UCBs in CBI net for laundering money

Not just prominent private and public sector banks that have been caught allegedly offering money laundering services, the CBI has reported yet another collective violation — by Urban Cooperative Banks (UCBs) — to the government.

Not just prominent private and public sector banks that have been caught allegedly offering money laundering services, the CBI has reported yet another collective violation — by Urban Cooperative Banks (UCBs) — to the government.

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UCBs, the report says, are increasingly being used to launder money.

This acquires significance in the backdrop of reports that many individuals connected closely to political parties have allegedly laundered thousands of crore through fictitious accounts in an Uttar Pradesh-based cooperative bank.

What queers the pitch further, however, is the reluctance on part of the RBI to share inspection reports on grounds of confidentiality. “It is appreciated that banks are bound by their functional obligations and confidentiality grounds. But cases of fraud or violation detected or committed by banks could be shared as intelligence inputs,” an official note accessed by HT said.

It may be noted that soon after the Cobrapost expose in March, the RBI had rubbished the allegations. On Monday, however, it levied heavy penalties on Axis, HDFC and ICICI banks for flouting anti-money laundering and KYC (Know Your Customer) guidelines.

Given that UCBs have immense penetration across the country, violations of norms and irregularities committed by them are ‘particularly grave’. There are 1,645 UCBs, more than 8,150 branches, R2 lakh crore of deposits and their advances are valued at R1.3 lakh crore.

While the RBI has filed a criminal case against the UP-based Indian Mercantile Cooperative Bank, it was the Intelligence Bureau that had alerted the finance ministry about the scam. The modus operandi involved depositing and withdrawing money from accounts of fictitious individuals.

An RBI scrutiny of a sample of about 650 loan files amounting to more than R13 crore, found violations galore, like no pre-sanction inspection, no documents showing existence of borrower nor any photograph or address proof of borrower and non-ascertainment of the purpose for which the loan was sanctioned.

“In 622 loan files, no security was found, but the RBI had been told that all the loans were fully secured,” the official said.