Not hopeful of RBI action on money laundering: Cobrapost

Moneycontrol Bureau

Media website Cobrapost Monday said it was not hopeful of the Reserve Bank of India taking a tough stand on money laundering, even after the latest expose which showed leading state-owned banks, Life Insurance Corporation and private insurers being party to the racket. In March this year, Cobrapost’s sting operations showed officials at HDFC Bank, ICICI Bank and Axis Bank helping customers to launder their black money into white, and brazenly flouting Know Your Client (KYC) norms. Also read: Here's how banks, insurers help clients launder black money A few days later RBI Deputy Governor KC Chakrabarty tried to downplay the incident, saying the country had a "perfect" system to prevent money laundering and that not a single such transaction had taken place in the sting operations. This was seen a clean chit by the RBI to these banks, and created a furore, considering that the central bank was yet to investigate the matter the fully. Last week, RBI Governor D Subbarao said the RBI had not yet given a clean chit to the three banks and that the probe was still on, and show cause notices would be issued. He said while money laundering was not observed in any of the banks, certain "specific transgressions" on the know-your-customer (KYC) front had come to light. Cobrapost is skeptical if the RBI will take any tough action against the banks and insurance companies alleged to be part of the money laundering racket. "Although the RBI has announced action, both at the systemic level and at the individual bank level, one can only hope they are not cosmetic, and the latest expose would spur both the RBI and the IRDA to address the malaise, for all times to come," says the Cobrapost release. "However, looking at the RBI’s rather suspicious, Protector-instead-of-Regulator conduct, it looks highly unlikely that any worthwhile cleansing of the system will happen. We are sure the RBI top brass will again go about town touting the expose as something of a non-issue since no transaction of cash has taken place," the release said.