Private banks in fire-fighting mode after allegations of money laundering

Reserve Bank of India asks ICICI Bank, HDFC Bank and Axis Bank for details

The senior management of three top private banks have swung into action after an online magazine, Cobrapost, claimed to have captured the alleged money laundering activities by these banks on tape.

ICICI Bank, HDFC Bank and Axis Bank have started internal probes to examine the claims. While the employees who allegedly offered money laundering as a product to customers have not been suspended, they have been asked to explain their actions, people familiar with the development said.

"Prima facie, we don't think that money has been laundered. Only promises were made but actual transactions did not happen. We are investigating the matter and asked our managers to explain their actions," a senior executive with one of these banks told Business Standard requesting anonymity.

Some bankers also see this as an opportunity to clean up the internal processes.

ICICI Bank has already constituted a high-level inquiry committee, which will submit its report in two weeks. HDFC Bank and Axis Bank, too, have formed teams comprising of senior executives of the banks to investigate Cobrapost's claims.

Cobrapost visited 20 branches of HDFC Bank, 19 branches of ICICI Bank and nine branches of Axis Bank across the country during the sting operation. Several employees in the three banks appeared to have offered money laundering service to the undercover journalists.While around 10 officials from ICICI Bank and Axis Bank are involved with the incident, about 18 officials' from HDFC Bank were involved.

Cobrapost said it has video tapes, running into "hundreds of hours", showing the banks openly offering money laundering as a product to "even walk-in customers", who wish to conceal their black 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," the online magazine said in a press statement.

The RBI has also asked banks to provide details on this matter. "At the moment, RBI is collecting information. We are in touch with the banks. That's all I can say as of now," said Urjit Patel, deputy governor of RBI.

He denied having sent any show-cause notices to these banks.

Cobrapost said it is willing to hand over the footage to any authorised law enforcement agency for the purpose of investigation. "The onus is now on the government to act swiftly, and get its investigative and enforcement agencies, including the CBI (Central Bureau of Investigation), to launch an investigation without even a day's delay," it said.