SBI denies allegations of money laundering in US

Mumbai, Oct 31: MR Janki Ballabh, chairman of State Bank of India (SBI), said US regulators had told the bank to tighten internal reporting and auditing systems, but he denied a report that they had alleged the bank was used for money laundering.

Mr Ballabh said SBI, whose New York branch is used for dollar remittances and payments from the United States to India, was also told by the regulators to create a separate department to comply with US banking laws. “If these rules are good for the bank, we will do it,” he told Reuters.

In an unsourced story, a business newspaper said the US Federal Reserve had issued a “cease and desist” order and imposed a monetary penalty on SBI on suspicion some of its branches in the United States were used to launder money.

“There has been no case of money laundering. There has been no such allegation from the US regulators that we have breached any of their banking rules,” mr Ballabh said. “The talk of a ‘cease and desist’ order and imposition of monetary penalty is premature. This is a decision that has to be taken by the US regulators”.

SBI, India’s biggest commercial bank, has five branches in the US and a local subsidiary, SBI California. The business newspaper said the US Fed had pulled up the bank for not maintaining transparency on escrow accounts for Indo-Russian trade at its US branches.

Mr Ballabh said Russian exporters had no access to the escrow accounts maintained with the SBI, and thus there were no chances of a money laundering case.

“The escrow accounts maintained are in conformity with Reserve Bank of India rules,” Ballabh said. “But the issue has to be settled between the Indian and US regulators.” The chairman gave an upbeat outlook for the bank on Tuesday, saying full year profits would climb more than 50 per cent to Rs 2500 crore ($521 million). His comments were made after SBI had reported an 11-per cent rise in net profit to Rs 644 crore for the second quarter July-September period.

— Reuters