RBI allays fears of money laundering, but says will tighten KYC norms

The Reserve Bank of India (RBI) has ruled out any systemic shortcomings in the way banks operate in the country that could help money laundering, but said banks should follow the `Know Your Customer' norms strictly in order to prevent pitfalls.

Referring to the recent expose made by online magazine Cobrapost.com through sting operations, which alleged that India's top three private sector banks are into money laundering and are violating know your customer norms, K C Chakrabarty, RBI deputy governor in charge of bank supervision, today said the country has a "perfect" system to prevent such offences and that not a single such transaction has taken place in the sting operation.

The online magazine had, last week, accused the country's three largest private banks - ICICI Bank, HDFC Bank and Axis Bank - of indulging in money laundering, both within and outside the country. The online portal also claimed that it had successfully carried out a sting operation to unearth the scam.

''Allegations doesn't mean flouting (of KYC norms). There is not a single transaction which has taken place,'' Chakrabarty said.

''We cannot take action based on allegations; if we find something ...that is a continuous process'' Chakrabarty said, adding that RBI's supervisory process is very effective.

"Let us not unnecessarily downgrade ourselves. Our system to prevent money laundering is perfect, absolutely nothing (wrong with it)," he said.

However, Chakrabarty said RBI would further tighten the anti-money laundering norms if needed. "If we find there is a need to further tighten any guidelines, we'll do that."

RBI and the finance ministry as also the three banks concerned, meanwhile, are investigating allegations that some officials of these banks offered to facilitate money laundering and agreed to accept unverified sums of cash and put them in their investment schemes and benami accounts in violation of anti-money laundering laws.