RBI wants banks to screen prospective staff

Banks would soon have to do a background check of candidates before recruiting them as employees.

The Reserve Bank of India (RBI) is working on guidelines, making it mandatory for banks to run a check on the background of prospective employees.

The background checking will be as per requirements of the financial action task force (FATF) on anti-money laundering (AML).

Speaking at a seminar on anti-money laundering organised by the Indian Banks' Association (IBA), Lalit Srivastava, RBI general manager, said as per FATF guidelines, the RBI had already asked banks not to outsource the task of customer identification as per know your customer norms to direct selling agents (DSAs).

On lessons learnt from the recent IPO scam, Srivastava said penal action against banks found guilty in IPO allotment scam should not be evaluated on the basis of amount of penalties.

The penalty for continued non-compliance could cost a bank heavily in its dealings in the international market and with its correspondent banks.

Sanjeev Singh, additional director, financial intelligence unit, said the government will soon issue AML guidelines encompassing the entire range of non-financial designated professionals.

These include chartered accountants, brokers, merchant bankers and other financial sector professionals. The government is also contemplating issuing an exemption list which will notify transactions out of the purview of AML guidelines.

The government is also in talks with the Association of Mutual Funds in India (AMFI) to exempt funds mobilised below Rs 50,000 from KYC norms and due diligence.

On the other hand, the money portals used by individuals and their banks for remitting funds will also be soon brought under the purview of AML guidelines.

During its investigation of the IPO allotment scam, RBI came across several factors that facilitated the scandal.

These included failure to obtain proper introduction of customers, their photographs and signatures, outsourcing of customer identification, failure to independently verify the identity and address of all joint account holders and absence of investigation of use and source of funds.