RBI slaps nearly Rs50 cr fine on 22 banks for violating KYC norms

The Reserve Bank of India (RBI) has imposed monetary penalty totaling Rs49.5 crore on 22 banks in the public and private sector for violation of its directions, including on `Know Your Customer' and `Anti Money Laundering'.

The banking sector regulator slapped penalties ranging from 0.50 crore to a little over Rs3 crore on 22 banks, including Andhra Bank, Bank of Baroda, Bank of India, Canara Bank, Central Bank of India, Deutsche Bank AG, Development Credit Bank Ltd, Dhanlaxmi Bank Ltd, Indian Overseas Bank, ING Vysya Bank Ltd, Jammu & Kashmir Bank Ltd, Kotak Mahindra Bank Ltd, Oriental Bank of Commerce, Punjab and Sind Bank, Punjab National Bank, State Bank of India, Federal Bank Ltd, Lakshmi Vilas Bank Ltd), Ratnakar Bank Ltd, United Bank of India, Vijaya Bank and Yes Bank Ltd.

RBI said in the case of seven other banks, including Barclays Bank Plc, BNP Paribas, Citibank NA, Royal Bank of Scotland, Standard Chartered Bank, State Bank of Patiala and The Bank of Tokyo Mitsubishi UFJ Ltd, where such scrutinies have been conducted and banks' explanation called for, the banks' written or oral submissions were found to be satisfactory or no violation of serious nature has been established.

While no penalties have been imposed on these seven banks, RBI has cautioned these banks, including Citibank and Stanchart, against violating its directions.

RBI had conducted a similar scrutiny in seven other banks during April and May 2013. The process of follow-up action in respect of those banks is at different stages of its completion, RBI said.

It may be recalled that the RBI had carried out a scrutiny of books of accounts, internal control, compliance systems and processes of these banks at their offices during April 2013 amidst allegations of violation of certain regulations and instructions by some banks including HDFC Bank, ICICI bank and Axis Banks.

RBI had since imposed fines on the three banks on 10 June 2013.

Non-adherence to regulation include failure to adhere to certain aspects of know your customer (KYC) norms and anti-money laundering (AML) guidelines like customer identification procedure, risk categorisation, periodical review of risk profiling of account holders, and periodical upgradation of KYC guidelines.

Non-adherence of KYC for walk-in customers include sale of third party products, omission in filing of cash transaction reports (CTRs) in respect of some cash transactions, sale of gold coins for cash beyond R50,000 etc.

Some of the penalised banks also failed to adhere to instructions on monitoring of transactions in customer accounts, instructions on classification of accounts as 'in-operative'/dormant and in monitoring of transactions in dormant accounts.

Other charges include non-adherence to instructions, which prohibit acceptance of cash above Rs50,000 from customers for sale of gold coins and issue of demand drafts, etc.

RBI also cited non-adherence to instructions on the upper limits for remittances under Liberalised Remittance Scheme and the upper limit for repatriation of funds from non-resident ordinary (NRO) accounts as also non-adherence to instructions on import of gold on consignment basis.

RBI said the investigation did not reveal any prima facie evidence of money laundering.

However, any conclusive inference in this regard can be drawn only by an end-to-end investigation of the transactions by tax and enforcement agencies, it added.