locally here .. else the account being useed for this 'noble cause' for Chidu's experiments 'with' black money and launderings ..... !

REPLY

CA PRADEEP AGARWAL

In Reply to Mrs Kokila Mani 4 years ago

Actually ICCI Bank had been in the midst of things previously also, when there were rumours of run in on the public deposits due to bungling going there but the rumours were set to rest by RBI, so see that your deposits are secure.

CA PRADEEP AGARWAL

In Reply to Mrs Kokila Mani 4 years ago

Actually ICCI Bank had been in the midst of things previously also, when there were rumours of run in on the public deposits due to bungling going there but the rumours were set to rest by RBI, so see that your deposits are secure.

jaideep shirali

4 years ago

If banks themselves do not follow KYC norms, then why be rigid with customers? PSU banks are better, but I'm sure if lower level staff are caught, we'd have staff strikes, rather than nailing the culprit. As a nation, we have an attitude of, "catch all the other culprits, then catch me". I'm sure these banks will tell this to RBI, with the same brazenness as our netas and babus. And as for that RBI official who cited HDFC Bank's policies with respect to credit card payment by cheque, his head should also roll, for quoting such paragons as HDFC Bank.

NSriramamurty

4 years ago

All 3 Banks Suspended Some of their Officers,after internal Enquiry.It is doubtful whether to appear for all as though Banks are strictly following all Rules. How can any Officer do those Acts without informing Branh Heads and take their Approval,which will be mostly in consensus with Bank's policies.RBI said that it will take action after receiving Annual Audit Reports of these Banks.As RBI Audit did not find out for all these years,it is doubtful how far their Audit finds now.Hence Other Economic Offences Wings must Inspect.

REPLY

Suiketu Shah

In Reply to NSriramamurty 4 years ago

Mr Sriramamurty

Dear right sir.
Treating cancer with band-aid this is what HDFC Bank is doing to once again attempt to fool the Indian public vis-a-vis their image.

CA PRADEEP AGARWAL

4 years ago

Do not know what happened KYC was to be given to NSDL/CSDL and a was to be maintained by a depository. So where is KYC norms

CA PRADEEP AGARWAL

4 years ago

Really saddening what they are doing with the Economy. I had very high regards for MR DEEPAK PARIKH, which have gone in flames, there is a saying wherever there is something then only you see smoke coming out-whatever be the outcome damage has been done to the reputation of HDFC group.

whereareyou

4 years ago

ICICI Bank is the first bank to take action against the employees. HDFC Bank and AXIS Bank has copied the Government style: Will inquire first: HDFC Bank and AXIS Bank is very smart, they can not afford to loose such SMART milking staff.
In fact CBDT should start inquiring all cash deposits Insurance premiums. A very good source of finding out two numbarees...

REPLY

CA PRADEEP AGARWAL

In Reply to whereareyou 4 years ago

ICICI BANK might be big but does not command respect, because genuine investors do not have confidence in it for pretty long time, as known.

Ubaldo C DSouza

4 years ago

This exposure is the result of a fall-out between the proverbial thieves. Of course, this does not make it less of a fact or less credible. I see a good thing happenning - 'set a thief to catch a thief'. Consolidation of financial assets has a downside too and it will benefit us seniors to spread our money across the financial landscape. It will generate more work to keep our minds from stagnation and crystallisation and will keep our money within the parameters of guarantees in force against wipe-outs of bank deposits. Every seeming calamity has an upside too!

REPLY

CA PRADEEP AGARWAL

In Reply to Ubaldo C DSouza 4 years ago

It is a fact set a thief to catch a thief, see they have forced the Finance Ministry to reduce audits of Branches and see the galloping rise in NPA's.

CA PRADEEP AGARWAL

4 years ago

Details are given on COBRA SITE regarding branches of these Banks and further targets are nice parameters but to obtain what devious means are adopted people should now know.

CA PRADEEP AGARWAL

4 years ago

See, where will investigations take-if done properly

CA PRADEEP AGARWAL

4 years ago

See, where will investigations take-if done properly

CA PRADEEP AGARWAL

4 years ago

The Bank's Audit system has collapsed that is why reduced Audits, NPA's have increased, so much illegal transactions going on? who to blame

REPLY

Suiketu Shah

In Reply to CA PRADEEP AGARWAL 4 years ago

Sir when there are chronic problems of integrity from the top there are no solutions esp when ones USP to sell itself to customers is "reliable,honest and trustworthy".The days and ethics of the respected late HT Parekh were totally different from the last few yrs.

People who are wanting to denfnd HDFC Bank are using the excuses saying this happens in every bank.Does that make the wrongdoings of HDFC Bank any less serious.I can surely say every govt bank worth its salt is more reliable than HDFC Bank which is rapidly falling .Mind you this is coming from a 14 yr old ex-customer of HDFC Bank.Todays Goldman Sachs(one of HDFC Banks supporters) has given a sell rating on the stock speaks for itself.

CA PRADEEP AGARWAL

In Reply to Suiketu Shah 4 years ago

Certainly not, theft committed by others is no excuse, every one has to bear what he has sown-wrongdoings cannot be legalized and should not go unpunished and that others are also doing it, Govt. banks no doubt are much more trustworthy than pvt banks no doubt about it

MOHAN

4 years ago

Padma Bhushan Kamath, Padma Bhushan Parekh, Padma Bhushan Kocchar ...................Padma Bhushan .....New Generation Padma Bhushans....

Suiketu Shah

4 years ago

To sum up the intrinsic inference of this operation,if still people believe HDFC Bank is a "trustworthy and reliable bank" there is a problem in judgement that our standards are so low that we consider crooks,cheats and proven frauds as "trustoworthy and reliable".There is something very very wrong with this bank in the sense of what image it is trying to create in peoples minds and what they really are.

REPLY

CA PRADEEP AGARWAL

In Reply to Suiketu Shah 4 years ago

Really, wrong going on and should be dealt firmly

Suiketu Shah

In Reply to CA PRADEEP AGARWAL 4 years ago

Best is to stay far far away from such banks as customer or investor or any which way.There are enough much better banks in India.There is a very popular saying "Why murder anyone who wants to commit suicide?"

arun adalja

4 years ago

good thing to open the eyes of rbi and other regulatory bodies by exposing so called progressive banks.these banks are asking to go for other products instead of doing regular service.they are telephoning customers and asking to go for insurance related products after seeing your balance in account that means anybody from bank watch my balance and insist to go what they say.really banks must be punished and cancell their licences.

February WPI inflation rises to 6.84%

The December WPI inflation figure was revised up to 7.31% from 7.18% estimated earlier, government data also showed on Thursday

The Wholesale Price Index (WPI) based inflation for February stood at 6.84, higher than 6.62% recorded in the previous month.

 

The WPI inflation of 6.84% is, however, much lower than 7.56% recorded during February last year.

 

The December WPI inflation figure was revised up to 7.31% from 7.18% estimated earlier, government data also showed on Thursday.

 

The rise in WPI inflation, which is the main indicator for inflation, has raised some doubts about the Reserve Bank of India (RBI) going in for any aggressive policy rate cut on 19th March.

 

Retail inflation was recorded at 10.91% in February—remaining in double-digits for third month in a row—on account of higher prices of vegetables, edible oil, cereals and protein-based items.

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