Banks Reluctant To Lift Veil Of Secrecy On Errant Clients

Investigating agencies are facing problems in obtaining information from public sector banks about questionable financial dealings at a time when a five-member committee of experts is trying to cobble together the draft of a comprehensive money laundering bill that will call for closer cooperation between the banks and federal investigators.

Under the existing procedures, banks are required to inform investigating agencies about all transactions over Rs 10 lakh.

A senior official at one of the investigating agencies explained that general information regarding the trend of deposits and withdrawals from one account, or a set of accounts, would help the sleuths build a database about suspected money launderers.

 

Investigation agencies have, however, come up against a wall of reticence with the public sector banks reluctant to furnish data on their clients. In contrast, the authorities say foreign banks are more forthcoming whenever such details are sought from them.

According to a Central Bureau of Investigation (CBI) official, whenever general information has been sought from public sector banks, they have stalled on the pretext of ensuring the secrecy of their customers.

If public sector banks find it difficult to inform us regarding deposits above Rs 10 lakh, I wonder how they will share information regarding higher deposits, said the official.

Incidentally, the draft of the proposed money laundering bill has set a floor of Rs 1 crore.

All transactions above this limit will have to be mandatorily brought to the notice of the investigating agencies.

The committee included Enforcement Directorate chief M K Bezbaruah, Reserve Bank of Indias representative Khezer Ahmed and Narcotics Control Board director-general H P Kumar, has already agreed that the Act to prevent money laundering should cover offences involving drugs and narcotics, including peddling, kidnapping, illegal arms transaction among others.

There is a slight grey area in the existing system since our job relating to these disclosures and that of the banks is in mutual conflict, admitted a government official.

The Rs 10-lakh limit was set by the government after a series of international meetings over the last few years to curb money laundering. While some countries have already implemented laws to check this menace, others like India have yet to do so.

Last year, officials of the Central Bureau of Investigation attended meetings of the Financial Action Task Force (FATF) in London as part of the international agreement to check money laundering. It was the FATFs recommendation to make use of photographs mandatory for all bank accounts in order to check the proliferation of bogus accounts.

Several other recommendations of the Financial Action Task Force are being looked into, a finance ministry official said.