RBI slapped a penalty of Rs1.5 crore each on BoM, Dena Bank and OBC for violating KYC norms while opening bogus accounts for a private organisation. Eight other PSBs are also warned to adhere to these norms
The Reserve Bank of India (RBI) has imposed monetary penalty of Rs1.5 crore each on state-run Bank of Maharashtra, Dena Bank and Oriental Bank of Commerce (OBC) for violating know your customer (KYC) or anti money laundering (AML) norms.
At the same time, the central bank warned eight other lenders Central Bank of India, Bank of India, Punjab and Sind Bank, Punjab National Bank, State Bank of Bikaner & Jaipur, UCO Bank, Union Bank of India and Vijaya Bank to adhere to its guidelines on KYC/AMC and put in place appropriate measures and review them from time to time to ensure strict compliance of requirements in future.
The case related to a Mumbai-based private organisation, whose name was used to open several accounts for fixed deposits (FDs) and overdraft (OD) facilities in various banks. Following a complaint from the organisation, RBI conducted an enquiry. The enquiry covering 12 branches of 11 public sector banks (PSBs) revealed deficiencies and irregularities while opening FDs and extending OD facility in Bank of Maharashtra, Dena Bank and OBC.
RBI found that these banks violated certain regulatory guidelines, like...
• non-adherence to certain aspects of KYC norms of the Reserve Bank like customer identification and acceptance procedure
• non-adherence to the Reserve Bank’s instructions on monitoring of transactions in customer accounts
• non-adherence to the Reserve Bank’s instructions regarding funds received through Real Time Gross Settlement System (RTGS)
• opening of fixed deposit accounts and granting overdrafts there against without due diligence or process
• weaknesses in the internal control systems, management oversight, use of internal accounts for parking customer funds, etc.
• involvement of middlemen/intermediaries in opening of the accounts as also subsequent operations in those accounts
Based on the findings, the Reserve Bank issued a show cause notice to 11 banks. After checking the replies submitted by these banks, RBI concluded that some of the violations of serious nature were substantiated and warranted imposition of monetary penalty on three banks, namely, Bank of Maharashtra, Dena Bank and OBC. "Failure on the part of these banks to take timely remedial measures had aggravated the seriousness of the contraventions and its impact," RBI said.
For others, RBI said based on these banks' written and oral submission, it decided not to impose any monetary penalty as their explanations were judged reasonable. "However, these banks have been cautioned to put in place appropriate measures and review the same from time to time to ensure strict compliance of KYC requirements in future," RBI said.