Indian banks face money laundering allegations

By Vikram Barhat | March 19, 2013 | Last updated on March 19, 2013
3 min read

The Reserve Bank of India is probing three banks for their alleged roles in money laundering based on a sting operation carried out by an Indian news website.

Television production company posted a series of hidden-camera videos that captured bank executives allegedly accepting requests for money laundering. This sparked an instant media storm.

The banks — Axis, HDFC, and ICICI — are being investigated as a result of the exposé, reports The Economic Times.

A spokesperson at ICICI Bank, which has branch offices in Canada, told via email “the investigation in India has no impact on Canadian operations.”

“We are deeply concerned with the media reports,” adds the note. “We have constituted a high-level inquiry committee to investigate into the matter and submit its findings in two weeks.”

Read: Money-laundering regulations get a facelift

Managers at the three banks in question allegedly offered the undercover reporter, who posed as a customer, advice on hiding money from tax authorities.

All three institutions allegedly agreed to place client money in investments and benami accounts, bank accounts under fake names, in violation of money laundering laws.

In a video posted to the website, an ICICI bank manager allegedly shows how to sanitize black money, bring it back into the system and invest it without being caught by the tax authorities.

Although the communication between the journalist and the bank representative takes place in Hindi, a voiceover explains the exchange in English.

For its Canadian customers who routinely remit money to India, Axis Bank’s website posted this notice:

“We regret to inform you that the AxisRemit Service will be temporarily unavailable for our valued users from Canada from 18.30 hrs, 25th February, 2013 (IST) till further notice.”

The bank further instructs any “money received after the 18.30 hrs 28th February, 2013 will be returned back to the remitting bank account.”

Read: Curbing illicit flows of money

Shanthi Venkatesan, deputy general manager, ICICI Bank Limited has assured the Securities and Exchange Commission (SEC) the bank will investigate the matter in a timely fashion.

“We are deeply concerned with the media reports,” she says in a note to the SEC. “We have constituted a high level inquiry committee to investigate into the matter and submit its findings in two weeks.”

The Bank’s note was part of the electronic submission of Form 6-K that requires foreign banks to inform the SEC of “material events.”

A release on the ICICI website says the bank, which holds $122 billion in assets, has suspended 18 employees pending the completion of the investigation and has appointed Deloitte to conduct an independent forensic inquiry into the allegations.

In a note dated March 16, HDFC Bank informs the New York Stock Exchange that it has also appointed Deloitte “to carry out an independent forensic enquiry into the [money laundering] allegations and reported statements, as made by Cobrapost representatives, when secretly taping bank officials.”

India’s finance minister P. Chidambaram has told local media the government and the country’s central bank are awaiting these internal investigations and are looking at the matter closely.

Industry experts and commentators have long raised concerns over the country’s lax banking regulations and have proposed closer scrutiny.

“There is clearly an unpoliced structure inside India’s commercial banks,” says Madhavan Narayanan, a New-Delhi based senior editor at Hindustan Times, a leading English-language daily in India.

“The central bank clearly is not putting enough pressure to reform the system on this front,” he told “Reserve Bank of India needs to think afresh as most of its focus seems to have been monetary policy than operational supervision.” is awaiting response to emails sent to corporate offices of HDFC and Axis in India.

Read: Banks need to prioritize morality

Vikram Barhat