This seems to be the biggest slip by an Indian financial institution which is supposed to maintain heightened vigilance on suspicious and high-value cash transactions. At least Rs 640 crore was deposited in cash by one of the alleged front companies of former Jharkhand CM Madhu Koda in a state-owned bank in Mumbai. The bank failed to trigger an alert to countless intelligence agencies tasked to keep a tab.
Income Tax officials investigating the case have found documentary evidence of how the huge cash transactions took place in Mumbai between 2006 and 2008 when Koda was at the helm of affairs in Jharkhand.

Koda’s alleged frontman Manoj Punamia deposited Rs 640 crore in cash in Union Bank of India at its Zaveri Bazar branch between November 2006 and December 2008. The cash transactions were carried out by a Balaji group company — Balaji Universal Trade. The same group operated by Punamia was earlier found to be behind hawala and legal money transfers to the tune of $110 million to other front companies of the cartel based in Dubai.

Sources said Enforcement Directorate (ED) had also found details of the cartel’s land investment in Bangkok worth Rs 100 crore. The agency is examining an accused Vikas Sinha at their Delhi office while Punamia is being questioned jointly by I-T and ED officials in Mumbai.

Strange details have emerged during the cross-examination of accused and verification of documents seized during raids. Balaji Universal Trade, that had made huge cash deposits, is believed to have made Rs 991 crore of transactions with Union Bank alone. Sleuths are yet to open many sealed almirahs and lockers that are likely to throw more surprises.

Suspicious transactions going unnoticed have unnerved the government which, for the first time, has realised that the anti-money laundering mechanism it had set up in the wake of global pressure post-9/11 has failed to give results.

As part of ‘know your customer’ guidelines issued by RBI, it is mandatory for all banks and financial institutions to monitor transactions of high-risk individuals and their intermediaries on a day-to-day basis and report all suspicious transactions to the Financial Intelligence Unit (FIU), under Union finance ministry, within seven days of getting such information or be liable for punitive action.

It’s surprising that the Mumbai bank failed to generate an alert when such huge transactions were being carried out by a relatively unknown firm, especially when the bank is believed to have appointed a principal officer located at its head office who is responsible for monitoring and reporting all suspicious transactions to FIU, apart from maintaining close liaison with enforcement agencies.

All high-risk accounts have to be subjected to intensified monitoring with periodical review of their risk categorisation in the fight against money laundering and combating financing of terrorism.

As per the RBI directive, banks should verify the identify of the person and seek information about the sources of funds before accepting a suspicious customer or a concern. The decision to open an account of such entity should be taken at a senior level and such accounts should be subjected to enhanced monitoring on an ongoing basis.

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September 2021