Cobrapost sting: ICICI Bank, HDFC Bank, Axis Bank driving money-laundering scam

Written by Reuters | Mumbai | Updated: Mar 15 2013, 15:10pm hrs
Rupee'Branches across all the three banks suggested laundering methods' (Reuters)
India's top private sector lenders ICICI Bank Ltd, HDFC Bank Ltd and Axis Bank Ltd said they were investigating allegations, made in sting by independent investigative journalist, Aniruddha Bahal of Cobrapost, about the widespread money laundering practices at their branches.

Bahal, founder and editor-in-chief of Indian news and opinion website, said he had collected hundreds of hours of video recordings from "dozens and dozens" of bank branches across the country. He did not say when the recordings were compiled.

The shares of the banks fell briefly on Thursday after Bahal made the accusations in a news conference televised by a local TV station in the morning.

An article on the website posted on Thursday said an associate editor, using an alias and pretending to work for a fictitious politician who wanted to launder money, sought advice from bank officials on how to do it.

The article said branches across all the three banks suggested laundering methods that were "imaginative in their range and brazen in their approach."

In one case, Bahal said, a video excerpt on his website showed an HDFC Bank official explaining to an undercover reporter for different methods to launder money.

It said offered to hand over the videos to law enforcement officials or regulators. The article did not say if the recordings were eventually passed on to the authorities.

Market regulator Securities and Exchange Board of India had no comment on the matter, according to a spokesman.


ICICI Bank said that it was "deeply concerned" about the accusations.

In a statement, it said: "ICICI Group conducts its business with the highest level of compliance to legal and regulatory requirements. All employees of the Group are trained and required to adhere strictly to the Group Code of Conduct... We have demonstrated our commitment to this by following a zero tolerance policy towards any violation."

"We have constituted a high level inquiry committee to investigate into the matter and submit its findings in two weeks."

HDFC Bank was investigating the matter on "top priority."

"Any deviation is viewed very seriously and stringent action is taken both at an organizational and employee level," the bank said in a statement.

Axis Bank also said it would investigate.

"Axis Bank has systems and processes that are robust and fully compliant with extant regulations. We will examine whatever information that is brought to our notice and investigate thoroughly," the bank said in a statement.

Axis Bank shares rose 1.1 percent as of 0728 GMT after earlier dropping as much as 3.5 percent.

ICICI Bank shares gained 2.3 percent after earlier falling over 2 percent, while HDFC Bank was up 1.7 percent, also recovering from earlier declines.

The shares recovered after government data showed core inflation rose less than anticipated, reinforcing expectations that the central bank will deliver an interest rate cut next week to boost the economy.

RBI says collecting info on allegations of money laundering

Reserve Bank of India (RBI) is collecting information regarding the alleged acts of money laundering by the country's three largest private sector banks, its Deputy Governor Urjit Patel said today.

The country's three largest private banks were today accused of indulging in money laundering both within and outside, with an online portal claiming that a sting operation conducted by it has revealed a scam.

"The RBI is in touch with the banks. At the moment, that is what I can say... We are collecting information," Patel told reporters on the sidelines of Exim Bank's annual commencement day lecture here.

When asked if any of the three banks in question--ICICI Bank, Axis Bank or HDFC Bank-- have been issued a show-cause notice in the aftermath of the expose, Patel said "No".

The portal Cobrapost played the contents of purported video recording of officials of HDFC, ICICI and Axis bank allegedly agreeing to receive unverified sums of cash and put them in their investment schemes and benami accounts in violation of anti-money laundering laws.

The footage shows a number of senior executives of the three banks verbally agreeing to take huge amounts of cash from the undercover reporter and putting them into a variety of long-term investment plans so that the black money ultimately is converted into white. However, no account was opened nor any cash deposited in these banks.

All the three banks claimed they conduct their business in compliance with legal and regulatory requirements of the highest standards but said they will investigate the charges.

However, no account was opened nor any cash deposited in these banks.

Reacting to it, Finance Minister P Chidambaram said the Government will not jump to any conclusions in the matter, while the CBDT said it has taken cognisance of the

sting operation and has begun a probe into it.

Stocks of the three banks were hit initially on bourses but recovered later on. The BSE's sectoral Bankex gained 2.08 per cent or 280.93 at the end of trade to close at 13,796.47 points as against the 1.07 per cent.

The three banks issued statements saying they will investigate the charges. However, all the three banks claimed they conduct their business in compliance with legal and regulatory requirements of the highest standards.

Meanwhile, Patel also sounded concerned about the infrastructure sector, stating more government investment needs to come into the critical area.

"The amount of government investment that is now required for good infrastructure to come up needs to increase. While private investment can still play a part, there are natural limits to it. So, there is one area of concern," he said.