Money laundering by Multinational Banks – Allegations

A sting operation conducted by an online magazine Cobrapost across various branches of private banks has revealed how bank employees are accepting black money from customers to convert them into white money. Cobrapost Editor has insisted that leading private banks like HDFC Bank, ICICI Bank and Axis Bank are involved in this money laundering.

The Cobrapost report said its undercover correspondent approached executives of the three banks across the country over five months – in many cases as a walk-in customer – pretending to work for a fictitious politician who wanted to launder money.

Through its website alleged that HDFC Bank, ICICI Bank and Axis Bank Ltd were involved in a “nationwide money laundering racket”. said it had unraveled the fraud through undercover investigations at several branches of these banks and their insurance affiliates.

Further it claims to have caught on camera an expose that allegedly proves that some of the largest private sector banks in the country help in money laundering. According to them, HDFC Bank, ICICI Bank and Axis Bank were part of a vast money-laundering racket.

“The brazen criminal activity by these banks is channelizing vast amounts of black money into the regular banking system as laundered white money,” said CobraPost, which conducted the sting spanning several months in various bank branches throughout the country.

The sting alleges that banks and their managements systematically and deliberately violate several provisions of the Income Tax Act, FEMA, RBI regulations, KYC norms, the Banking Act and Prevention of Money laundering Act (PMLA) with utter disregard to consequences, driven by their desire to boost cheap deposits and thereby increasing their profits.

Earlier in the day, investigative website Cobrapost, which made this sensational charge, said such illegal conversions, called money laundering, are being done with the full knowledge of the senior managements of the three banks.

This is what the Cobrapost release said on the likely response from the banks to the expose,“When confronted with irrefutable evidence, the PR spin machines of the banks are likely to go into over drive and claim that ‘these cases are aberrations and isolated’, or that ‘the tapes are doctored’, or that ‘we will look into the matter and take action’.

The media report said money laundering services were being offered practically as a standard product across the country. These money laundering services were being openly offered to even walk-in customers who wish to launder their illicit money.

The Reserve Bank of India on Thursday asked ICICI Bank, HDFC Bank and Axis Bank for information on allegations that they were helping customers convert black money into white as a standard service.

RBI deputy governor said: “We have been in touch with the banks and have asked for information on the matter.” The apex bank is expected to follow this up with a formal notice soon.

Reacting to the allegations, the three banks announced their own investigations into the matter.

“ICICI Group conducts its business with the highest level of compliance to legal and regulatory requirements. All employees of the group are trained and required to adhere strictly to the group code of conduct, including anti-money laundering and know your customer norms.” the ICICI Bank spokesperson said.

“Segregation of frontline sales activities and back-office operations and post-transaction monitoring processes are in place to ensure independent checks and balances and adherence to all the laid down policies and procedures of the bank,” HDFC Bank said. “Any deviation is viewed very seriously and stringent action is taken both at an organizational and employee level.” Any deviation is viewed very seriously and stringent action is taken both at an organisational and employee level. We would like to assure our customers and other stakeholders that the bank has always adhered to the highest standards of compliance and corporate governance and will continue to do so,” it added.

Some Banks which are said to have been involved in this scam, also issued similar statements.

The Reserve Bank of India (RBI) is expected to take a closer look at the guidelines on transfer of funds and know your customers (KYC) following an exposure by allegation that private banks are helping individuals convert black money into white money. The likely exercise would aim at covering any loophole that results in money laundering.

RBI may seek detail report from private banks involved on the big-ticket cash transactions. Alternatively, they could also conduct on-site inspection at a short notice to verify books of private banks.  This apart, RBI may also take a closer look at KYC guidelines for co-operative banks since the exposure by alleges that it is easier to route money through co-operative banks to convert it into white money. Co-operative banks come under dual jurisdiction of state government and RBI making it difficult for RBI to effectively regulate it.

So far, the RBI has officially not issued any statement regarding the allegation made by however in the past RBI has fined several banks for their failure to meet the KYC norms.