Sting operation: FinMin, Irda to probe money laundering charges by Cobrapost

Written by ENS Economic Bureau | New Delhi | Updated: May 7 2013, 14:08pm hrs
RupeeThose named in the Cobrapost sting operation include State Bank of India, LIC, Reliance Life, Tata AIG etc. (Reuters)
The finance ministry on Monday called for strict action against public sector banks (PSBs) and insurance firms against which charges of money laundering have been levelled by online portal Cobrapost.

The measures include suspension of all officers and employees who clearly appear to have advocated plans that facilitate money laundering and taking away portfolios of all other officers and agents who were involved in these activities. The secretary, department of financial services, Rajiv Takru has asked the chairman-cum- managing directors of various public sector banks as well as Life Insurance Corporation of India for an immediate action, said a finance ministry release. It has directed chairmen of banks to send detailed reports on each of the employees and action taken against them.

Meanwhile, the Insurance Regulatory and Development Authority (IRDA) has also begun probing the accusations against insurers. The insurance companies concerned have been asked to file a report on the allegations. The matter is under examination and appropriate action will be taken at the earliest, it said in a release.

As many as 23 public and private sector banks as well as insurance firms are alleged to have run a nation-wide money laundering racket by Cobrapost in its second expose that was released on Monday. The online portal alleged that the financial sector entities offered to open bank accounts and lockers for customers without following know your customer (KYC) norms, effectively agreeing to convert their black money into white and obtain fictitious PAN cards.

Those named in the Cobrapost sting operation include State Bank of India, LIC, Punjab National Bank, Bank of Baroda, Canara Bank, Reliance Life, Tata AIG, Yes Bank, Indian Bank, Indian Overseas Bank, IDBI Bank, Oriental Bank of Commerce, Dena Bank, Corporation Bank, Allahabad Bank, Central Bank of India, Dhanlaxmi Bank, Federal Bank, DCB Bank and Birla Sun Life.

Reacting to the report, SBI chairman Pratip Chaudhuri said the bank would investigate the matter. So far, it does not indicate if KYC violations have been done. But if they have been done, the people would be severely punished, he said, but maintained that the bank can not be privy to details of what customers store in their lockers. We are very clear that there is zero tolerance for any money laundering or working around the KYC, he asserted.

Bank of Baroda general manager DD Singla said, We are in the process of investigating the whole event. Instances of deviation will be sternly dealt with as per our established procedure. Similarly, refuting the allegations, a spokesperson for Reliance Life said, As part of its ongoing compliance efforts, Reliance Life will continue to examine any specific instances that come to light for appropriate remedial action, if any.

IDBI Bank said, The bank has initiated an internal enquiry into the allegations made by Cobrapost. Any deviation will be viewed seriously and strict penal action would be initiated against the officials involved.