Axis Bank fined Rs 1.66 crore for neglecting to identify and disclose fictitious NSG accounts
2024-06-13The Financial Intelligence Unit (FIU) has fined Axis Bank Ltd. Rs 1.66 crore for their failure to identify and report suspicious transactions at one of its branches. The National Security Guard (NSG) is a counterterrorism commando group. The penalty was imposed in response to a bogus account opened in the NSG's name. The fine was levied by the FIU, an organisation within the Union Finance Ministry that is in charge of upholding anti-money laundering regulations, following an investigation into the creation of a bogus account that was allegedly used to aggregate illegal cash.
The fraudulent activities were reported to have taken place in Gurugram, Haryana, in 2021. According to officials, the local police and the Enforcement Directorate (ED) have been investigating the case for several years. Last year, the ED attached assets worth Rs 45 crore belonging to an NSG officer on deputation from the BSF and his family members, including his sister who was a manager at Axis Bank.
The FIU’s investigation, concluded after considering written and oral submissions from Axis Bank, substantiated the charges against the bank. The agency highlighted the bank’s failure to establish a system to detect and report suspicious transactions, properly investigate and close alerts, and address alerts within a reasonable period.
In its summary order issued on June 3 under Section 13 of the Prevention of Money Laundering Act (PMLA), the FIU directed Axis Bank to implement several corrective measures:
- Review Mechanism: Axis Bank must review its current transaction monitoring system to understand why alerts were not raised in this case and ensure compliance with customer due diligence mandates.
- Certification: The bank is required to provide certification within 90 days, confirming the steps taken to establish a robust transaction monitoring mechanism.
- Data Management: The FIU criticized the bank for furnishing disorganized data dumps, which created confusion and hindered the scrutiny process. The agency advised Axis Bank to streamline its data-sharing practices to maintain clarity and coherence in all submissions to regulatory authorities.
- Employee Screening and Training: Axis Bank must implement stringent procedures for employee screening, as mandated by the Reserve Bank of India’s (RBI) know-your-customer (KYC) guidelines. The bank is also required to establish an ongoing training program to ensure continuous compliance with regulatory requirements.
The FIU’s penalty and directives to Axis Bank highlight the need for continuous vigilance and adherence to regulatory requirements in the financial sector. As the investigation continues, Axis Bank’s actions in response to the FIU’s directives will be closely monitored to ensure the implementation of effective anti-money laundering measures.
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