Icici Bank Deposit Scheme

Money Laundering: RBI Governor Admits the Need for Corrective Action.

Hit hard by
money laundering

 allegations on India’s major
private banks –
HDFC

HDFC Housing Development Fund Corporations
HDFC Huntington’s Disease Family Center
,
ICICI

 and Axis –
Reserve Bank of India

 (
RBI

abbr. Baseball
runs batted in

Noun 1. rbi – a run that is the result of the batter’s performance; “he had more than 100 rbi last season”
run batted in
)
Governor Duvvuri Subbarao on Friday said that there is need for
corrective action to prevent such illegal activities in the country.

Private Banks – HDFC, ICICI and Axis – were allegedly caught
red-handed in Cobrapost’s nation-wide undercover investigation
called Operation Red Spider, and these major financial institutions were
willing to turn black money into white. Cobrapost shared the video
footages of the operation to reporters at a press conference a few days
ago and the footages are also available on its site.

“I can’t at this time say or make a broad sweeping
statement that there are no transactions taking place at all, but I
believe the system is largely safe,” Subbarao said at a banking
industry gathering.

“However, there is need for some corrective action. We are
going to the head offices of all those banks to check what the system is
for detecting management-level control over these transactions.”

The RBI had earlier said that it has begun probe into the
allegations of money laundering against a few private banks.

“The RBI is collecting information, and the RBI has been in
touch with the banks. At the moment, that’s all I can say,”
Urjit Patel, deputy governor of the RBI, told reporters last week.

The sting operation by Cobrapost found out that many private sector
banks floated the rule and turned black money to white, accepting cash
amounting to lakhs.

“Our investigation, conducted across dozens and dozens of
branches of these banks and their insurance affiliates, across all five
zones of the country, revealed these shocking facts that these money
laundering practices are part of a standard set of procedures within
these banks,” Cobrapost Editor Anirudh Bahl had told reporters.

Cobrapost alleged that these private sector banks launder black
money in the following manner:

1) Accept huge amounts of cash and invest it in insurance products
and gold.

2) Open an account to route the cash into various investment
schemes of the bank.

3) Do it even without the mandatory PAN card or adhering to the
KYC

 norms laid down by the Reserve Bank Of India.

4) Split the money into tranches to get it into the banking system
without being detected.

5) Use “benami” accounts to facilitate the conversion of
black money.

6) Use accounts of other customers to channelize the black money
into the system for a fee.

7) Get demand drafts made for the client either from their own
banks or from other banks to facilitate investment without it showing up
in the client’s account.

8) Keep the identity of the investor/depositor secret.

9) Open multiple accounts and close them at will to facilitate the
investment of black money.

10) Invest black money in multiple instruments in the names of
different individuals, not necessarily drawn from among the family.

11) Allot lockers for the safekeeping of the illegitimate cash,
including special large size lockers to accommodate crores of hard cash.

12) Personally come to the residence of the client to take the
black money deal forward and collect the cash, even bring along counting
machine.

13) Use provisions like Form 60 to deposit the illegitimate cash
into the account to route it into investment.

14) Help the client transfer black money abroad through
NRE

 (Non-Resident External)/NRO (Non-Resident Ordinary) account transfer.