RBI
Bank Penalties- What does it mean?
Here comes another burning issue of RBI
penalizing Banks for irregularities in their modus operandi.
And the count is not small mind you. It is
around 13 banks including co-operative ones.
The CBI has been conducting search and
seizure operations and has found irregularities in working requirements and the
rules and regulations to be followed and governed by the Supreme regulatory
authority that is RBI.
Time and again this issue of Know Your
Customer (KYC) not being followed properly has come to the fore front. This
time it is coupled with advance import remittances.
Bank of Baroda has a glaring Rs. 6,000
Crore Forex related irregularities. It has been fined to the limit of Rs. 5
Crore, HDFC by Rs. 2 Crore and Punjab National Bank by Rs. 3 Crore.
The fraud involves import payments that
never happened in reality for Bank of Baroda. Work as usual, weak internal controls. Anti-
Money laundering channels were bypassed. Timely reporting was not done. The
Suspicious Transaction Reporting process to the Financial Intelligence Unit was
over looked.
Similarly, for HDFC it involved anti-money
laundering guidelines not properly followed and bills of entry for import
remittances not being properly accounted for.
Similarly, Rs. 5 Lakhs penalty on the
Co-operative City Bank, Guwahati, Rs. 2 Lakhs on Indapur Urban Cooperative Bank of Pune, Rs.
1 Lakhs on Model Cooperative Urban Bank, Hyderabad.
All said and done this brings further the
need of Forensics and Continuous Auditing. Internal Controls are not up to the
mark and regulator not being taken seriously.
We need to ensure the following:
·
Vigilance
·
Transparency
·
Timely Reporting
·
Fairness
·
Continuous Audit
·
Independence- Maker Checker
·
Timely Review
·
Fraud Risk Management
Procedures
·
Proactive rather than reactive
·
Tone at the top
·
Whistleblower Mechanism
·
Ethical Hotline
·
Internal Benchmark ratings
·
Balance- Quality Vs. Targets
·
Preventive/ Detective Controls
To do post mortem is easy but to nip the
matter in the bud is utmost important. At the same time deterrents need to be
in place to stop from happening again. It cannot be stressed that if we lose
public confidence in the system like this time and again we will not be able to
progress and move to a better tomorrow!
Would be sharing further inputs in
future articles. For fraud risk awareness training for corporate and write-up
please contact me on the below:
Raunaq Chawla
+971-562642495/ +91-9650668585
Happy to help with a smile!
