Following Rs 6,000-crore forex related irregularities, The Reserve Bank of India (RBI) has imposed a monetary penalty on HDFC and Bank of Baroda.
In October 2015, Bank of Baroda, in a notice to the stock exchanges exhibited that during the period May 2014 to August 2015, a total of 5,853 outward foreign remittance transactions for a sum of $546.10 million (Rs.3,500 crore) for ‘advance remittance for imports’ and for other purposes were remitted through 38 current accounts to various overseas parties numbering about 400 in Hong Kong and one of them in the UAE.
This penalty imposition is owing to the weaknesses and failures in internal control mechanisms with respect to certain AML (anti-money laundering) provisions such as
- Monitoring of transactions,
- Timely reporting to FIU (foreign investigations unit),
- Assigning of UCIC (unique customer identification code) to customers.
RBI penalized HDFC bank for lapses in adhering to KYC/AML (know your customer / anti money laundering) guidelines.
RBI also issued a notice to HDFC regards seeking more information regarding a foreign exchange scam that was reported in the media and a foreign exchange scam was revealed at Bank of Baroda and a number of public and private sector lenders were found to be affected by it.
The Central Bureau of Investigation (CBI) conducted raids across bank branches on October 2015, including those of Bank of Baroda and HDFC Bank, as part of a foreign exchange scam, where bank employees had allegedly accused of transferring money to certain people to illegally transfer funds to various accounts in Hong Kong and the UAE, breaching the foreign exchange norms set by the RBI.
CBI also reported that around Rs.6, 000 crore worth of funds were transferred illegally.
- Following these issues, RBI has imposed a fine of Rs 2 crore on HDFC Bank, and penalised Bank of Baroda of Rs 5 crore. Both banks have informed the exchanges about the development.
- RBI also fined Punjab National Bank for Rs 3 crore for violation of the Banking Regulation Act.
- In a step to ensure that such incidents do not recur, HDFC Bank and BoB has implemented a “comprehensive corrective action plan” to strengthen its internal control mechanisms.