Bank of Maharashtra, Dena Bank and Oriental Bank of Commerce have been imposed with a monetary penalty of Rs. 15 crore each by the Reserve Bank of India (RBI) for violation of Know Your Customer (KYC)/ Anti Money Laundering (AML) norms.
“Failure on the part of these banks to take timely remedial measures had aggravated the seriousness of the contraventions and its impact,” RBI said in a release.
The RBI also cautioned eight other banks -- Central Bank of India, Bank of India, Punjab and Sind Bank, Punjab National Bank, State Bank of Bikaner & Jaipur, UCO Bank, Union Bank of India and Vijaya Bank – “to put in place appropriate measures and review them from time to time to ensure strict compliance of KYC requirements in future.
“The penalties have been imposed in exercise of powers vested in the Reserve Bank…taking into account the violations of the instructions/directions/guidelines issued by the Reserve Bank from time to time. This action is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank and its customers,” the central bank said.
RBI said it received a complaint from a private organisation, on the basis of which a scrutiny of fixed accounts opened in its name in Mumbai based branches of certain public sector banks was undertaken in July 2014.
“With more complaints and involvement of other banks coming to light, a wider thematic review was conducted. In all, 12 branches of 11 Public Sector Banks were covered.
“The scrutiny/thematic review looked into the modus operandi of the alleged frauds involving accounts of certain organisations in these banks, deficiencies/irregularities while opening Fixed Deposits (FD) and extending Overdraft (OD) facility there against them. Besides, the effectiveness of systems and processes in place pertaining to implementation of KYC norms/AML standards in respect of these accounts was also looked into,” the RBI added.
The findings revealed violation of some regulatory guidelines as also other disquieting actions on the part of the banks such as non-adherence to certain KYC norms, monitoring of transactions in customer accounts, RBI’s instructions regarding funds received through Real Time Gross Settlement System (RTGS), opening of FD accounts and granting overdrafts without due diligence or process, weaknesses in the internal control systems, management oversight, use of internal accounts for parking customer funds and involvement of middlemen/intermediaries in opening of accounts as also subsequent operations in those accounts.