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Money laundering: RBI takes action against erring UCBs

RBI has aggressively pursued the issue and around six UCBs were closed as they were found to be “unviable”.

By: Press Trust of India | New Delhi | Published: September 15, 2014 1:28 am

Cracking down on money laundering, the Reserve Bank of India (RBI) has closed down six urban cooperative banks (UCBs) which were suspected of being used to route illegal money.

The central bank has also asked state governments to take stern action against any other erring UCBs after reports emerged that such entities were being used as conduits for money laundering.

The matter of misuse of UCBs, over which there is dual control by Central and state governments, was discussed during a recent meeting of the Economic Intelligence Council (EIC) headed by finance minister.

UCBs are inspected annually or once in two years depending on their ratings or classification. About 70 per cent of these urban cooperative banks are subjected to inspection every year.

RBI has aggressively pursued the issue and around six UCBs were closed as they were found to be “unviable”, according to the minutes of the meeting.

Sources who were present at the meeting said it was found that these banks were lax on regulatory issues and were used as conduits.
“RBI had taken up the issue with the state governments and also advised stringent action against the erring UCBs,” it said, but did not disclose the names of the banks.

On the issue of risk categorisation and compilation or updating of profiles of all their existing customers, the apex bank said their regional officers have been advised to seek compliance from UCBs and submit an update which would be reviewed and any necessary action initiated.

RBI has been directed by the chairman, EIC, to block accounts of non-complying customers while keeping the credit option open.
The customers would be able to credit money into their accounts but the withdrawal facility would be
activated only when the mandated information is furnished.

The action comes after it was noticed that the UCBs, which hold deposits of over Rs 2 lakh crore, were being misused for money laundering.

It was observed that the problem of irregularities in the UCBs is of “grave nature” given their wide reach and penetration across the country with 8,100-plus branches which have huge deposits to the tune of Rs 2.09 lakh crore and advances worth Rs 1.35 lakh crore.
SIT on black money empowers ED to probe huge forex violations

New Delhi : To check large-scale foreign exchange violations and generation of slush funds, a Special Investigation Team (SIT) on black money has asked the Reserve Bank of India and Enforcement Directorate (ED) to jointly take on cases of huge exports outstanding.

The SIT, for the first time, has authorised the ED to obtain regular information on export outstanding amount of more than Rs 100 crore, a data till now shared only by the banking regulator with investigative and enforcement agencies like the Department of Revenue Intelligence and Customs.

Sources said the SIT found that a number of such instances are being reported and hence it has asked RBI to begin providing the ED dossiers on such defaults as it is the lead agency to check forex contraventions and the hawala route of illegal payments.
The ED investigates forex related crimes under the Foreign Exchange Management Act.     PTI

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