Money laundering: RBI advised to share banks inspection report

The matter of non-sharing of inspection reports was discussed during a meeting of Economic Intelligence Council headed by Arun Jaitley

The Reserve Bank of India (RBI) has been advised by the law ministry to share extracts of its banks’ inspection reports with intelligence and law enforcement agencies to help check money laundering and violations of other banking laws.

RBI has been refusing to share the inspection reports with the Central Economic Intelligence Bureau (CEIB), an apex intelligence agency under the finance ministry, citing legal hurdles, official sources said.

The matter of non-sharing of inspection reports was discussed during a meeting of the Economic Intelligence Council headed by Finance Minister Arun Jaitley. It was then decided to refer the matter to the law ministry for advice, they said.

The law ministry has recently opined that the provisions in the Banking Regulations Act, 1949, and other banking laws do not restrain RBI from sharing extracts of inspection or scrutiny reports with law enforcement agencies or CEIB.

The Ministry's advice has been communicated to the RBI.

The RBI was required to share relevant extracts of inspection reports with law enforcement agencies and CEIB to check black money and other financial crimes where gross violations of Know Your Customer (KYC) guidelines and Prevention of Money Laundering Act are noticed, sources said.

RBI has communicated to the CEIB that it is examining the matter in consultation with its legal department. The RBI may share extracts of inspection reports with the bureau, the sources said.

RBI had objected to sharing the reports with CEIB on the ground that the latter was not a statutory body. The central bank, however, was sharing these reports with Intelligence Bureau (IB), which is also not a statutory body, they said.

The matter of misuse of Urban Cooperative Banks (UCBs), over which there is dual control by central and state governments, for money laundering has been a matter of concern for central intelligence agencies. Violations of banking laws by other banks have also been noticed, the sources said.

A total of 489 UCBs have come under the scanner of RBI, which has issued instructions to its regional offices to undertake scrutiny to ascertain compliance with Know Your Customer norms, besides Anti-Money Laundering and Combating the Financing of Terrorism guidelines, they said.