The Reserve bank of India has imposed penalty on ICICI bank and Bank of Baroda for violation of its instructions on Know Your Customer (KYC) and anti-money laundering (AML) norms. ICICI BAnk is liable for Rs 50 lakh and Bank of Baroda Rs 25 lakh as penalty charges.
The RBI said that the fraudsters had managed to open fictitious accounts in the name of the statutory organisation in the above five banks and operated the accounts mainly for encashing cheques/demand drafts/postal orders of which they were not the rightful owners, for periods ranging from one month to two years, without being detected by the banks.
A scrutiny was undertaken in the above five banks in January, 2014 to ascertain the adherence to extant regulatory instructions by banks in the instant case. The findings of the scrutiny revealed violation of certain regulatory guidelines issued by the Reserve Bank, namely:
- Non-adherence to certain aspects of know your customer Know Your Customer(KYC) norms like customer identification and acceptance procedure
- Internal norms regarding customer identification procedure of a bank being violative of Know Your Customer (KYC) directions issued by Reserve Bank
- Non-adherence to instructions on monitoring of transactions in customer accounts
After the inquiry, the Reserve Bank came to the conclusion that some of the violations of serious nature were substantiated and warranted imposition of monetary penalty as determined above on two banks, namely, ICICI Bank Ltd. and Bank of Baroda. Failure on the part of these banks to take timely remedial measures had aggravated the seriousness of the contraventions and their impact.
Remaining banks, namely, State Bank of India, Axis Bank Ltd. and State Bank of Patiala, have been cautioned to put in place appropriate measures and review them from time to time to ensure strict compliance of Know Your Customer (KYC ) requirements in future, the RBI said in the press release.