F P :Mar 16, 2013
ICICI Bank suspended 18 employees on Friday, a day after the lender and two of its peers were accused of indulging in money-laundering activities.
The suspension has been effected pending the bank’s investigation into money-laundering charges, sources in ICICI told PTI. The probe is expected to be completed in two weeks.
Three of the the country’s largest private banks, including ICICI Bank, were on Thursday accused by online portal Cobrapost of indulging in money-laundering; Cobrapost had unveiled the sensational findings and backed it up with sting video.
Cobrapost had at a press conference played out the sting video, which showed officials of the three private banks, including ICICI Bank, agreeing to receive large sums of cash and channel them into their investment schemes through benami accounts in violation of anti-money-laundering laws.
The video footage shows a number of senior executives of the three banks orally agreeing to take huge amounts of cash from the undercover reporter and channel them into a variety of long-term investment plans so that the black money ultimately is converted into white. However, no account was actually opened; nor was any cash deposited in these banks.
After the sting operation was played out, ICICI Bank said it had constituted a high-level inquiry, and that its report would be submitted in two weeks.
“ICICI group 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,” the bank had said.
PTI
Money laundering allegation: Axis Bank initiates probe
ZeebiZ : Saturday, March 16, 2013, 11:57New Delhi: Private sector lender Axis Bank on Saturday said it has asked 16 concerned officials to report to administrative offices, pending investigation which has been initiated with regard to alleged money laundering activities.
"The bank has initiated an internal enquiry. Pending outcome of the enquiry, we have asked 16 concerned employees to report to administrative offices," sources in the Axis Bank said.
Country's three largest private banks -- ICICI Bank, HDFC Bank and Axis Bank -- were accused of indulging in money laundering both within and outside, with an online portal Cobrapost claiming that a sting operation conducted by it has revealed a money laundering scam.
On Friday, ICICI Bank suspended 18 concerned officials till investigations are completed.
Earlier this week, the portal Cobrapost had played the contents of a purported video recording of officials of private banks including Axis Bank, allegedly agreeing to receive unverified sums of cash and put them in their investment schemes and benami accounts in violation of anti-money laundering laws.
The footage taken in 'Operation Red Spider', purportedly shows a number of senior executives of the three banks verbally agreeing to take huge amounts of cash from the undercover reporter and putting them into a variety of long-term investment plans so that the black money ultimately is converted into white.
However, neither any account was opened nor any cash deposited in these banks.
Soon after the revelation, the bank in a statement had said "Axis Bank has systems and processes that are robust and fully compliant with extant regulations...We are confident that all our businesses will live up to the high standards we have set for ourselves as a bank."
PTI
Why banks’ heads can’t plead innocence
Venky Vembu:FP : Mar 15, 2013
In the end, all it took to pull down the shiny reputations of three of India’s most high-profile private banks was one intrepid reporter with a sting camera – and a yarn about wanting to launder money on behalf of a leading politician.
The images of front-office staff and middle-level managers at the branches of banks and insurance companies across India virtually gloating about their experience of handling dubious cash transactions on behalf of their other shadowy customers to get them of the taxman’s radar make a mockery of any claims that these banks may make to abiding by ethical business practices. “HDFC Bank exists merely to eat up black money,” preens a bank manager in Delhi. “I myself counted Rs 90 lakh in cash at this very table,” squeals a young lady at another bank.
What the Cobrapost sting video reveals is that the Standard Operating Procedures for money-laundering by these banks (and, almost certainly, others as well) have been refined to a high art, which points to the institutionalisation of the process within the banks. It is perhaps this that lulled the staff into a sense of complacency into being rather more indiscreet than was warranted when a potential customer walked in with the promise of bringing Rs 50 lakh worth of funny money onto their balance sheet.
All three banks have pledged to conduct investigations into the damning sting video allegations, and reiterated their commitment to the pursuit of ethical business.
Yet, only the incredibly naïve will believe that these middle-level managers and the lower-rung staff put their jobs on the line in so blatantly soliciting shady business – or that those higher up the hierarchy did not have even the faintest inkling of precisely how all that new business was being drummed up. Bank employees are, of course, set punishing targets for new business, and anyone who wants to climb up the greasy pole—and who doesn’t?—has an incentive to go rogue. But just the breezy manner in which they operated – in packs, in some cases – and the fact that so many of them (across cities) were ready to put themselves out on a limb tells a rather more sordid story: that these were the accepted norms within these banks, rather than the excesses of a rogue employee.
It’s very likely that, as happened in the wake of the Harshad Mehta stock market scandal of 1992 and the Ketan Parekh scam of 2001, the lower-level bank functionaries who were caught on camera in this case will be eased out, with a compensation big enough to buy their silence for eternity. That ought to serve as a warning to those at the bottom of the food chain: that the “oral orders” that they receive from their superiors to bend the rules don’t count for much when the game is up. Those on top will walk free, leaving them to carry the can.
Yet, for all the deniability that the heads of these banks—and the regulators—have given themselves, they cannot entirely escape the taint of the scandal. Chairman and CEOs are, of course, not in on day-to-day transactions, nor should they be. But, as stakeholders in the brand equity of the bank, they must decidedly bear the cross for the wholesale failure of governance and ethical practices mechanism that the expose represents. To claim that they didn’t know mischief was afoot or that it didn’t have even their tacit consent sounds incredulous. But even if that were true, the buck stops with them.
In his first, and only public comments thus far in response to the Cobrapost sting, Chidambaram observed on Thursday that he had spoken to the chairman of two of the banks (the third, he said, was travelling overseas), but that the government wasn’t “jumping to conclusions” about the sensational disclosures.
Coming from a finance minister who has—rightly—been deploying the carrot-and-stick approach to bring tax evaders into the net, and fairly successfully at that, that remark is considerably underwhelming.
Under his watch, the Income Tax Department is going after high-rolling big spenders who have thus far been flying beneath the taxman’s radar – and, as he himself acknowledged on Thursday, that effort is yielding dividends, as reflected in the spike in the number of income-tax assessees this year.
But that same earnestness about going after tax-evaders seems to be lacking in Chidambaram’s response to the sting video, which establishes the widespread prevalence of rather more big fish—and politically connected ones at that—that are being helped by some of India’s biggest banks to dodge the tax net. This is doubly galling because Chidambaram is not unaware of the nature of the problem: after all, he introduced the Banking Cash Transaction Tax some years ago, solely to disincentivise cash transactions that were become conduits for channeling—and laundering—black money. (Of course, he was forced to backtrack on that provision, just in time for the 2009 elections.)
One would have therefore expected him to respond with a trifle more alacrity to the sting video’s sensational revelations of big banks helping the big fish to evade tax and launder black money. It might also help for Chidambaram to call the heads of these banks and the banking regulator to account – and not buy too readily into their anticipated denials and disavowals that these were aberrations of rogue employees of which they knew nothing. The Cobrapost video lays bare the rotten innards of the banking system, and holds an unflattering mirror to some of India’s leading financial institutions.
Chidambaram’s response to this will determine how serious he is about going after the big moneybags that are making a mockery of the system.
