Money laundering: Over 480 urban cooperative banks under lens

New Delhi: Over 480 urban cooperative banks across the country have come under the scanner of the Reserve Bank of India (RBI) for alleged violation of anti-money laundering laws.    

The central bank has been taking strict action like imposition of penalty and denial of branch expansion against the erring urban cooperative banks (UCBs), official sources said. The RBI has issued instructions to its regional offices to undertake scrutiny of 489 UCBs to ascertain compliance of  Know Your Customer (KYC), Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) guidelines, they said.  

The matter of misuse of UCBs, over which there is dual control by central and state governments, for money laundering has been a matter of concern of central intelligence agencies. RBI has also been coordinating with the state governments  on the issue and advised strict action against the defaulting UCBs, they said.  The central bank has also issued guidelines to block accounts of all non complying customers, the sources said.  

Most of the urban cooperative banks were lax on regulatory issues and were used as conduits for money laundering, they said. It has been observed that the problem of irregularities in the UCBs is of "grave nature" given their wide reach and penetration across the country with 8,100-plus branches which have huge deposits to the tune of Rs 2.09 lakh crore and  advances worth Rs 1.35 lakh crore, according to a report by Central Economic Intelligence Bureau (CEIB).    

"The issue also acquires serious proportions because it  jeopardises the hard earned money of the public which is put  at stake due to non-adherence to the RBI regulations or  instructions and also letting the banking channels being  abused by unscrupulous people in laundering money which can   play havoc with the financial health, safety and security of the country," the report has said.    

Sources said UCBs are inspected annually or once in two years depending on their ratings or classification. About 70 per cent of these urban cooperative banks are subjected to  inspection every year. CEIB officials are in touch with RBI  and keeping a close watch on any case of suspected money  laundering via these banks, they said