Stung! ICICI, HDFC and Axis banks accused of money laundering

Last Updated: Thu, Mar 14, 2013 11:50 hrs

New Delhi: Three top private banks - ICICI, HDFC and Axis banks - have been accused of running a nationwide money laundering racket by an investigative news website and production house, based on a sting operation that they said spanned some five months.

Stating that it was a pan-India undercover investigation, Cobrapost on Thursday claimed to have caught on tape several officials of these banks indulging in "brazen criminal activity" by channelizing vast amounts of ill-gotten money into the regular banking system as laundered white money.

"Our investigation, conducted across dozens of branches of these banks and their insurance affiliates revealed that the money laundering practices are part of a standard set of procedures within these banks," said Cobrapost.

Editor of Cobrapost, Aniruddha Bahal, said: "These banks and their managements are violating several provisions and policies of the government with utter disregard to consequences to boost cheap deposits and increase profits."

He said he had collected hundreds of hours of video recordings from "dozens and dozens" of bank branches across the country. He did not say when the recordings were compiled.

An article on the website posted on Thursday said an associate editor, using an alias and pretending to work for a fictitious politician who wanted to launder money, sought advice from bank officials on how to do it.

The article said branches across all the three banks suggested laundering methods that were "imaginative in their range and brazen in their approach."

In one case, Bahal said, a video excerpt on his website showed an HDFC Bank official explaining to an undercover reporter for Cobrapost different methods to launder money.

It said Cobrapost offered to hand over the videos to law enforcement officials or regulators. The article did not say if the recordings were eventually passed on to the authorities.

Market regulator Securities and Exchange Board of India had no comment on the matter, according to a spokesman.

The banks rake in vast amounts of black money in the form of illegal deposits, insurance and investment products, sold by them.

"The interaction between officials of the banks and our reporter clearly brings out the connivance of senior management of these banks in facilitating money laundering and other illegal transactions," said Cobrapost.

"The senior management has compromised all standards of governance and brazenly broken the law by offering money-laundering services practically as a nation-wide product," it added. 

'Deeply Concerned'

ICICI Bank said that it was "deeply concerned" about the accusations.

In a statement, it said: "ICICI Group conducts its business with the highest level of compliance to legal and regulatory requirements. All employees of the Group are trained and required to adhere strictly to the Group Code of Conduct... We have demonstrated our commitment to this by following a zero tolerance policy towards any violation."

"We have constituted a high level inquiry committee to investigate into the matter and submit its findings in two weeks."

HDFC Bank was investigating the matter on "top priority."

"Any deviation is viewed very seriously and stringent action is taken both at an organizational and employee level," the bank said in a statement.

Axis Bank also said it would investigate.

"Axis Bank has systems and processes that are robust and fully compliant with extant regulations. We will examine whatever information that is brought to our notice and investigate thoroughly," the bank said in a statement.

Axis Bank shares were up 0.5 percent at 3:15 p.m. after earlier dropping as much as 3.5 percent.

ICICI Bank shares gained 2.2 percent after earlier falling over 2 percent, while HDFC Bank was up 2.3 percent, also recovering from earlier declines.

The shares recovered after government data showed core inflation rose less than anticipated, reinforcing expectations that the central bank will deliver an interest rate cut next week to boost the economy.

Read Cobrapost's press release here

ICICI Bank, Case 1

HDFC Bank, Case I

Axis Bank, Case 1

Other developments

ICICI, HDFC, Axis banks recover after early-morning fall

ICICI to probe money laundering allegations

Axis Bank orders probe too

HDFC bank expresses concern; launches probe

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