Cobrapost's Shocking  Mega Expose: Major Indian Private Sector Banks, HDFC Bank, ICICI Bank and Axis Bank, Are Blatantly Running A Huge Nation-wide Money Laundering Racket “
(www.cobrapost.com )

While we have not verified the truth in the above instance, the latest development relating to Anti-Money Laundering, KYC violations is a real cause of concern. 

Just when India is getting ready to welcome new banks and the most important factor in issuing new licenses was to ensure that the corporate or group had an impeccable reputation and transparent corporate governance and entity structures. RBI believes that Banking was synonymous to trust and it has to protect the nation from malpractices by these new banks. So, in an industry that is considered the epitome of trust, it is now alleged that the industry is running a tax evasion mechanism. How much truth is in these claims remains to be seen.

A few observations from Riskpro (www.riskpro.in)
•Is there a correlation of such practices in Banks that have large networks and hence large number of frontline staff.

•Why did Cobrapost target only 3 private banks. What about Public Sector Banks and other private banks. It is hard to believe that they found more than 15-20 cases in above banks, but not a single case in smaller private banks or other PSB.

•Why are most of the findings in North region (Delhi, Haryana, UP, Rajasthan) and a few in Central, West and South India. If cobrapost wanted to expose Banks, should it not cover all states.

•Incase the findings are found to be wrong, what happens to the damage to the reputation of major Banks. Damage to Indian reputation. Are these Banks or India at the mercy of such manipulation. Why is there so much media coverage, knee jerk reaction on stock exchange due to these allegations.

•Should the website not be blocked. A wrong post on twitter, facebook means that account is locked, blocked. Then why not the cobrapost website that potentially could be causing immense damage to reputation of these banks.

•Even if this has happened just once in every branch of every bank in last one year, we could be talking about huge number of instances.

•If there is truth in such allegations, what is the amount of penalty these banks could face. A few lacs, a few crores or what. Why not Rs 10 crore by case found or even Rs 50 crore per case.

•AML / KYC is one of the greatest risks of any financial institution. Yet Banks generally don’t have adequate trainings on these aspects.

•Bank’s frontline are usually cordial, educated graduates, but may be its time to staff these positions with intelligent finance professionals, AML experts or fraud experts who can read the mind of the customers intent. 

•Why are more and more products sold in Banks. And if this makes business sense, then Banks and their staff should be subject to strict SEBI, IRDA, RBI and other regulatory norms. They should be certified financial advisors.

•In other words, all branch staff who interface with customers should be certified investment advisers, and should follow SEBI norms on investment advisory, even it is just account opening.

•Is there a solution to tax evasion.

•Finally, it is happening in other industries. Brokerage House, Wealth management firms, NBFC etc.