In what would come as a big setback to private banks in the country, a sting operation conducted by Cobrapost website has revealed that some of the largest financial institutions like HDFC Bank, ICICI Bank and Axis Bank are indulging in money laundering.
A press release by Cobrapost claimed that private banks - HDFC, ICICI and Axis - were caught red-handed in its nation-wide undercover investigation called Operation Red Spider, willing to turn black money into white. They shared the video footages of the operation to reporters. The footages are also available on its site.
However, IBTimes cannot verify the authenticity of the video shot on hidden camera.
"Our investigation, conducted across dozens and dozens of branches of these banks and their insurance affiliates, across all five zones of the country, revealed these shocking facts that these money laundering practices are part of a standard set of procedures within these banks," Cobrapost Editor Anirudh Bahal told reporters.
Cobrapost alleged that these private sector banks launder black money in the following manners:-
1) Accept huge amounts of cash and invest it in insurance products and gold.
2) Open an account to route the cash into various investment schemes of the bank.
3) Do it even without the mandatory PAN card or adhering to the KYC norms laid down by the Reserve Bank Of India.
4) Split the money into tranches to get it into the banking system without being detected.
5) Use "benami" accounts to facilitate the conversion of black money.
6) Use accounts of other customers to channelize the black money into the system for a fee.
7) Get demand drafts made for the client either from their own banks or from other banks to facilitate investment without it showing up in the client's account.
8) Keep the identity of the investor/depositor secret.
9) Open multiple accounts and close them at will to facilitate the investment of black money.
10) Invest black money in multiple instruments in the names of different individuals, not necessarily drawn from among the family.
11) Allot lockers for the safekeeping of the illegitimate cash, including special large size lockers to accommodate crores of hard cash.
12) Personally come to the residence of the client to take the black money deal forward and collect the cash, even bring along counting machine.
13) Use provisions like Form 60 to deposit the illegitimate cash into the account to route it into investment.
14) Help the client transfer black money abroad through NRE (Non-Resident External)/NRO (Non-Resident Ordinary) account transfer.
However, ICICI Bank denied the allegation and said in a statement that it "conducts its business with the highest level of compliance to legal and regulatory requirements."
"All employees of the Group are trained and required to adhere strictly to the Group Code of Conduct, including AML and KYC norms. We have demonstrated our commitment to this by following a zero tolerance policy towards any violation," said a statement from ICICI bank.
"We are deeply concerned with the media reports. We want to assure our customers and all stakeholders that we are committed towards adherence to the high standards of business conduct, which is expected of us. We have constituted a high level inquiry committee to investigate into the matter and," it added.
Meanwhile, the money laundering allegation took a toll on the stocks of HDFC Bank, ICICI Bank and Axis Bank in the morning trades.
ICICI Bank stock was down by 1.38%, while HDFC Bank was down by 1.12%. Axis Bank was down by 1.74%, reported Business Standards.