RBI – Robberer’s Bureau of India
Editor: Nagaraja.M.R.. Vol.11..Issue.30….….25/07/2015
CHENNAI: Defamation complaints and dismissal from service – these were the gifts management of the State Bank of India showered on four of its employees who acted as whistle-blowers and exposed a series of ‘currency bundle missing’ cases involving several lakhs of rupees from various branches of the bank.
Halting the witch-hunt by top brass of the biggest bank in India and coming to the rescue of the employees one of whom was even dismissed from service, Madras high court said: “It is unfortunate that a public sector bank like the SBI should file a (defamation) suit not only claiming damages for loss of reputation, but also seeking for a prior restraint on the trade union in publishing hand bills, posters and putting up placards.”
A division bench of Justice V Ramasubramanian and Justice K Ravichandrabaabu said, “Image of the bank cannot be confused with officers at lower level committing fraud, misconduct and embezzlement. Certainly when a trade union finds that action is not being taken, they can take the issue to the public and the grievance projected in no way amounts to defaming the bank. An employee working in a public sector bank also owes a public duty when public funds were frittered away or misappropriated.”
In May 2006, a sum of Rs 30 lakh – six bundles of Rs 500 denomination – went missing from currency notes stored in the strong room of Avinashi branch of Coimbatore module in SBI’s Chennai circle. Holding that chief general manager Pradip Chaudhary cannot be spared for the loss caused to the bank, three persons – M V Thangaswamy, president, S Gunasekar, general secretary and G Arasukumar, treasurer of SBI Ambedkar Trade Union – wrote complaints to the RBI and pasted posters seeking action.
In this regard, they pointed out that cash bundles worth Rs 5 lakh had gone missing from Salem branch, Rs 6 lakh went missing from Rasipuram branch, Rs 5.5. lakh from Aminjikarai branch, Rs 5 lakh from Kulithalai branch, Rs 6 lakh from Avinasi branch, Rs 1 lakh from Avinasi branch and the latest case of Rs 30 lakh going missing from the same Avinasi branch.
The bank hit back by issuing show-cause notices, memos, defamation suits and then dismissal of one officer from service, on the ground that they pasted posters without properly verifying the truth and with a view to defame the bank and cause damage to their business and reputation.
Setting aside the dismissal and other proceedings, the judges said, “It is seen from the contents of the posters that it was only an appeal to the bank for taking action. Specific instances were pointed out to the chief general manager to take appropriate action. Instead of taking action on the grievances projected by the trade union, the bank had filed the suit.”
Exposing inaction of the bank in the light of a series of cash shortages can only be in public interest and making such statements cannot be detrimental to the interest of the bank, the bench said. The bank itself expects its officers to take all possible steps to ensure and protect the interests of the bank. Publishing or exposing the cash shortages in the bank and the inaction of the top officers cannot amount to willful damage to the property of the bank. It cannot even be said to be prejudicial to the interest of the bank, they concluded.
“Merely because it has exposed some irregularities, the poster will not affect the commercial interest of the bank,” they said, adding that on the other hand, only by such exposures, correctional measures could be taken and the bank could assure the general public that all is well with them.
In this regard, the bench pointed out that it is usual practice for trade unions and public sector banks to publish the list of defaulters and the non-performing assets of the bank in order to bring it to the notice of the general public and the government, so that corrective actions can be taken.
SOILED NOTE FRAUD CASE @ RBI BANGALORE
Complete case details also available at http://members.lycos.co.uk/ganapathihariram/
As per allegations of RBI management Bangalore in 1977-79 , criminal
As per allegations of the management , the crime took place in the
Charge sheet issued by RBI Bangalore office to mr.G.Hariram
CBI has charge sheeted 17 employees in connection with this case ,
Even after coming out clean, mr.G.Hariram was not reinstated into
In India as per law , the decisions of court of law are binding on all
Why RBI authoroties are hell bent upon to send away the innocents /
Who will give justice to innocents like old man mr.G.Hariram & who
RBI Governor Hiding Information & Hiding Crimes
APPEAL UNDER SEC 19 (3) OF RTI ACT 2005 OF GOVERNMENT OF INDIA & GOVERNMENT OF KARNATAKA
FULL NAME OF THE APPLICANT : NAGARAJA.M.R.
ADDRESS OF THE APPLICANT : NAGARAJA.M.R.,
EDITOR , SOS E-VOICE JUSTICE & SOS E-CLARION OF DALIT ,
# LIG-2 / 761, OPP WATER WORKS OFFICE,
HUDCO FIRST STAGE, LAXMIKANTANAGAR,
HEBBAL, MYSORE , KARNATAKA PIN – 570017.
“Power will go to the hands of rascals, , rogues and freebooters. All Indian leaders will be of low calibre and men of straw. They will have sweet tongues and silly hearts. They will fight among themselves for power and will be lost in political squabbles . A day would come when even air & water will be taxed.” Sir Winston made this statement in the House of Commons just before the independence of India & Pakistan. Sadly , the forewarning of Late Winston Churchill has been proved right by some of our criminal , corrupt people’s representatives , police , RBI Officials , public servants & Judges. Some of the below mentioned public servants fall among the category of churchill’s men – Rogues , Rascals & Freebooters. RBI Officials are denying me information under one pretext or the other and covering-up SCAM worth crores of rupees.
We salute honest few in public service , our whole hearted respects to them. HEREBY , I DO HUMBLY REQUEST YOU TO GIVE ME WRITTEN STATEMENTS / ANSWERS TO THE FOLLOWING QUESTIONS – WHICH IN ITSELF ( ie answers ) ARE THE INFORMATION SOUGHT BY ME. HERE WITH I AM SEEKING NOT THE OPINIONS ABOUT SOME HYPOTHETICAL ISSUES , BUT YOUR OFFICIAL STAND , LEGAL STAND ON ISSUES WHICH ARE OF FREQUENT OCCURRENCE WHICH ARE VIOLATING PEOPLE’S FUNDAMENTAL RIGHTS & HUMAN RIGHTS. WE DO HAVE HIGHEST RESPECTS FOR JUDICIARY & ALL PUBLIC INSTITUTIONS , THIS IS AN APPEAL FOR TRUTH , INFORMATION SO THAT TO APPREHEND CORRUPT FEW IN PUBLIC SERVICE, WHO ARE AIDING & ABETTING TERRORISM , UNDERWORLD & CRIMINALS.
HEREBY , I DO HUMBLY REQUEST YOU TO GIVE ME WRITTEN STATEMENTS / ANSWERS TO THE FOLLOWING QUESTIONS – WHICH IN ITSELF ( ie answers ) ARE THE INFORMATION SOUGHT BY ME. WITH RESPECT TO CASE NO old CC34 / 1989 & NEW NO SC436/1991 AT 21
ST ADDITIONAL CITY CIVIL & SESSIONS COURT BANGALORE
CHARGE SHEETED OFFICER MR.G.HARIRAM RBI BANGALORE
CHARGE SHEET NO staff no.3698/156/84-85 dt 01.01.1985
Amended charge sheet staff no.3798/156-84/85 dt 08.04.1985
1. Why didn’t you notice the alleged crimes of 1977 , 78 & 79 till the
mid of 1979 ?
2. This crime came to light only due to anonymous phone calls of good
Samaritans to authorities , but not due to your inspection . is your
inspection division working properly ?
3. why there is no security check up of officers during entry & exit
out of premises ?
4. why there is no individual weighment , individual statement of
value of bags of reissuable notes & bags of note meant for destruction
, after sorting is done, why they are not tallied with total weight ,
value of notes issued for sorting ?
5. Immediately after noticing the crime, why did not you transfer all
the employees of those sections ?
6. why did not you take steps to preserve3 & protect respective
documents relating to such high profile crime ?
7. why didn’t you immediately issue charge sheet to all the accussed &
waited till 1983 ?
8. Why RBI has left out , so many officers ( who worked in the same
sections for more period than accused officers ) from domestic
9. why CBI also failed to put those people in the charge sheet before
the court ?
10. is it because they were in favorable terms with the vested
11. did the CBI dance to the tune of vested interests in RBI while
preparing charge sheet & during investigation , instead of
independent investigation ?
12. those left out probables from the charge sheet might have caused
the destruction of evidences / records. During the course of domestic
enquiry / court proceedings , it has been recorded that some records
have been destroyed. Are not CBI & RBI responsible for destruction of
evidences , aiding true criminals get away ?
13. in normal times , what is the period specified in RBI regulations
for preserving old documents / records ?
14. after noticing such a high profile crime the RBI must have taken
utmost care to preserve such old records for indefinite time , for
producing before courts of law as & when demanded. But it didn’t ,
15. does not this point to connivance of higher authorities of RBI ,
with the criminals ?
16. RBI authorities have conducted domestic mass enquiries , instead
of individual enquiries , is it not detrimental to the rights of
17. RBI authorities have stated that court proceedings & domestic
enquiry are independent of each other & are not binding on one
another. However RBI authorities straight away took on record of
domestic enquiry the court statements , evidences , but didn’t honour
the order of same court of law ? why this double standard by RBI ?
18. The alleged crime was committed in 1977-79, but charge sheet was
framed in mid 1985 , why this long delay ?
19. didn’t this facilitate the masterminds of crime to destroy ,
manipulate evidences ?
20. as stated before court , indeed some records , 22nd currency note
packet were missing , who is responsible for it ?
21. has the CBI conducted enquiry , polygraph test of RBI higher
officers – S.N.RAZDAN , W.S.SARAF , J.P.AWASTHI , J.MITRA & others ,
if not why ?
22. is it not due to inefficiency , negligence of duty by such high
ranking managers , that such a crime occurred in RBI Bangalore ?
23. what disciplinary action RBI has taken against the inefficient ,
negligent higher officials ?
24. whatever internal rules an organization makes must be within the
line of law. If such internal laws of the organization are violative
of law , fundamental rights of employees , such internal rules become
illegal. Are not the way of RBI disciplinary proceedings illegal ?
25. as per RBI pension regulations 1990 , RBI has the right to deduct
any loss caused to the bank , from the pension of RBI employee if the
misconduct of employee is proved in judicial proceedings . even though
mr.G.Hariram came out clean from the court , why RBI has denied his
26. judicial courts of law are appellate authorities over & above ,
domestic enquiry committees & judicial orders supersedes the domestic
enquiry proceedings. Still RBI showed contempt of court & didn’t
reinstate mr..G.Hariram into service , why ?
27. even if an employee’s misconduct causing loss to the bank is
proved , before denying him pension (towards making up loss to the
bank) , previous sanction of the central board of RBI must be taken.
But in mr.G.Hariram’s case , pension was denied in full without taking
previous sanction of the central board of RBI , is it not illegal ?
28. RBI alleged that mr..G.Hariram caused loss to the tune of Rs.14000
to the bank & recovered it from his provident fund dues. There was
nothing left over to recover , still RBI completely denied pension to
mr.G.Hariram , why ?
29. ideally, domestic enquiry findings / disciplinary actions should
be completed first , then the employee can appeal to appropriate court
of law. In mr.G.Hariram’s case , CBI & RBI failed to prove the charges
in court of law , as a result court discharged him from the charges.
To cover-up it’s failures RBI management dragged domestic enquiry much
beyond court orders date & gave findings indicting mr..G.Hariram. does
the enquiry officer of domestic enquiry think that he is over & above
the court of law ? is it not illegal & contempt of court ?
30. ideally , RBI authorities should have appealed to higher court
against lower court order discharging mr.G.Hariram from charges. But
it was not done , why ?
31. did the RBI pay interim relief to mr.G.Hariram , during suspension
32. the undue delay in filing charge sheet , consequent destruction of
key evidences , dishonour / contempt of court orders , undue haste in
giving findings , dismissal , denial of of pension without central
board’s sanction , all point towards criminals within RBI higher
management. What disciplinary action has been taken against
J.P.AWASTHI, S.N.RAZDAN,J.MITRA, W.SARAF & others ? if not why ?
33. why charge sheet was amended? Is it legal ?
34. did the charge sheet was amended to falsely implicate
mr..G.Hariram , by including cancelled note vault in the charge
35. does not this itself show that it is not statement of actual
happenings / facts , but a cunning ploy to mislead investigation
towards fixed innocents from actual criminals ?
36. is it true that that only 5% of sample inspection is done out of
bundled verified defective note packets ?
37. is not the conduct of joint / mass enquiries of all charge sheeted
officers illegal ?
38. how come such an important evidence 22nd note packet went
39. is it because it may point towards real criminals ?
40. as per the statement of management witness / inspection head /
expert mr.vijendra rao , the notes of earlier dates have been removed
from packets made into new bundles , right ?
41. as per his statement , entire certificates , seals of some asst
treasurers are there , who didn’t work at all on that day is not it ?
42. does not it show that some body else was misusing the seals ,
putting some innocents seals over the notes ?
43. does it not show that , crime has taken place at verification
44. does it not show involvement of some asst treasurers ?
45. why asst treasurers have not been charge sheeted ?
46. why inspection of RBI Bangalore office was not done between 1975 &
47. is it not true that you failed to produce all records showing
internal inspection / audits , during domestic enquiry & court
48. your expert mr.vijendra rao has stated that some seal marks are
smudged , he has stated some seal marks appears to be so & so. He has
clearly nowhere stated that this seal mark is exactly this , so he
himself is not 100% sure ?
49. your expert nowhere said that 100% sure this seal mark is this ,
on that day this seal was issued to mr.G.Hariram , isn’t it ?
50. your expert says during 1975 , he didn’t notice3 any fraud.
However approver says fraud was there before mid 1977 also. Why no
action has been taken ?
51. why you didn’t produce all records of all persons , who have
specifically worked in alleged sections , the registers of those
departments with daily activity report containing seal nos , packet
nos , bag nos , etc ?
52. are not their chances of some criminals putting the seal marks of
innocent officers over the notes , bundles , bags , etc ?
53. your expert is not 100% sure of seal mark , your records are not
there to prove the presence of charge sheeted officers in the alleged
sections , neither your expert nor your records are 100% sure on what
date , at what stage , by whom crime was committed , isn’t it ?
54. is not the charge sheet amounting to higher ups picking up
officers they dislike & falsely implicating them ?
55. is it not cunning ploy of higher ups to divert attention from
original criminals ?
56. why no action was taken against currency officer of 1977-79
mr.J.Mitra ? why his pension , super annuation benefits were not
57. what is your justification , supporting evidence , records for
picking up only three officers including mr.G.Hariram for legal
prosecution and leaving the majority of probables ?
58. why you have dropped charges against five asst treasurers ? why
you didn’t even conduct domestic enquiry against them , let alone
legal prosecution ?
59. Is it RBI’s & CBI’s way of fair play & justice ?
60. as inly 5% sampling of verified note bundles are done , there are
more possibilities of rebundled packets getting unnoticed in relaxed
95% lot , isn’t it ?
61. you have left out so many officers who worked in those sections,
some of whom even became management witnesses , instead of being
charge sheeted by the management, is it fair play & legal ?
62. who are the bank employees , from whom you have recovered the alleged bank loss of Rs.220000 ?
63. were all of them charge sheeted , enquired , legally prosecuted ,
dismissed & their pension , gratuity withheld ?
64. you don’t have any internal statuotary records to prove that
mr.G.Hariram worked in those departments , except a currency officer’s
office note dated just on the eve of charge sheet years after the
alleged crime ? does it not prove that this note has been concocted
just to fix mr.G.Hariram ?
65. where as you have records of other officials attendance in those
departments , but not charge sheeted them why ?
66. three officers of staff grade A daily work in three sections out of 40 officers , why you have picked up only mr.G.Hariram , out of 1095 working days , he has worked for only 223 days in those
sections , still those officers who worked for more days in those
sections are not charge sheeted why ? the approver , the management
expert witness , shift registers , V2 registers , Destruction
certificates , Form CD 55 , etc , nobody , no records were able to say
on what date , at what stage , by whom crime took place , also they
were unable to say on what date at what stage crime was committed by
mr.G.Hariram ? is it not futile imagination , cunning ploy of RBI
higher authorities to fix innocent Mr.G.Hariram ?
67. the management expert witnesses said , the most probable place of
crime is punching / Cancelled Note Vault , incinerator , where asst
treasurers were joint custodians . they were not enquired & let off
68. the charge sheet alleges extraction / substitution of
defaced note packets. Where as the management expert witness say
substitution of defaced notes only ? is not there difference between
loss of one number of note & 100 number of notes ?
69. as per the normal course of duty , staff officers does not
count notes in each bundles , but they just count the number of
bundles only. Is not there chances of inserted note bundles or bundles
containing less number of notes going unnoticed ? is it not the
failure of statuotary system of work practices ?
70. does not all these prove higher authorities of RBI & CBI
were hell bent to fix mr.G.Hariram & to shield the original
Questions with respect to other cases :
71. how do you monitor the work of bank officials nominated as
directors of companies which have availed bank loans ?
72. how do you monitor the work of companies , in which banks
have invested ?
73. how do you monitor the rapid wealth growth of certain bank
officials , who work in shares investment / equity funds section ,
74. inspite of project reports by bank officials , over
assessment of collateral securites / value of debtor companies by bank
officials , the loans become NPAs & full value cann’t be realized in
the market by selling off the assets of debtor companies also. In such
cases , what action is taken against erring bank officials who collude
with criminal industrialists for availing higher amount of loan than
75. give bankwise specific figures of NPAs.
76. give names of industrial groups / promoters whose
companies have become NPAs , so that public can be aware of them ,
before investing in new companies promoted by them.
77. is not collection of loan from debtors of bank through
rowdies / recovery agents , illegal ?
78. why not criminal complaints filed against bank mangers for
aiding , abetting rowdism , murdering people ?
79. if your method of employing rowdies to collect loans of Rs.
10000 from commoners is right , what would you do to a promoter of a
debtor company to recover loans of crores of rupees , supari killing ?
but debtors of crores of rupees is let off coolly by banks , why ?
80. what is the exact amount of loss caused to the exchequer
by karim lala telgi who printed fake stamp papers ?
81. what action has been taken against those involved ?
82. have you taken action against all those mentioned by telgi
during narco analysis test , if not why ? is it because they are
powerful & bigwigs ?
83. how you are controlling the illegal finance activities ,
money lending by individuals , pawn brokers & chit fund companies ?
84. how you are monitoring the receipt of public donations ,
foreign donations by many NGOs ?
85. how many erring NGOs , chit fund companies , pawn
brokers , individuals you have booked for illegal finance activities ?
Questions relating to RBI CURRENCY NOTE PRESS MYSORE
86. who were responsible for selling the good printing machine at
security press nasik to scamster karim lala telgi as scrap ?
87. who recruited the candidates below merit rankings in R.B.I for
what criminal roles ?
88. how many irregularities have taken place in R.B.I till date ?
89. who is responsible for installing, operating & supervising the
security set-up in R.B.I ?
90. how the raw materials ie number of paper sheets, ink, etc are
accounted for in inward stores & while issuing for printing ?
91. how wastages, scrap of ink , papers , etc in the printing process
are accounted for?
92. How the finished goods ie currency notes are accounted for ?
93. Who keeps physical figures & possession of goods, inventory of
all the above?
94. How the scrap paper is disposed off ?
95. From security angle who keeps track from start till dispatch ?
96. Give me the merit ranking list of all candidates for the
post of stores assistant in BRBNMPL in the year 1995-96 ?
97. give me the merit ranking list of all candidates for the
post of process assistant at BRBNMPL in the year 1996 ?
98. give me the merit ranking list of all candidates for the
post of process assistants & maintenance assistants at BRBNMPL in the
year 1996-1998 ?
99. is not RBI & BRBNMPL authorities created by statuotary
laws , fully funded by public money ie from government exchequer ?
100. still why BRBNMPL & RBI refused to answer my previous
information request as per RTI Act ? are you afraid that skeletons
will come out of cubboard ?
101. what action initiated against the SBI branch Bangalore & SBI
Overseas branch for loss of cheque / draft amounting to crores of
rupees ? if not why ?
102. give me specific figures bank wise with respect to loss caused
to the bank by loss of cheques or demand drafts , etc ?
103. how RBI is containing crimes of loss of cheques / DDs causing huge losses to the banks to the tune of crores of rupees ?
104. what action taken against the RBI officials who are covering up crimes inspite of my repeated appeals & RTI requests ?
YEAR TO WHICH ABOVE PERTAINS : MAJORITY OF DOCUMENTS PERTAINS TO YEAR 1995 – 2015 .
PUBLIC INFORMATION OFFICER WHO FAILED TO GIVE INFORMATION :
CPIO , C/o PCGM and Secretary , Secretary’s Department , Reserve Bank of India , 16 th floor, Central Office Building , Shahid Bhagat Singh Marg , Mumbai – 400 001
FEES PAID : IPO 16G 733466 for rupees TWENTY only
DATE : 28.03.2015 ……………..………………………NAGARAJA.M.R.
PLACE : MYSORE , INDIA….. ……………………….( APPLICANT)
FINANCE SCAMS IN INDIA & 5-STAR LEADERS WITH BEGGING BOWL
In ” mysooru mithra” a kannada daily dated 15/06/2005, the editor has
In indian banks , there is a strange practice that whenever a cheque
However , upto 1997 two branches of state bank of india in bangalore &
In the 1997 internal audit report of the bank itself , this has been
It is just an instance of two branches of SBI, what about hundreds of
The government takes pride in murdering forest brigand veerappan. The
In india, both central & state government tax/ revenue officials are
More than 50 billion indians are barely surviving on a single meal per
Editorial : Crimes @ Reserve Bank of India
Ref no. RTI APPEAL via web DPG/B/2008/80341
RBI is a public authority , set up by an act of parliament. Numerous
Just refer “Oil for Food Money in Iraq scam ” and “ Vostro Account Scam of 1990s”. Influential people are involved , everything happened under the noose of RBI , With the connivance of RBI officials ?
We requested the CPIO of RBI HQ for information as per RTI Act ( our
He has stated that some information pertains to security press ,
One more ruse of CPIO of RBI is that , I am seeking his views /
One more ruse given by CPIO of RBI is that I have raised many issues ,
To sum up , CPIO of RBI is hell bent to protect the criminals @ RBI
BRITISH officials are investigating the activities of one of the most prominent overseas backers of secessionist groups in Jammu and Kashmir. Last month, the United Kingdom’s Charities Commission and the Metropolitan Police began looking into allegations that Ayub Thokar, the head of the World Kashmir Freedom Movement, had funnelled funds raised for charity to the terrorist groups.
Investigations into Thokar’s role in funding terror began after Indian officials handed over evidence in the case to their British counterparts in June. The two Indian officials from the Ministry of Home Affairs and a senior Jammu and Kashmir Police officer made available details of funds funnelled from Thokar’s charity, Mercy International, through Standard Chartered Grindlays Bank (since then renamed Standard Chartered Bank) and the Development Credit Bank. The investigators also provided transcripts of telephone intercepts and cases filed against the recipients of the funds in India.
On May 25, a long-running Intelligence Bureau operation led to the arrest of Srinagar-based journalist Imtiaz Bazaz. Officials claim that he was a key conduit for transferring funds to Hizbul Mujahideen field commanders in Jammu and Kashmir. On April 22 Bazaz had received a foreign currency remittance of Rs.4,84,875 into his account with Standard Chartered in New Delhi, and on May 15 a second remittance of Rs.14,98,000 into the Development Credit Bank. Although intelligence officials monitored the first transaction, they did not intervene, in the interest of building up evidence. The second transaction was frozen.
The funds trail led straight to Thokar. It transpired that in early 2001, Hizbul Mujahideen chief Mohammad Yusuf Shah had sent Rs.48 lakh to Jamaat-e-Islami leader Syed Salahuddin through Thokar. Subsequently, after the arrest of Jamait-ul-Mujahideen finance commander Qasim Faktu, Thokar began to finance his organisation through the terrorist’s wife, Asiya Indrabi. Most of the funds were routed through Bazaz, who arranged for the transfer of funds received in New Delhi to accounts held with the Jammu & Kashmir Bank in Srinagar. Cash was then paid to the final recipients.
Meanwhile, Income Tax Department investigations against All Parties Hurriyat Conference (APHC) leader Syed Ali Shah Geelani have started to bear fruit (Frontline, July 5, 2002). The secessionist leader claimed an annual agricultural income of Rs.10,000 in his tax returns, and also received the official pension of Rs.85,200 due to two-term MLAs – ironically enough for a man now at the cutting edge of the secessionist anti-election campaign! His expensive house in Hyderpora, however, had several cars parked there and the household was run by a personal staff of 14 people. The monthly kitchen expenses amounted to Rs.25,000. Income Tax Department searches of the Geelani home also yielded Rs.10.25 lakhs and $10,000 in cash. Income-tax officials have now decided to impose penalties of Rs.30 lakhs on Geelani, based on his estimated income over the last six years, the maximum period allowed by law. His businessman son-in-law Altaf Ahmad Shah, who allegedly used his legitimate operations to launder funds, has been slapped with a Rs.40 lakhs penalty. Failure to pay could lead to the auctioning of Geelani’s assets, including the Hyderpora home.
Separate income-tax penalties of Rs.2 crores have been imposed on businessman Abdul Rashid Saraf, who was allegedly involved in handling hawala funds sent to APHC chairman Abdul Gani Bhat. Saraf, income-tax authorities found, had failed to disclose income of Rs.3.37 crores over the last six years.
The vigour that the Income Tax Department has shown in this matter marks a welcome departure from the past. After it was driven out of Srinagar in the later 1980s by mobs that attacked income tax inspectors, the organisation had granted de-facto independence to the State. This time, two planeloads of officials flew into the Avantipora Air Force base and they were escorted to the raids by police officers. Their successes seem to have convinced the Income Tax Department that it is after all possible to play a useful role in Jammu and Kashmir.
In the U.K., both Mercy International and Thokar will now have to answer some hard questions. For one, there is no explanation why the organisation did not send supposed philanthropic donations to the several-dozen charities in Jammu and Kashmir which have clearances under the Foreign Exchange Management Act. Thokar will also have to explain how he paid for the purchase of his London home, and his regular overseas travels, given the fact that he has no ostensible means of income. India has, however, chosen not to seek Thokar’s extradition, since the fact that his wife is a U.K. national makes this outcome unlikely.
For India, British action in this case will be a key test of its loudly-advertised anti-terrorist stance. In March, sources told Frontline, Deputy Prime Minister L.K. Advani had handed over to British Foreign Secretary Jack Straw a dossier on the activities of secessionist groups in the U.K. Titled ‘Misuse of British Soil by Kashmir Expatriates Based in the U.K. for Funding Terrorism in J&K’, the document outlined many of the charges which investigations have now added substance to. Sources say the team that visited the U.K. pointed to Straw’s promises to crack down on terrorism-related money laundering, and were told that criminal prosecutions would take place in the U.K. Earlier, the U.K. successfully prosecuted two Khalistan-linked British nationals involved in backing the Babbar Khalsa International.
If funds transfers to terrorist groups are effectively cut off, it will do not a little to cripple such organisations. The reasons are simple. While it is easy to send cadres across the Line of Control, actually sustaining their activities in Jammu and Kashmir needs an elaborate financial structure. Money is needed to pay for everything from food and shelter to informants, political support and the legal defence of arrested sympathisers. Since it is impossible to lug sacks full of cash across the LoC, illegal funds transfers come into play. For many businessmen in the Kashmir Valley, holding such cash for short terms has been a profitable, risk-free enterprise. Now the penalties imposed should persuade conduits for blood-money transfers that crime does not, in fact, pay.
New Delhi, Mar 6: European countries are being used as hot destinations by terror group al-Qaeda to route money to India, according to a report by Peruvian Financial Intelligence Unit (FIU).
The report said the FIU had found at least one case of such suspicious transaction by al-Qaeda every month and shared them with the US investigators.
“The FIU also reports tracking cases similar to that of an OFAC-designated (US Office of Foreign Assets Control) of al-Qaeda element moving money from Europe through Lima and on to India,” the report leaked by Wikileaks, a non-profit media organisation dedicated to bringing important information to the public, quoting FIU head Enrique Saldivar disclosed.
“Asked if this al-Qaeda case was the first of its kind or they had seen similar cases before, Saldivar told NASOff that they see about one case a month,” the cable said.
The FIU receives and analyses STRs, may request additional information relevant to cases or operations related to money laundering or terrorist financing, provides Financial Intelligence Reports (FIR) to the Public Prosecutor’s Office, participates and/or requests joint investigations, and coordinates with foreign FIUs and entities.
“Of the 7,710 suspicious activity reports examined by FIU analysts in 2009, 781 resulted in financial intelligence reports sent to the Public Ministry for further processing and investigation.
“Based on these 781 intelligence reports, the FIU concludes more than 3 billion USD moved illegally through Peru”s financial sector in 2009,” it said.
“83 per cent of this amount, according to the FIU, is related to drug trafficking. The other 17 per cent is reportedly related to fiscal fraud, corruption and illegal gun dealing. Currently, 308 of these intelligence reports are at various stages of investigation and prosecution in the legal system as compared to four cases in 2008,” the cables read.
According to Saldivar, anti-money laundering efforts in Peru are hindered by several factors.
Mumbai: Standard Chartered Plc, (StanChart) which is set to hit the market with the first ever issue of Indian depository receipts (IDRs) on 25 May, has not disclosed many pending cases against it for alleged violation of foreign exchange remittance norms in the draft red herring prospectus submitted to the capital markets regulator.
The alleged violations—17 transactions of drafts, one telex transfer and two cash transactions—go back to 1991-92, when the Enforcement Directorate (ED) found a series of forex violations made through the bank’s Mumbai branches to the UK.
ED is a government agency that looks into foreign exchange transactions.
The violations were discovered after ED investigated a number of banks, including Standard Chartered, in the aftermath of the Harshad Mehta scam that rocked the stock markets in 1991-92.
The ED complaint was filed in the court of chief metropolitan magistrate in Mumbai by enforcement officer S. Parvez in May 2002.
These complaints, which are still pending, charge the bank and its then chairman Rodney Galpin of “total violation” of the exchange control manual and provisions of then prevailing foreign exchange regulation norms.
Mint has reviewed copies of some of these case files.
The Issue of Capital and Disclosure Requirements (ICDR) norms, laid down by the Securities and Exchange Board of India (Sebi), require any firm floating a public issue to disclose all pending proceedings initiated for economic offences against the issuer or its directors, as well as the present status of such cases.
StanChart said that it has no “material litigation” to disclose. The bank’s spokesman Arijit De said the lender has applied the relevant materiality standard in arriving at the disclosures.
In response to an email questionnaire, he said the bank would comply with the applicable laws, regulations and international practice with regard to material information disclosure and uniformity of disclosures.
“Accordingly, in relation to disclosure on litigation, as provided under the provisions of the Sebi (ICDR) regulations, 2009, as amended, Standard Chartered Plc, as an issuer of IDRs, is required to disclose ‘material litigation’. In considering whether disclosures are necessary in relation to litigation, Standard Chartered Plc has applied the relevant materiality standard. On this basis, no litigation is required to be disclosed,” the email said.
Under Sebi rules, the so-called materiality of a case must be judged on three broad parameters: qualitative nature, litigation or defaults that may not be material at present but might have a material impact later, and litigations that may not be material individually, but may be found material collectively.
A questionnaire to Sebi on whether it has granted any special exemption to StanChart for the IDR remained unanswered.
A senior lawyer at a national law firm said: “All pending litigations that have a bearing on the issue should be disclosed in the prospectus as per ICDR regulations. Moreover, the issue of materiality varies from case to case and is subjective. If I were an underwriter, I would have disclosed the status of the cases and justified if the cases have any material impact on the company’s businesses or not, in the prospectus.” The lawyer did not want to be identified.
Market analysts say there is no definitive yardstick for deciding the importance of a case.
“Materiality is subjective and judgemental,” said Prithvi Haldea, chairman and managing director of Prime Database, a primary market tracker. “The merchant banker, issuer and lawyer can collectively take a call on whether a matter is material or not.”
However, if these matters are decided in court and proven to be material, the issuers, bankers and lawyers can be taken to court for substantial damages, he added.
The amount involved in the 17 transactions listed by ED and facilitated by the bank between February 1991 and September 1992 is Rs4 crore. The bank also allegedly facilitated a telegraphic transfer of Rs1.5 crore. ANZ Grindlays Bank, which was acquired by StanChart in 2000, allegedly helped the same entities transfer around Rs55 crore. Separate cases are pending against both banks in the matter.
According to the case files, Irish rugby player Keith Fairbrother was the key beneficiary of the transfers. He owned a company, Indo International, earlier known as Eastern Suburbs, based in the UK, but with bank accounts in both names in India as well as the UK.
Fairbrother is said to have facilitated a few import-export deals between some Indian firms and their counterparts in the erstwhile Union of Soviet Socialist Republics (USSR). Since India and USSR had bilateral trade pacts, any payment to entities there needed to be routed through the Reserve Bank of India (RBI) with appropriate approvals and sanctions. Fairbrother, the files claim, broke these rules using various foreign banks, including StanChart.
Through his associate Kuldip Singh Sood in India, Fairbrother would collect Indian rupee drafts drawn by an Indian bank on its domestic branch. Allegedly with the connivance of StanChart, he would get them cleared without making any declarations or taking any approvals and credit the amount to a vostro account of StanChart London and Manchester. These banks would, in turn, transfer the amount to a beneficiary of the same name in the UK.
A vostro account is the local currency account held by a local bank for a foreign one. Such accounts are used for inter-bank transfers, and money transfers to non-residents need RBI’s nod. ED has charged that the bank and its then CEO violated these rules.
A senior broker, on condition of anonymity, said that as a matter of principle, the company should publish all pending legislation and leave the question of materiality to investors’ judgement.
“By choosing to ignore pending legislations, they are setting a bad example for the companies coming to list such instruments in future,” he said.
PANAJI: Opposition leader Manohar Parrikar on Thursday said he would write to Prime Minister Manmohan Singh, fearing that money from a multi-crore excise scam linking Goa with Indian border states is being used to fund terrorist activities.
Parrikar has also alleged that the state excise department has been issuing permits to companies furnishing bogus addresses.
· Incidentally, the state government’s reply that the state finance secretary is investigating earlier allegations made by Parrikar on the excise scam has not satisfied the opposition leader, who has demanded that the matter be immediately handed over to the Central Bureau of Investigation (CBI).
Raising the matter during question hour, Parrikar said that illicit alcohol consignments worth crores of rupees are being sent to border states in the north and north-east of India.
“Money from this scam is being used to fund terror networks. The excise departments from other states such as Punjab, Rajasthan and the north eastern states are involved,” he said. The opposition leader also reminded the House that he had first made these allegations in the last assembly session.
“I believe the prime minister is an upright person and I will write to him to probe into this,” Parrikar said. Chief minister Digambar Kamat, however, did not commit to a criminal investigation into the scam.
“The finance secretary is currently conducting an inquiry into the matter,” he told the House.
Parrikar retorted: “The finance secretary does not have powers to conduct such an inquiry. We have to verify the signature of the superintendent of excise on the order, which the finance secretary will not be able to do. He cannot go to Punjab and Rajasthan to investigate the matter.”
“The only thing that needs to be investigated is who made the payment for the 1.04 lakh litres of alcohol that was imported in September. Trace the source of payment and you will find out who the culprit is,” Parrikar said.
Mumbai / Pune: The reluctance of a top Swiss bank to help Indian investigators is slowing the unravelling of an intricate multinational trail of money transfers—across Switzerland, New York, the British Virgin Islands and Pune—between an Indian horse owner and a fugitive Saudi arms dealer, according to officials in the Enforcement Directorate, the government body that investigates economic crimes.
A top official in the Enforcement Directorate (ED) who did not wish to be identified confirmed on Friday that the agency’s officials, in December 2007, had advised the Indian government not to clear a Rs467 crore plan by UBS (United Bank of Switzerland) AG, the world’s biggest wealth management company, to buy the Indian mutual fund business of Standard Chartered Bank because the Swiss bank had not helped track international money transfers of Pune horse owner Hassan Ali Khan.
Investigators from the ED, who recently claim to have found $8 billion in the Swiss bank accounts of Hasan Ali Khan, say they now have evidence of a $300 million transfer to him (via a Chase Manhattan bank account in New York) from billionaire Saudi arms dealer Adnan Khashoggi, whose arms supplies to Tamil terrorists, the LTTE, were revealed during an investigation into the 1991 assassination of Rajiv Gandhi.
alt=”Home turf: Hassan Ali Khan (second from right, in safari suit) with wife Rheema (second from left) and father-in-law Abbas Ali Khan (fourth from right). ” title=”Home turf: Hassan Ali Khan (second from right, in safari suit) with wife Rheema (second from left) and father-in-law Abbas Ali Khan (fourth from right). ” v:shapes=”_x0000_s1026″>Home turf: Hassan Ali Khan (second from right, in safari suit) with wife Rheema (second from left) and father-in-law Abbas Ali Khan (fourth from right).
As the Bombay high court hears an Enforcement Directorate plea not to return passports to Khan and his wife Rheema, theHindustan Timeshas previewed a secret ED report that reveals the agency’s attempts to find the links between Khan and Khashoggi.
As evidence the report quotes a notation, “funds from weapon sales”, made by UBS AG, a top-tier investment banking and securities firm, after it froze an account belonging to Hassan Ali Khan, the Pune horse owner, following the $300 million transfer to him—it isn’t clear when— from Khashoggi.
“I would not like to talk about this,” said UBS India managing director and chairperson Manisha Girotra, referring all questions to the bank’s spokesperson.
“As a truly global entity, our policy on such issues is to comply with the laws and regulations in each host country, while at the same time, complying with the banking laws in Switzerland,” the UBS spokesperson said in an email. The spokesperson declined to comment specifically on the arms sale notation.
The government has told the Bombay high court that the Khans are “virtually absconding” and if they are allowed to leave India, investigations could collapse. Khan’s counsel, Milind Sathe, said his client “regularly appeared before the Directorate”. Asked where Khan was, his main lawyer, Mugdha Jadhav, said: “Can’t tell you, sorry.”
At Pune race course, HT found Hassan Ali Khan’s father-in-law, Abbas Ali Khan, who said his son-in-law was “not well” and in Mumbai. He dismissed all allegations.
Hassan Ali Khan has three Indian passports—issued from Pune, Patna and Mumbai; he also applied for passports from Guwahati and Chandigarh— and he and his wife have applied to Switzerland for citizenship, another ED official who did not wish to be identified said. Passport authorities in those three cities are now trying to find out how three passports were issued to Khan.
Kashoggi now lives a quiet life in the principality of Monaco. There is a British warrant out for his arrest.
Another top official at ED who also did not wish to be identified said Kashoggi’s $300-million transfer was “only the tip of the iceberg” and that the agency was trying to connect the dots in the global trail, which also includes evidence of another $290 million in two “fictitious companies” created by Hassan Ali Khan and a friend in the British Virgin Islands in the Caribbean. All the money transfers are recorded in a laptop seized in January 2007 from Hassan Ali Khan’s house in Pune and while investigators believe this is laundered money, there is no direct evidence. They would also need corroboratory evidence to establish that these transfers have anything to do with terror networks.
“These are all false allegations,” said Sathe. Asked about the $300 million transfer from Khashoggi, he said: “When the Enforcement Directorate questions us, we shall give a reply.”
The ED official, who confirmed the agency’s involvement in spiking UBS’ deal with Standard Chartered, said the Swiss bank had told Indian investigators to get a letter rogatory, a formal request from an Indian court to a Swiss court. This is a complicated process and would have needed to be routed through the ministry of external affairs, and it would have involved finding and presenting clear evidence of Hassan Ali’s links to terror.
It now seems apparent that UBS’ stand in the ongoing investigation led to the collapse of its deal with Standard Chartered Bank.
In a December report, Mint said that the Reserve Bank, India’s banking regulator, would not approve the deal because of possible money laundering through the Swiss bank involving certain transactions of Khan. On Friday, RBI declined to comment. “We are a civil body,” a spokesperson said. “Whenever we find violations, issued to be investigated, we hand over the information to the Enforcement Directorate. We have not issued any comments on the issue of UBS.”
In December, Standard Chartered, the parent of Standard Chartered Bank in India, sent a notice to stock exchanges in London and Hong Kong, where it is listed, saying it would not proceed with the deal, without giving a reason.(Hindustan Times)
CRIMES OF RBI & CBI & IT’S COVER-UP
The central bank of India Reserve Bank Of India , which is supposed
Hereby , I do request the honourable supreme court of India to treat
AN APPEAL TO UNION FINANCE MINISTER GOVERNMENT OF
An age old saying – AS THE KING SO DOES THE SUBJECTS. In india various
The tax officials are utterly corrupt, the wards of these officials
Hereby, the HRW urges you to make public:
1. the financial worth of finance minister to tax official at circle
2. to make public the NPAs, losses & monies under litigation by both
3. to make public measures taken to recover these monies.
4. to publish annual accounts with complete details of discretionary
Public want to know whether proper discretion is being applied while
R.B.I CURRENCY THEFT CASE – COVER-UP ACT BY C.B.I?
Even in ordinary branches of banks , the safety
Even with respect to my complaint regarding
C.B.I COVERING UP THEFTS IN R.B.I
Nowadays even free e-mail accounts need password to operate, to
It is a cock & bull story of C.B.I, that all alone a single security
1. who were responsible for selling the good printing machine at
ILLEGAL RECRUITMENT IN R.B.I CURRENCY NOTE PRESS RESULTING IN FREQUENT THEFTS ???
I have applied for the post of STORES ASSISTANT in
However candidates with lesser merit ranking were selected. My
It is the criminals in R.B.I MANAGEMENT who
Also, hereby i urge you to provide me justice by giving merit ranking
SATYAM CO FRAUD – ARE YOU SINCERELY READY TO CATCH TAX THEIVES , CORPORATE CRIMINALS ? – AN APPEAL TO UNION FINANCE MINISTER & KARNATAKA STATE FINANCE MINISTER
In india , tax compliance is worse. In our criminal justice system,
MEGA FRAUD BY GOVERNMENT OF INDIA – Rs 85 000 crore tax arrears waiver + non performing assets of banks to the tune of Rs. 200 000 crore
India has become an IT power , taken giant strides in the field of
The banks insist on matching collateral security even for self
The same banks, overestimate the project cost of corporates ,
Already , by the connivance of public servants , bank , tax officials
HRW has extended it’s services to GOI months back itself , to
Hereby , E-VOICE OF HRW requests the Honourable Supreme Court of India
1. to make necessary amendments to companies act , to make the
QUESTIONS FOR MONEY – PARLIAMENTARY ACTS & LEGISLATIONS FOR ???? – improper functioning of democracy in india
the vohra committee report has proved the criminalisation of
Just see how the GOI gave export incentive of Rs.1800 crore to
Various indian & multinational companies are looting indian
In india, indirect democracy is the form of governance. In this
THREAT TO INDIA’S SECURITY BY CORPORATE CRIMINALS
Black money in foreign banks amounts to plunder of nation: Supreme Court
Black money stashed away in foreign banks is not just a case of tax evasion, it is “mind- boggling crime” amounting to “theft and plunder of national wealth’’, the Supreme Court said on Wednesday.
In a frank message to the Union government, the court wanted it to realise the gravity of the issue. “We are talking about mind-boggling crime. We are not on the niceties of various treaties,’’ a bench of justices B Sudershan Reddy and SS Nijjar told solicitor-general Gopal Subramanium.
Earlier, the government had contended that money in foreign banks was a case of tax evasion and it cannot make public the names of Indian account holders.
“The authorities have to go on the basis of mutual agreement with various countries where the money is stashed,’’ Subramium said.
“This is the problem worrying us. It is not only about tax evasion and has something more,’’ the bench said after it was pointed out that the source of the money could be narcotics, terror fund or arms dealing.
The court was hearing a petition filed by noted criminal lawyer Ram Jethmalani and some retired bureaucrats and police officers.
Standard Chartered Bank’s draft red herring prospectus to raise $500 million-$700 million through the first-ever issue of Indian Depository Receipts (IDRs) has completely blanked out at least 15 litigations pending against it in connection with the securities scam of 1992 and a foreign exchange scandal involving the misuse of its vostro account, also in the 1990s.
The prospectus has reportedly been cleared by the Securities and Exchange Board of India (SEBI), which is fully aware that most litigations pertaining to the 1992 scam are still dragging their way through the Indian judicial system. It is shocking that the Bank has attempted to avoid disclosure, given that the Bank’s deep involvement in the scam is widely known in India and the IDRs are being sold to Indian investors. What is worse, when asked about the failure to disclose litigation pending against the Bank, SEBI has chosen to not to respond to the emails marked to the entire top brass of the Bank.
On checking with the Bank, Arijit De, head of external communications, has this to say: “With reference to your email to Neeraj Swaroop, our response is as below: The IDRs represent the shares of Standard Chartered PLC, UK , the ultimate parent company of Standard Chartered Bank, India. In accordance with the disclosure requirements under SEBI Regulations, IDR Rules, other applicable laws and international practice, SC PLC has made appropriate disclosures of all material issues in the draft offer document filed with SEBI. We have nothing further to add beyond what is disclosed in the DRHP.”
However, a simple reading of page 414 of its draft red herring prospectus suggests otherwise. It says: “As of the date of this Draft Red Herring Prospectus, neither the Company, any member of the Group, any Director, or any material associate of the Company (emphasis ours) are involved in any material governmental, legal or arbitration proceedings or litigation and the Company is not aware of any pending or threatened material governmental, legal or arbitration proceedings or litigation relating to the Company, any member of the Group, any Director or any material associate which, in either case, may have a significant effect on the performance of the Group, and there are no liabilities or defaults (including arrears and potential liabilities) in relation to such material proceedings or litigation which would be required to be disclosed under the SEBI Regulations.”
Moreover, the cases filed by the Enforcement Directorate and in the Special Court do not all pertain to the Indian operations (the Bank’s Indian operation itself is significantly large and important, especially after the impact of the global financial crisis). In fact, many of them specifically name a former chairman of the Bank, Rodney Galpin.
Among the cases that we have information about include some in the Special Court set up to try the securities scam related offences (MA 365/2003 – SCB v/s the Custodian & others; Suit 45 of 1995 SCB v/s Andhra Bank; Suit No 6 of 1994 SCB v/s Andhra Bank and Suit No 32 of SCB v/s Andhra Bank). Then there are at least half a dozen cases filed by the Enforcement Directorate, many of them in 2002. We have sent a list of all these cases to SEBI, but have no response from the regulator.
Are these cases serious enough to make a difference to the Bank’s global operations and performance? Probably not. Also, many Indian companies have successfully raised funds, even after disclosing that the main promoters were accused of murder or worse. The issue is the Bank’s lack of transparency, while selling a financial instrument to Indian investors.
What is worse, the failure to insist on this disclosure reflects even more badly on the market watchdog. In its very first IDR clearance, SEBI has shown that it is probably overawed with the international bank’s plans to raise funds in India or its fat, 801-page offer document. Either way, it is not insisting on the same transparency and disclosure standards that it expects from Indian companies, which should be a matter of serious concern, given that global banks have not covered themselves in glory in the lead-up to the financial crisis of 2008. — Sucheta Dalal
Too many loopholes
Hidden-camera videos of the country’s three leading private banks’ officials allegedly advising customers on money-laundering recently kicked up a storm. Heads have started to roll at the junior levels in these banks – ICICI, HDFC and Axis. But punishing wrongdoers is unlikely to stem the irregularities. A commenter on Cobrapost.com, the Delhi-based website which conducted the sting, hit the nail on the head. He said the problem was not just these three banks – it was that the entire system was riddled with loopholes. “It’s a good opportunity for the regulators to plug these loopholes,” he wrote.
He pointed to the multiplicity of acceptable identity documents – for instance, the PAN (permanent account number) card, passport and Aadhaar unique identification (UID) number – and the fact that none of them are interlinked. “It’s a real pity for a country which produces some of the best IT talents in the world,” he added. Contrast India with the United States, where social security numbers are in place since 1935.
There are numerous problems at multiple levels – the industry regulator, the government, and the banks themselves. At the level of the bank, the core issue is the approach to banking, as banks are caught up in an aggressive sales culture. The ones named in Cobrapost’s allegations have said they do business ethically. However, all three declined to speak to Business Today until they had investigated the matter fully.
At the level of the regulator – the Reserve Bank of India (RBI) – there is an urgent need to improve the frequency and quality of inspection. More importantly, there is a need to overhaul Know Your Customer (KYC) norms for financial intermediaries such as banks, non-banking financial companies (NBFCs), insurers and mutual funds.
And at the government level, there is a need to speed up Aadhaar – the national unique identification (UID) number project – as it would eliminate the multiplicity of documents.
The central bank’s KYC guidelines require banks to collect three documents – photographs, identity proof, and address proof – from customers before they can open an account or get a locker. If a customer has no UID number, the bank has no option but to accept documents such as voter ID, electricity bill, passport, or PAN card.
“The root cause of many of the problems today is the multiplicity of enforcement agencies, array of regulations and variety of documents for the identification of a single person,” says Pavan Kumar Vijay, Managing Director of Corporate Professional Group, a corporate advisory firm.
The Cobrapost videos show bankers asking for easily available KYC documents, and, in some cases, even advising customers not to submit a PAN card so they can stay off the tax radar. Bankers say some customers get away with submitting a lease agreement and rent receipts as address proof. “These are the most suspect cases, where the bank should do a ground check or periodically re-check whether the customer still has the same residence or job,” says the chairman of a public sector bank.
Some banks accept a company ID card as proof of identity, and a letter from an employer as residence proof. That is in line with RBI guidelines, but banks are also required to update the customer data from time to time. But many bankers say these checks get short shrift, as the bank is focused on attracting new customers.
“The problem is not with the KYC, but its implementation,” says M.D. Mallya, who recently retired as Chairman of the state-owned Bank of Baroda. He may be right, as the genuineness of even crucial government-issued documents is not always above quest ion.
According to the Comptroller and Auditor General (CAG), there were close to 96 million PAN cards as of March 2010, but only 34 million tax returns were filed.
The PAN card is one of the most abused documents. The CAG noted in 2010/11 that big tax evaders spread out their money by opening multiple bank accounts with fake PAN cards. Tackling PAN card fraud is not enough, though. The Income Tax Act allows those who claim not to have a PAN card to fill out Form 60 and say they have no taxable income, or Form 61 to say their income is from agriculture. A Cobrapost video shows a banker allegedly advising an undercover re-porter to fill out Form 60 to avoid detection by tax authorities.
So just by filing Form 60 and without submitting a PAN card, a tax evader can deposit cash of over Rs 50,000 in a bank or post office, no questions asked. According to banking industry sources, the RBI and the finance ministry are investigating cases in which banks have not reported transactions backed by Form 60 or 61 to the government’s Financial Intelligence Unit (FIU).
Finance Minister P. Chidambaram
Eventually, Aadhaar will resolve the KYC issue. But until that happens, some argue, it is impossible to require just one or a few documents as acceptable proof of identity and residence. “There is the issue of financial inclusion, or people having different sets of documents,” says a banker from one of three banks named by Cobrapost. He adds that some people genuinely do not have taxable income, many do not have a passport, and for some, the only address proof is an employer’s letter.
“Banking is a serious business where service, compliance and safety are core elements,” says A.K. Khandelwal, former Bank of Baroda chairman and author of the book Dare to Lead. But private banks have a strong culture of cross-selling their subsidiaries’ products, and increasing the number of savings and cur rent account deposits.
“Nurturing an ethics-based corporate culture, with provisions to claw back performance-based incentives… can help correct the current approach of mobilising fresh business by any means,” adds Khandelwal.
The Cobrapost expose shows bankers allegedly marketing insurance products to convert black money into white. Insurance products are profitable, because the bank earns a high first-year commission on the premium. The bank manager could benefit, too: many banks and insurers offer rewards for high sales, such as foreign junkets.
Insurance products are easy to sell. The bank’s KYC requirements are sufficient proof for investing any amount in an insurance scheme. A PAN card is not necessary, even though some single-premium policy amounts are as high as Rs 30 lakh. Many banks sell policies that mature after seven years. At that point, nobody can question the source of the money, because income-tax laws do not require banks to keep records for more than seven years.
RBI Governor D. Subbarao
Cobrapost has also alleged that the three banks have been laundering money. Money-laundering means the transfer of money from illegal sources – drugs and arms trafficking, terrorism, extortion and theft – into the financial system through fictitious bank accounts and hawala transactions. Cobrapost alleges that the banks suggested opening accounts in the name of the applicant’s spouse, cousin, or friend, which is not money-laundering in the strict sense.
By law, bank employees have the authority to ask a customer for details of transactions that are not consistent with the customer’s profile. The onus is on the bank to ensure that the account is not being used to launder money. Insurance companies, too, are required to report cash transactions of over Rs 10 lakh a month to the FIU.
Following Cobrapost’s allegations, the RBI and the Insurance Regulatory Development Authority are investigating KYC violations and the background of customers who have put large sums into singlepremium insurance plans. ICICI Bank’s life insurance arm has launched a probe, too.
Some in the industry say the FIU is seeking details of policy holders with high-value single-premium policies. The RBI, too, is investigating high-value transactions. “If there is a series of cash transactions valued at Rs 10 lakh or more in a month, they need to be reported under AML,” says a public-sector banker on condition of anonymity. AML refers to anti-money laundering rules.
Banks are required to report demand drafts, mail transfers and travellers’ cheques worth Rs 50,000 and more to the RBI. A source in the central bank says: “The investigation will also look at the extent of complacency shown by the top management of these banks.”
Some bankers argue that it would be unfair to blame the top management of the three private banks that Cobrapost has named – the country’s largest in terms of market capitalisation. ICICI and HDFC have nearly 3,000 branches each, and Axis Bank has close to 2,000. The Cobrapost investigation covered some 50 branches. All three banks have comprehensive codes of conduct for employees. For example, ICICI Bank, with a balance sheet of Rs 5 lakh crore, has a detailed manual outlining due diligence for accepting a customer.
A day after Cobrapost published its investigation, ICICI and HDFC banks appointed audit firm Deloitte Touche Tohmatsu to carry out an independent forensic enquiry in addition to their own internal investigations into Cobrapost’s allegations. The stock market has reacted, too: the banks’ stocks have fallen more than the BSE Sensex.
“The RBI may also put the brakes on new branch licences to some banks,” says Kashyap Jhaveri, analyst at Emkay Global Financial Services, in a recent report. An analyst who manages the money of foreign institutional investors says the probe could expand to other banks. A Goldman Sachs report notes: “These developments, if proven true, could potentially lead to slower growth across private banks’ deposits and business.”
The RBI’s deadline for a scrutiny of the head office and branches of the three private banks is March 31. The central bank is also studying whether the banks’ gold coins and wealth management products could be potential ways to stash black money. RBI Deputy Governor K.C. Chakrabarty has downplayed the expose, saying: “If we find there is a need to further tighten any guidelines, we will do that.”
Some in the industry say that Finance Minister Chidambaram’s estimate that 46,800 people have taxable income of over Rs 1 crore is baffling, considering the growth of banks’ wealth management services and the portfolio management services of mutual funds and brokerages.
In addition to being the government’s debt manager, the RBI manages the country’s monetary policy, and supervise and regulate banks. “There is a strong case of hiving off the banking supervision from RBI,” suggests a banker.
The number of bank branches in the country has grown to 80,000. The RBI has some 20,000 employees, of which one-third are maintenance and technical staff. Some bankers question, however, whether adding layers of people will improve the situation.
Former RBI governor Bimal Jalan says: “We should learn from the current experience and see how we can improve our ethical governance system in implementing the banking guidelines.”
There is also the issue of black money – estimated at Rs 10-15 lakh crore – being generated in the first place. It is common knowledge that much of it is stashed in other countries. The Cobrapost sting has highlighted that banks, which are highly regulated, seem to be doing little to bring tax evaders to book at home. It is anyone’s guess what goes on in more loosely regulated financial intermediaries such as co-operative banks, NBFCs and credit societies.
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