Finmin calls for immediate action against bank, LIC staff after Cobrapost expose

The Finance Ministry has asked public sector banks and the Life Insurance Corporation (LIC) to take immediate action against employees who "appear to be advising" customers on ways to violate regulatory norms, including the Know Your Customer (KYC) norm.

In its expose on Monday, web portal Cobrapost has named as many as 23 public and private sector banks and insurance companies for allegedly "running a nation-wide money laundering racket, blatantly violating laws of the land." They are alleged to have violated the KYC and 'Anti Money Laundering' Guidelines.

"An inquiry must be initiated and completed expeditiously," Financial Services Secretary Rajiv Takru asked heads of several state-owned banks and LIC.

Takru's communication has been sent to the State Bank of India and its associate banks, LIC, the Punjab National Bank, Bank of Baroda, Canara Bank, Bank of India, Allahabad Bank, Andhra Bank, Bank of Maharashtra, Central Bank of India, Dena Bank, Indian Overseas Bank, Punjab & Sind Bank, UCO Bank, United Bank of India, Vijaya Bank, Indian Bank, Corporation Bank, Union Bank of India, IDBI Bank, Syndicate Bank and Oriental Bank of Commerce.

He also asked the chairmen and managing directors to place under suspension with immediate effect officers and employees "who clearly appear to be advising potential customers along lines that would be an infringement of the legal process/could facilitate money laundering/could defeat the KYC norms or the norms of due diligence prescribed by RBI and the law".

The banks, the ministry said, should also "initiate a detailed scrutiny of such officer's work and institute a special audit, if necessary, for this purpose".

Takru has also asked the banks to disvest the officials concerned of their current portfolio and advise them to proceed voluntarily on leave pending investigations.

The finance ministry has also sought detailed reports from the financial institutions about names of erring employees, their designations and action taken against them.