Major Indian Private Sector Banks, HDFC Bank, ICICI
Bank and Axis Bank, Are Blatantly Running A Huge Nation-wide Money Laundering
Racket
New Delhi: A Cobrapost pan-India undercover investigation spanning several
months, unearths a vast, nation-wide money laundering racket being run by HDFC
Bank, ICICI Bank and Axis Bank. The brazen criminal activity by these
banks is channelizing vast amounts of black money into the regular banking
system as laundered white money.
Our investigation, conducted across dozens and dozens of branches of these
banks and their insurance affiliates, across all five zones of the country,
revealed these shocking facts:
That these money laundering practices are part of a standard set of procedures
within these banks;
* These money laundering services are being openly offered to even walk-in
customers who wish to launder their illicit money;
* A variety of options for laundering ill-gotten cash are being offered
brazenly;
* These money laundering services are being offered practically as a standard
product across the country.
This huge money-laundering racket being run by these
banks has been captured by Cobrapost, on video-tape, running into
hundreds of hours. The evidence is graphic, crystal-clear and clinching.
The investigation finds the banks and their managements systematically and
deliberately violating several provisions of the Income Tax Act, FEMA, RBI
regulations, KYC norms, the Banking Act and Prevention of Money laundering Act
(PMLA) with utter disregard to consequences, driven by their desire to boost
cheap deposits and thereby increasing their profits.
It puts a big question mark on the legitimacy of these banks' deposits and
therefore their profits. It also raises grave questions of the legitimacy and
origins of funds being raised in their insurance and investment arms. It is
also clear from our investigations that these banks have been indulging in these
criminal practices for several years and have well-oiled processes for the
same.
Covered in this investigation, codenamed Operation Red Spider, are three leading private sector banks, namely, HDFC Bank, ICICI Bank and Axis Bank.
What were Cobrapost's methods to unearth this scam?
It took just a cold call by the Cobrapost reporter to the branches of the
banks, mentioned above, to put a grossly illegal proposition on the table:
A politician wants to launder a huge sum of black money. The purpose:
make it white. Would the bank officials help? And the lid came off the murky
world of money laundering in the Indian banking sector, as the officials of
these banks rolled out the red carpet for our Associate Editor Syed Masroor
Hasan.
Taking an alias of Rajeev Sharma, Masroor visited dozens and dozens of branches
across the length and breadth of the country, including many major cities and
state capitals, across all five zones. Nowhere was he disappointed. Nowhere was
he turned away. Almost every banker that he came across was willing to help
launder the black money of the fictitious politician Masroor was supposedly
working for. The discussions on how to launder the money went up the management
hierarchy.
How these banks launder black money
* The ways these major banks suggested to transform the black money into white
were both imaginative in their range and brazen in their approach. This brought
to the fore a modus operandi that is tailored to rake in vast amounts of black
money in the form of illegal deposits, insurance and investment products, sold
by these banks. All these creative means make the dirty money squeaky clean
without the regulatory authorities ever getting a whiff of what they are doing.
Here is a gist of what the various bankers suggested to help the politician
launder his illegitimate money:
* Accept huge amounts of cash and invest it in insurance products and gold.
* Open an account to route the cash into various investment schemes of the
bank.
* Do it even without the mandatory PAN card or adhering to the KYC norms laid
down by RBI.
* Split the money into tranches to get it into the banking system without being
detected.
* Use “benami” accounts to facilitate the conversion of black money.
* Use accounts of other customers to channelize the black money into the system
for a fee.
* Get demand drafts made for the client either from their own banks or from
other banks to facilitate investment without it showing up in the client’s
account.
* Keep the identity of the investor/depositor secret.
* Open multiple accounts and close them at will to facilitate the investment of
black money.
* Invest black money in multiple instruments in the names of different
individuals, not necessarily drawn from among the family.
* Allot lockers for the safekeeping of the illegitimate cash, including special
large size lockers to accommodate crores of hard cash.
* Personally come to the residence of the client to take the black money deal
forward and collect the cash, even bring along counting machine.
* Use provisions like Form 60 to deposit the illegitimate cash into the account
to route it into investment.
* Help the client to transfer black money abroad through NRE (Non-Resident
External)/NRO (Non-Resident Ordinary) account; transfer the money
telegraphically or through means other than regular banking procedures.
Other than these, officials suggested further
innovative methods unique to their banks. For instance, HDFC
Bank's officials offer such convenient cash laundering services like
the operation of lockers (with cash in them) outside regular banking
hours to ensure the secrecy of these customers' identities and to mask the
nature of the transactions. To stay one step ahead, ICICI Bank officials were
ready to make a suitable profile for the client, such as showing him as an
agriculturist or engaged in some business, so as to make the investment
unquestionable. On the other hand, Axis Bank officials proved to be a notch
above in inventing fraudulent means. Use “sundry” accounts of the bank, they
suggested, to deposit all the illegal cash from where it is to be routed into
investment. Either use accounts of other customers, for a fee, to transfer
money abroad, or use some shell company and take away a chunk of foreign
currency as expenses toward business-cum-leisure trips. They would pamper you,
offering you privilege banking or priority banking, pulling out all stops to
make the deal happen.
Operation Red Spider exposes the alarmingly lax and ineffective regulation of
our Banking and Insurance Industries
Operation Red Spider makes it clear that the agencies
entrusted under law to have an oversight over the banks, namely, the RBI, the
Income Tax Department, Directorate of Revenue Intelligence, the Enforcement
Directorate and various economic offences wings, have been grossly
inefficient in unearthing misconduct on the part of the banks. It took a single
reporter equipped with a low-end hidden camera, to unearth these endemic money
laundering practices in HDFC Bank, ICICI Bank and Axis Bank: by merely posing
as a walk-in customer wanting to launder huge sums of cash for a politician.
The interactions between officials of the banks and the reporter clearly brings
out the connivance of senior management of these banks in facilitating money
laundering and other illegal transactions. Operation Red Spider clearly
establishes that the senior management of these banks has compromised all
standards of governance, and brazenly breaking the law by offering these
money-laundering services practically as a nation-wide product. It becomes very
clear through the Cobrapost investigation that all that matters to these banks'
managements is to increase the bank’s access to cheap deposits, thereby
boosting their profits vastly, even if the money thus accessed is criminal
and shady.
Cobrapost has hundreds of hours of raw video footage pertaining to the
reporter’s interactions with personnel from the above-mentioned three banks.
Cobrapost is willing to hand over the footage to any authorized law enforcement
agency that wants to look into the matter. Cobrapost has undertaken dozens of
investigations (including Operation Duryodhana: the cash for questions scam
which led to the dismissal of 11 Members of Parliament) over the past 10 years
and has been submitting unedited tapes to authorities whenever asked for. No
agency has ever raised any questions as to the genuineness of evidence
presented by Cobrapost.
When confronted with irrefutable evidence, the PR spin machines of the banks
are likely to go into over drive and claim that “these cases are aberrations
and isolated”, or that “the tapes are doctored”, or that “we will look into the
matter and take action”.
Let all parties be assured that nothing in Operation Red Spider is
fabricated. The camera is a mechanical witness and it has captured the words
and actions of the bankers with great clarity. These banks can be called
criminal syndicates for what their managements are willing to do to improve the
bank’s bottom line.
The hundreds of hours of video footage clearly establish that these cases are not
aberrations at all. In fact, to the contrary, they are the norm, across all
five zones, major cities, spanning the length and breadth of a large country
like India.
Furthermore, these managements themselves are complicit in these criminal
activities, and hence, to allow them to investigate this scam will only result
in the destruction of evidence and a cover up of their tracks. No fair
investigation can happen with the same people sitting at the helm of
affairs.
We further need to have the debate again whether private entities should be
given banking licenses and whether those that have them deserve them or the
country is better served with their licenses being cancelled. For, as things
stand, as demonstrated by the conduct of HDFC Bank, ICICI Bank, and Axis Bank
(the country’s leaders in banking), perhaps the country might be better served
by private banks not being on the banking canvass.
Finally, Mr. Chidambaram, our Finance Minister, has been speaking extensively
about the cancer of money laundering and tax evasion in our system. The onus is
now on the government to act swiftly, and get its investigative and enforcement
agencies, including the CBI, to launch an investigation without even a day’s
delay. Any delay will result in evidence like incriminating emails being
destroyed (there are bank officials who have been caught on tape, saying that
they routinely email seniors for approval/information on these illegal
transactions), and cash being removed from lockers, customer identities being
altered, etc.
The whole country has been looking at the Swiss banks with suspicion as being
the main repositories of black money belonging to Indian residents.
As this path-breaking Cobrapost investigation starkly reveals, it is our very
own, home-grown Indian banks that are the primary culprits in this giant
racket.