IBA rolls up its sleeves to curb money laundering

The Indian Banks’ Association (IBA) has joined hands with 10 banks to improve the customer verification system and monitoring of transactions to help check money laundering activities in the country.

IBA has set up a working committee headed by ICICI Bank Senior General Manager Sanjay Chaugle to prepare revised guidance notes on know-your-customer (KYC) and anti-money laundering (AML) operations. A member of the working committee said that some KYC norms, such as the requirement of a permanent account number, have not been proposed to be eased.

According to sources, emphasis is being given to monitoring of transactions and record keeping in a more automated manner by creating a database for names to filter out defaults. The focus would be on putting in place a software that could detect suspicious transactions, they said. In recent months, the Reserve Bank of India (RBI) has issued guidelines on wire transfers, transaction monitoring and usage of software after the implementation of the KYC and AML norms.

The new committee is looking at regulatory changes and preparing a road map for banks to implement them better, and in a more coordinated manner. Customer risk categorisation and training of bank employees to deal with the new guidelines were the other focus areas, they said.

Lenders such as State Bank of India (SBI), ICICI bank, Standard Chartered bank and HSBC have come together to improve the processes.

The recent focus on AML operations and KYC is part of the government’s efforts to join the Financial Action Task Force (FATF), an elite group of 40 countries, working to curb money laundering activities.

While India has put in place the norms, it only needs to amend the Prevention of Anti-Money Laundering Act (PMLA) to include offences such as insider trading in the list of scheduled offences to join FATF. India expects to share details of the legal amendments with FATF by the end of the year, paving the way for the entry into the elite group by next year, according to government officials.

In the past, the absence of India’s presence in FATF as a member, though it has received observer status, has been cited by US authorities for denying branch licences to SBI and ICICI Bank.