The Reserve Bank of India, the national banking regulator, has issued INR1.5cr (USD165,276) fines to three public sector banks and issued to cautions to eight more for failure to implement appropriate measures to prevent and detect AML/CTF. The censure comes in the wake of a thematic review of KYC in banks which found a lack of due diligence carried out in public sector banks and a concerning use of intermediaries to open and operate accounts.
Public sector banks in India are those which are part of the national State Bank of India network, the largest banking group in the country. AML/CTF practitioners in India have in the past lamented the apparent multi-tiered system of regulatory enforcement employed by the Reserve Bank of India. International private organisations received the most attention – although they were more likely to have the highest AML/CTF standards, Indian private banks came in second and Indian public sector banks were treated most leniently.
In real terms, this caused huge discrepancies in how each group of banks managed clients. For example, a non-Indian citizen looking to open a bank account with an international bank in India would be heavily scrutinised without any apparent risk assessment. In my own experience, transactions were declined if my signatures did not match exactly the one on my original on-boarding documents, even if a bank employee had witnessed it; account opening itself was fraught with difficulties, including producing far more documents than the ‘one plus one’ often acceptable for low risk accounts; two months before my visa expired, the bank contacted me personally to find out whether I would be leaving India, and thereby closing the account.
The level of attention and resources given to a personal account which could only by law receive payment from an agreed source – my employer – was astounding.
A British Indian friend of mine had a vastly different experience. His employer called the local bank, gave over my friend’s details and convinced the bank to open an account for a person they had never met. No doubt the business owner used his considerable influence at the bank to ease the account opening process.
Meanwhile, the Indian government has amended the anti-corruption law, increasing the penalty for corruption to a maximum 7 year jail term, and crucially extending the provisions to cover both the offerer and recipient of the bribe.
Finally, a sad note to end this month’s blog.
The devastating earthquake which hit Nepal in late April has killed 6,000 people at the time of writing and will leave hundreds of thousands more injured, homeless and without access to water. We have yet to read about the full consequences of the disaster. Volunteers across Nepal are working hard to help save lives; there are many worthy causes out there and many requests for aid flooding into email inboxes and social media pages.Donate directly, if you find an organisation you trust. The people on the ground need support from the outside world to help Nepal’s population.
I have spent time in the Kathmandu Valley; it is an astounding place, populated by people of many religions and cultures living peacefully together. Nepal is one of the world’s poorest countries. Many of the villages in the valley are inaccessible by road under normal circumstances; the earthquake has left them entirely isolated and help is not able to reach them.
Horribly, some fraudster or other will take advantage of this, in a bid to steal funds, just as they did with the 2004 tsunami. Please be vigilant for fraudsters, and alert your customers to any scams, while directing them to genuine causes.
First published on the International Compliance Association blog in May 2015.