Banks named in alleged money laundering expose order probe

HDFC-BankNew Delhi, March 16 : HDFC Bank said Saturday it had retained Deloitte Touche Tohmatsu for an independent forensic inquiry into charges of money laundering levelled against it by an investigative news web site, based on a sting operation over five months.

The move comes even as ICICI Bank suspended 18 officials, pending inquiry into the money laundering allegations, while Axix Bank, the third private sector institution that was named in the expose, said an internal probe had been ordered.

The Reserve Bank of India (RBI) and the finance ministry also conducting independent investigations into the allegations.

HDFC Bank said it has also appointed Amarchand and Mangaldas, and Suresh A Shroff and Company to examine breaches if any of the its code of conduct and ethical standards by any official.

"The Bank is committed to the highest standards of compliance, corporate governance and ethics and has in place systems and procedures to ensure that its business is conducted in compliance with laws and regulations," the institution said in a statement.

HDFC Bank said it was also proceeding to detail out the internal checks and balances, as also procedural safeguards already in place, to report how effective they are to comply with the regulatory guidelines and internal procedures.

This was being done also to check if they will prevent, trap or enable pre-fact or post-fact discovery of any violation of the norms and of money laundering activity, the bank said, adding training will also be given for ingraining ethical behaviour and conduct.

A special audit has also been ordered at some of the branches where the videotaping was reportedly done by Cobrapost, that had Thursday aired the expose, while also detailing out the nature of the alleged racket in a press conference.

"Our investigation, conducted across dozens of branches of the banks and their insurance affiliates revealed that the money laundering practices are part of a standard set of procedures within these banks," said Cobrapost.

Speaking to IANS, editor of Cobrapost, Aniruddha Bahal, said: "These banks and their managements are violating several provisions and policies of the government with utter disregard to consequences to boost cheap deposits and increase profits."

The development also caught the attention of the financial sector overseas, even as the shares of the three banks fell Friday -- ICICI Bank was down 1.4 percent, Axis HDFC lost 1 percent, while HDFC Bank saw its shares fall 0.6 percent.

"We think these developments, if they were to be true, could potentially lead to slower growth across private banks' deposits and businesses as the RBI may then direct banks to focus on improving risk management rather than expanding," Goldman Sachs said.

"It is difficult to ascertain the extent of the slowdown till more clarity on these developments is provided by the banks."(IANS)