The Reserve Bank of India has penalized Bank of Maharashtra, Dena Bank and Oriental Bank of Commerce for violation of KYC norms (know your customer) and anti money laundering (ALM) norms. The RBI has put a fine of Rs 15 lakhs on each banks.

The Banking Regulator has warned and directed Central Bank of India, Bank of India, Punjab and Sind Bank, Punjab National Bank, State Bank of Bikaner & Jaipur, UCO Bank, Union Bank of India and Vijaya Bank to strictly follow the KYC practices.

The Central Bank had ordered a probe against these banks for violation of KYC norms and ALM norms based on a complaint received by a private organisation. The RBI has found out non adherence to KYC norms, inadequate monitoring of customer accounts, opening of fixed deposit accounts and granting overdrafts without due diligence, use of internal accounts for parking customer funds, and Involvement of middlemen/intermediaries in opening of the accounts..etc in its probe.

Tidbits

• The Reserve Bank of India introduced KYC guidelines for all banks in 2002.
• Know your customer (KYC) is the process of a business verifying the identity of its clients.
• Know your customer policies are becoming much more important globally to prevent identity theft, financial fraud, money laundering and terrorist financing.
• Banks usually frame their KYC policies incorporating the following four key elements:
  • Customer Policy
  • Customer Identification Procedures
  • Monitoring of Transactions
  • Risk management.