Cobrapost 2: FinMin calls for action, banks to investigate

Moneycontrol Bureau

The second round of Cobrapost sting operation evoked immediate responses across the spectrum. Rajiv Takru secretary at the Department of Financial Services asked all state owned banks and the Life Insurance Corporation (LIC) of India to initiate actions. At the same time, the State Bank of India (SBI) – India's largest lender, assured of stern punishment if allegations involving select officials, are proved.

"If KYC (Know Your Customer) violations are detected, people would be severely punished," said Pratip Choudhuri, chairman – SBI in New Delhi.

"If somebody puts big sum with us, we are obliged to see the identify proof. However, we cannot ask whether that cash is taxed. That is for the Income Tax department to see. We have a set-up in Jaipur, which sees if any transaction is disproportionate to the scale of operations, then it is reported to FIU."

It is a normal practice for a branch manager (of any bank) to report any suspicious transaction to the Financial Intelligence Unit (FIU), the government agency which reports the same to the Income Tax Department.

Choudhuri rubbished allegation that transaction were split under Rs 50,000 so that those were not detectable. Cobrapost, an investigative news website alleged that 23 financial institutions including giants like SBI, PNB, Bank of Baroda, LIC and others were involved in money laundering cases across India.

"Those (allegation) are too vague and generalized. Our system still captures small transactions. We have reported all to FIU. All transactions have been investigated. We are fully compliant with the Money Laundering Act. Our own investigation is on," he said adding that the bank has not yet concluded on the alleged KYC violations.

Meanwhile, the ministry has started scrutinizing the video footage shown in the exposure. It has obtained copies of DVDs, allegedly contain what happened in the sting operation.

"We have immediately put three different senior officers on the job to watch these DVDs and prepare transcripts so that we know exactly what kind of transaction has taken place and with whom – name wise, branch wise and transaction wise. At this moment we are not talking in terms of forensic examination of DVDs," he told CNBC TV18.

Also read: Why Cobrapost expose was a non-event for bank stocks

Two other large public sector lenders – Bank of Baroda and IDBI Bank separately issued press statements in the aftermath of Cobrapost revelations/allegations.

Both have initiated internal investigations. They have exuded confidence of respective internal standards relating to anti-money laundering and KYC violations. In case of any deviation from established norms or guidelines, banks however, will act, releases indicated.

Reliance Capital whose name also figured in the list of 23 institutions, has outright denied such allegations.

"We categorically deny the baseless allegations in relation to any involvement of the company in money-laundering by customers of our life insurance business. Reliance Life adheres to strict internal controls, processes and best practices and is in full compliance with the KYC norms and regulatory framework," it said in a press release.

saikat.das@network18online.com