Here's how banks violated RBI norms on KYC

Moneycontrol Bureau

Banks got a rebuff from the Reserve Bank of India (RBI). The central bank on Monday imposed nearly Rs 50 crore fines on 22 banks while warning seven other banks for violating Know Your Customer (KYC) or Anti-Money Laundering (ALM).

Must read: RBI fines 22 banks, warns 7 for KYC violations

It is noteworthy that Cobrapost.com, an online investigative magazine had carried out a series of sting operations on Indian banks. It had alleged of wide-spread infringement of KYC and ALM norms. Based on those allegations, the central bank formed an investigation committee and carried out a scrutiny among alleged lenders. Outcomes of the investigation actually prompted the RBI to act with (monetary) punishment measures.

Here's what it reveals:

• Non-adherence to certain aspects of know your customer (KYC) norms and anti money laundering (AML) guidelines like customer identification procedure, risk categorisation, periodical review of risk profiling of account holders, periodical KYC updation;
• Non-adherence of KYC for walk in customers including for sale of third party products, omission in filing of cash transaction reports (CTRs) in respect of some cash transactions, sale of gold coins for cash beyond ` 50,000;
• Non-adherence to instructions on monitoring of transactions in customer accounts;
• Non-adherence to instructions on classification of accounts as 'in-operative'/dormant and lapses in monitoring of transactions in dormant accounts;
• Non-adherence to instructions which prohibits acceptance of cash above ` 50,000 from customers for sale of gold coins and issue of Demand Drafts, etc.;
• Non-adherence to instructions on the upper limit for remittances under Liberalised Remittance Scheme, upper limit for repatriation of funds from non resident ordinary (NRO) accounts;
• Non-adherence to instructions on import of gold on consignment basis.

Based on the findings of the scrutiny, the Reserve Bank issued a show cause notice to each of these banks, in response to which the individual banks submitted written replies. After considering the facts of each case and individual bank's reply, as also, personal submissions, information submitted and documents furnished, the Reserve Bank came to the conclusion that some of the violations were substantiated and warranted imposition of monetary penalty, RBI said in a release on Monday.

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