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Rural, co­operative banks under lens as govt keeps tab on terror finance

businesspaper Updated: Jul 06, 2016, 07:03 IST

NEW DELHI: In the wake of rising threats of terror attacks in India, the government has decided to increase its attention on co-operative and regional rural banks, which otherwise escape stringent scrutiny, to ensure there is no “dirty” money in the system.

These banks are likely to be asked to spruce up vigilance and put in place anti-money laundering mechanisms and report any “unusual” or suspicious transactions. Banks may have to report any case where an account holder deviates from her normal transaction pattern.

“It is relatively easy to open bank accounts in these banks and the checks and balances need to be strengthened, the scheduled commercial banks have the systems(anti-money laundering) in place ,” a senior government official said.

While these banks, too, are mandated to follow similar know-your-customer (KYC) norms there is little oversight .

“A lot more attention needs to be given to the co-operative banks and their reporting norms must be tightened,” said Ashvin Parekh, managing partner, Ashvin Parekh Advisory Services.

Market regulator Sebi, in 2014, had issued a list of terror outfits and asked market entities to be cautious and keep a close watch on transactions to ensure that they do not find their way into India’s capital markets.

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