Monday, March 18, 2013

the inside story of money laundering

The cobra post sting on money laundering facilitation by banks has stirred a hornet nest in private banks ....the mighty 20 year old banks like, ICICI Bank, HDFC Bankand AXIS Bank of the country circumventing KYC norms is a piece of the pie. 

KYC – for many clients is a different ball game . For the poor with Rs 500 in hand to open savings account it is a dampener, with endless documents being sought which they have never heard in their life and for the richy rich KYC is an enabler ….the banker will enable it for you, if you have Rs crore + with you to open yet another saving account. What a pitty, but, that’s is the irony !... but why would the crore plus need a new account now ...where was this money floating outside the banking system? Should this not be caught in the STR ( suspicious transaction account which banks sent FIU(Financial Intelligence unit)of the banking system- if liquid cash is brought it ???????

The recent report of ICICI Bank suspending 18 officials at the lower level smacks of discrimination and bais. officials at the lower level are often made scapegoats . it is the case of ICICI screwing up the job of 18 officials because of the cobra bite ! They normally don't violate norms of this nature of diluting KYC without a nod from the top. As somebody said “ The observance of KYC norms is done only where it is convenient to the bank” . Smaller customers are harassed with KYC “ kill your customer” norms and big fish is baited with “ kneel-down for the Customer” norms.

Private banks are no holy cows “ they have mopped up crores of deposits....their deposit growth needs a closer investigation ...a granular analysis which the KCC says ( KC chakravorthy) . many say private banks grows faster it is because the PSU banks are inefficient. It may be good for FIU to study these deposit accounts. It is time to enable the CBS ( Core banking solutions) to generate the Suspicious transaction reports on line to FIU. That’s is self generated reports ? you will find many purtis and non-purtis … with crores being directed from a shanties and basties. IT is ultimately the technology that can bring transparency to the fore ! 

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Works at NABARD for poor HH / was Research Affiliate at CDS, Tvm / was Visiting Faculty on microFinance for MBA students NMIMS, Mumbai.