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The three private sector banks allegedly involved in money laundering activities could face the hefty fines from the Reserve Bank of India (RBI) if the violations are proved.
RBI can deal this case under Prevention of Money Laundering Act, 2002 (PMLA) which was amended in 2011.
Money laundering act asks the banks to maintain record of all transactions and also to verify and maintain the records of the identity of all its clients.
According to the act these records should be presented for inspection when called for.
If situation warrants investigating agency can also seize the records if it believes that they are connected to the money laundering.
If the violations are proved the banks will be levied the fine of not less than Rs 10,000 which may extend to Rs 1 lakh for each failure, act says.
“The officers involved in the act could be tried under PMLA act,” Y P Trivedi, senior Supreme Court lawyer said. “As far as bank is connived, it will not be very easy prove their role as they would put entire blame on officers” he added. However if their role is proved banks would be fined he said.
In the cases where money laundering actually may have happened RBI has no power to recover the money and it will have to go through the regular procedure of going to magistrate court for demanding the money, he said.
On the quantum of fine he said that would depend on the gravity of the offense and RBI has got large powers to heavily penalise banks.
However banks don’t face threat of the cancellation of license for the alleged money laundering Trivedi said. Left front had demanded cancellation of licences of these banks. They also won’t face suspension of board as specified in the amendments to banking regulation bill which was passed by the parliament in December last year.
However equity analysts said there won’t be any impact on stock prices of these banks.
“In the short term there could be sentimental reactions in the stock price however the fundamentals haven’t changed,” said an analyst with a brokerage firm. There are other macro factors weighing on stock prices therefore it’s very difficult to say for what reason stock prices are falling, he said.
Finance ministry had also said that there would be action on persons found guilty in money laundering.
Online portal cobrapost had exposed in a sting operation that employees of these three banks openly offered money laundering as a product without coming to the notice of the authorities. Cobrapost's journalists visited 20 branches of HDFC Bank, 19 branches of ICICI Bank and nine branches of Axis Bank across all the five zones of the country during their sting operation.
Last year in October RBI had fined ICICI Bank and ING Vysya Bank Rs 30 lakh and Rs 55 lakh respectively for violating certain provisions of PMLA and KYC norms. RBI had then said that these banks failed to obtain adequate documents for opening accounts and also failed to carry out sufficient customer identification procedures”.
