The RBI has found "certain weaknesses" in Union Bank of India's Zaveri Bazar branch in Mumbai where sizeable cash was reportedly deposited in two accounts that are being investigated in the alleged hawala case involving former Jharkhand Chief Minister Madhu Koda.
"In its initial scrutiny, RBI has observed certain weaknesses in the implementation of extant anti-money laundering guidelines and detection of suspicious transactions," Finance Minister Pranab Mukherjee said replying to questions in Rajya Sabha.
The bank has, in the interim, placed the then branch manager under suspension for poor control of the affairs.
"In view of large value of cash transactions, Income Tax authorities identified two accounts (of) Balaji Bullion Bazar and Balaji Bullion Corporation of Zaveri Bazar, Mumbai Branch of the Union Bank of India," he said.
The bank, he said, has told the Government that it was complying with all guidelines including submitting the requisite cash transaction reports on the large value cash transactions undertaken through the two accounts.
RBI has also undertaken a scrutiny of these accounts and observed certain weaknesses, he said without giving details.
Under the Prevention of Money Laundering Act, banks are obliged to submit to the Financial Intelligence Unit cash transactions exceeding Rs 10 lakh, transactions appearing suspicious and those that appear to be leading to some sort of terrorist act.
"RBI findings (in case of the Union Bank's Zaveri branch) are technical in nature. It is not that the bank concerned did not report (the high value cash transactions in the two accounts)," Mukherjee said.
When asked how the alleged hawala operators were able to open and operate the bank accounts when the Know Your Customer (KYC) guidelines of RBI are in place, he said KYC is not an investigating agency and the job was vested with agencies like ED and IT.
S S Ahluwalia (BJP) had wanted to know how the alleged hawala operators did not come to light in view of KYC provisions where all bank customers are required to furnish personal and professional details in a prescribed format.
Mukherjee said investigations in the alleged hawala case involving Koda were still on and he would not like to divulge details at this moment.
During the year 2008-09, Financial Intelligence Unit-India (FIU-IND) received a total of 55.11 cash transaction reports (CTRs), including 31.08 lakh reports from the public sector banks, he added.
