FIU imposes Rs 68 lk fine on banks for failure to file STRs

Over a dozen public and private sector banks have been slapped a fine of Rs 68 lakh for their "failure" to report attempts of suspicious transactions and money laundering in their branches which were brought to light by a sting operation conducted in 2013.Financial Intelligence Unit (FIU), the elite snoop wing under the Finance Ministry, recently concluded the long-running exercise of examining these cases and issued multiple penalty orders against a total of 13 banks between January and September this year.These penalty orders are appealable before the Appellate Authority of the Prevention of Money Laundering Act (PMLA) in 45 days.All the banks, in records accessed by PTI, have been penalised under section 13 of the PMLA for their "failure to detect and report attempts of suspicious transactions" in their select branches in the country which were covered under the sting operation.A news portal had made public a sting operation in 2013 in which its reporters, acting as decoy customers, met senior bank executives and officials expressing desire to stash and subsequently launder a huge amount of money at the behest of a politician and minister by hoodwinking tax authorities.The FIU, an empowered agency under the PMLA, has fined HDFC Bank Rs 26 lakh, ICICI Rs 14 lakh, Axis Bank Rs 13 lakh, Oriental Bank of Commerce and Corporation Bank Rs 1 lakh each, Bank of Maharashtra, Central Bank of India and The Federal Bank Limited Rs 2 lakh each, Dhanlaxmi Bank Limited, Development Credit Bank Ltd, Indian Bank and Dena Bank Rs 1 lakh each and ING Vysya Rs 3 lakh at the rate of Rs 1 lakh for each branch.Under anti-money laundering laws, the FIU Director is authorised to slap a maximum penalty of Rs 1 lakh on a bank for its failure to submit Suspicious Transaction Reports (STRs) to it.An STR pertains to those transactions which have been done in unjustified complexity or without a bonafide reason giving rise to a suspicion about their intent or are suspected to be used for money laundering or terrorist financing activities.The banks are bound under law to file STRs to FIU under anti-money laundering laws on a time bound basis.In its exhaustive orders, the FIU rubbished the banks' argument that the customers featuring in the sting had not actually carried out the transactions but merely expressed their desire to do so which cannot be construed as the bank's failure to comply with laid down rules."That the theft did not occur or the trespasser did not have the intention to trespass is no justification for the guards to be asleep," the FIU said, while nailing the role of the bank employees for not reporting such activities and instead encouraging the customers to use illegal means to hide their black money.The FIU said such an act by a customer "should have rung an alarm in a prudent banker" and noted that it becomes evident from the review of the sting footage that the employees of the banks were "either oblivious of their duties or cared little for compliance with their legal obligation under PMLA."Pulling up the managements of the banks who did not deny the authenticity of the sting video but, at the same time, pointed out that these instances were aberrations by individual employees, the FIU said "it is not enough to lay down a policy but equally important to implement it.""The banks' argument that the incident would not fall in the category of attempted transaction is only a post facto rationalisation and banks' head office was not even aware of the matter until it was out in the media."Rather than looking deeper into the causes with a view to establish accountability and take remedial measures, the bank had tried to justify the actions/responses of the branch manager without appreciating the context and seriousness of the matter," the order against one of the banks said.The FIU, more or less, made similar observations in all other cases it examined after it took suo moto notice of the sting operation.A senior official said the Finance Ministry was serious about taking the cases to their logical conclusion as these instances are directly related to India's fight against the menace of black money.The agency, which is the national snoop body to keep an eye on suspicious transactions happening in the Indian banking channels, underlined in the orders that PMLA aims at "prevention" of laundering of proceeds of crime and the statutory requirement under law makes it clear that even attempted transactions are required to be reported. It points to the "high level of expectation the law has from the banks" it said in the orders.Most of the banks featuring in the sting had countered the FIU's charge that mere enquiry by a person unknown to a bank would not constitute to be even an "attempted transaction".The agency, in its orders against all these banks, expressed surprise and concern that the employees in question did not dissuade the customer from breaking the law but went on to suggest that they will help them invest huge amounts of cash offered in multiple accounts, route them to UK and other destinations through hawala, invest in gold, LIC and other investment instruments, allow non-quoting of PAN or quoting of multiple PANs to confuse tax authorities and assured they will help in "managing" everything.The order noted that some employees featuring in the sting even said they were "willing to work around" to help in stashing the funds.The FIU order said one does not expect statements from responsible bankers like in one case-- 'kya ghumana hai, kaise ghumana hai bataa doonga main' (I will tell you how to manipulate things).The order said the "conversation between the reporters and bank manager had several features which should have led to generation of behavioural alerts as per Indian Banks' Association guidelines and as well as the policies and instructions issued by the bank.""However, despite ample indication that the funds being discussed were of suspicious nature, no alerts were generated by the branch officials," it said.