The recent case of Union Bank of India getting caught in the crossfire in Madhu Koda dealings has put banks on high alert and most were looking to tighten their scrutiny of transactions, especially those involving large cash movement, senior bank officials said.
Even the Reserve Bank of India (RBI) has spared no time to reiterate its know-your-customer (KYC) and anti-money laundering (AML) norms.
On Thursday, RBI asked banks to furnish suspicious transaction report (STR) to Financial Intelligence Unit within seven days of arriving at a conclusion that a cash or non-cash “transaction, including attempted transaction, or a series of transaction integrally connected, are of suspicious nature.”
Banks are also bound to report any transaction of Rs 10 lakh and above to the Financial Intelligence Unit.
“Banks are asking even long-time customers like us to now provide additional details on our cash deposits. In bullion trade, it is common to have large cash dealings, but because of the recent Madhu Koda issue, our normal business operations have been slowed down,” said Darpan Dalal, proprietor of Suvarna Jewellers.
Balaji Bullion was allegedly used as a front organisation by former Jharkhand Chief Minister Madhu Koda and his aides to deposit money that was allegedly made from scams.
As most trades in bullion happen in cash, the Balaji Group did not arouse suspicion even when it made large cash transactions of nearly Rs 100 crore in their Union Bank of India accounts at Zaveri Bazaar.
Union Bank of India’s Chairman and Managing Director MV Nair was called for questioning by the income-tax department and also had to clarify the issue to the government earlier this week.
“We are reputed to have, among public sector banks, the best technology and vigilance, but in the view of the recent occurrence and controversy, we are going to enact a lot of measures to tighten further our security systems,” S Raman, executive director of Union Bank of India, said.
The official reiterated the bank’s contention that it had adhered to all existing KYC and anti-money laundering guidelines in its dealings with the large cash transactions of nearly Rs 100 crore in the account.
Another official with Union Bank of India said it was looking at even hiring an external professional consultant for evaluations of all its systems and processes when conducting both cash and non-cash transactions.
Bankers pointed out that such large cash transactions were commonplace in bullion trade, but even scrutiny over these needs to be tightened after the Koda episode.
Andhra Bank Chairman and Managing Director RS Reddy said there were enough safeguards in place and “systemically there is no way a bank can hide such suspicious dealings.”
“All banks, including us, now have robust monitoring systems. All KYC and AML norms are followed and robust vigilance is employed. In case of minor defects, these issues can be handled by the banks as the existing norms are fairly strict,” he said.
Andhra Bank was also working towards sensitising its branch-level staff, especially those dealing with bullion traders, in terms of norms necessary for such dealings, Reddy said.
“We have systems of automatic reporting of any transaction over Rs 10 lakh and the systems are already in place to throw up any suspicious dealing. We are now trying to train branch-level staff to handle such transactions better,” SC Gupta, chairman and managing director of United Bank of India, said.
Some bankers said government’s diktat to Union Bank for conducting an audit of all its accounts for such dealings was a little harsh as it would be difficult to accurately study very old transactions.
“Banks do adhere strictly to KYC norms. This is not a serious concern,” said KR Kamath, chairman and managing director of Punjab National Bank.
“Banks having old accounts, it becomes difficult. Bullion trading mostly happens in cash, you can ask anyone that. But that doesn’t mean norms are not followed,” he added.
Kamath said such cases were one-off and all banks have adequate systems in place to prevent such acts.
