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The sting operation conducted by the online portal Cobrapost on Monday came back to haunt the banks it had snooped on as the Reserve Bank of India (RBI) slapped a fine of Rs5 crore on Axis Bank, Rs4.5 crore on HDFC Bank and Rs1 crore on ICICI Bank for alleged violation of KYC norms and alleged anti-money laundering guidelines after inquiring into charges levelled by the website against the institutions.

“After considering the facts of each case … Reserve Bank came to conclusion that some of the violations were substantiated and warranted imposition of monetary penalty…” the central bank said in a statement. RBI imposed a penalty of Rs5 crore on Axis Bank, Rs4.5 crore on HDFC Bank and Rs1 crore on ICICI Bank.

The penalty follows scrutiny carried out by RBI of books of accounts, internal control, compliance systems and processes of these three banks at their corporate offices and some branches during March/April 2013. The scrutiny was conducted to investigate into the allegations of contravention of Know Your Customer (KYC)/ anti-money laundering guidelines against them following expose by online portal Cobrapost.

Although the investigation did not reveal any prima facie evidence of money laundering, RBI said, “any conclusive inference in this regard can be drawn only by an end-to-end investigation of the transactions by tax and enforcement agencies.” RBI further said that a similar scrutiny was being conducted at corporate offices of 36 other banks and “the process of follow up action in respect of these banks is at different stages of its completion.”

The violations include non-observance of certain safeguards in respect of arrangement of “at par” payment of cheques drawn by cooperative banks, non-adherence to certain aspects of KYC and AML guidelines like risk categorisation and periodical review of risk profiling of account holders.

They did not adhere to the KYC norms for walk-in customers for sale of third party products and failed to file cash transaction reports in respect of some cash transactions and sale of gold coins for cash beyond Rs50,000. In certain cases, the banks failed to obtain permanent account number (PAN) card details or form 60/61 and verify the source of funds credited to a few non-resident ordinary (NRO) accounts.

RBI had launched the investigation into the working of banks following the expose by Cobrapost which showed some bankers giving suggestions to customers on ways to bypass regulatory norms.

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