One of the community most affected by demonetization after common men and bankers would be bank auditors. Most of the auditors are dwelling in confusion after so many notifications of government of India and RBI. Many bankers have been accused of being involved in illegal activities after demonetization. Responsibility may also be imposed on bank auditors if we lack in giving true and fair view on the activities of bank.
In view to facilitate members in this regard and to clear the vision a bit I have tried to compile few important notifications of RBI and ministry of finance, that all bank concurrent auditors should take care of.
Hope many find it beneficial!
We’ll discuss the areas pointwise on the basis of the priority and risk weightage of the same in audit reports.
1. Accounts under PMJDY:
Accounts under PMJDY or JAN DHAN Accounts have been the most concerned area after Demonetization. Many banks have experienced huge cash deposits in these accounts though these are basic saving accounts which carry a very small threshold limit.
Huge cash deposit in these accounts and frequent cash withdrawals after such deposits should be analyzed taking PMLA into consideration.
RBI has notified Rs. 10000 Weekly withdrawals from such accounts in case of KYC compliant accounts and Rs. 5000 in case of limited and Non-KYC compliant accounts.
Frequent account transfers from such accounts to certain accounts should also be looked into. Cash deposit limit of 50000 during the demonetization was notified for accounts under PMJDY. PAN or form 60 compliances in cases of excess cash deposits should also be taken care of.
2. Opening of new bank accounts:
Opening of new accounts and unusual transactions during post demonetization period to be scrutinized. Many new banks accounts were also opened after demonetization, huge cash deposits and frequent withdrawal from such accounts should be analyzed and appropriately reported. Transfers via NEFT, RTGS or like medium should also be analyzed.
3. Disbursement pattern of new currency:
The disbursement pattern of new currency notes be checked to ascertain whether any particular customer or set of customers was favored. Many bankers are already accused of favoring particular customers, hence it is recommended to check the disbursement pattern to check the same.
4. Preservation of CCTV recordings:
RBI has advised banks to preserve CCTV recordings of operations at bank branches and currency chests for the period from November 08 to December 30, 2016, until further instructions, to facilitate coordinated and effective action by the enforcement agencies in dealing with matters relating to illegal accumulation of new currency notes.
Enforcement agencies may be tax authorities or investigators from government agencies. All bank officials and auditors should make sure that CCTV recordings of this period are preserved for any investigation, non-availability of the same may indirectly imply any fraud being committed.
5. Cash deposit and withdrawals in dormant/non-operative accounts:
Inoperative accounts have always been an area of great concern for bank auditors, as its one of the areas prone to risk of fraud. Reason of non-operation and KYC compliance before allowing any transaction in the account should be properly checked.
Unusual transactions in the account may be due to illegal activities in the said account, confirmation from account holder in such cases should also be taken.
Bankers as well as bank auditors are playing a very important role in successful implementation of demonetization and cashless economy. Its hence advisable to all members to be very careful while performing our duties. Any wrong step, knowingly or unknowingly may lead to very bad outcomes.
Hope this article was useful to all readers, feel free to contact me in case of any queries or confusions.
(This article is written by CA Snigdha Nigam. She is a practicing chartered accountant. She can be reached at Snigdha.firstname.lastname@example.org)