FinCEN files: 44 Indian banks, $ 1 billion transactions, reported to US regulator


Written by Sandeep Singh | New Delhi |

Updated: Sep 24, 2020 7:09:23 AM

The FinCEN files contain a 20-page ‘intelligence assessment’ of the mirror network and list 54 shell companies which they say move billions of dollars each year from Russia through European securities markets to other jurisdictions from 2011.At least 44 Indian banks have been reported in transactions by Indian entities and individuals in a set of suspicious activity reports filed by US banks with the monitoring agency, the Financial Crimes Enforcement Network (FinCEN) , an investigation by L’Indian Express spectacles.

According to a set of documents where party-related addresses are in India, Indian banks are listed in SAR related to over 2,000 transactions valued at over $ 1 billion between 2011 and 2017. Significantly, there are thousands. transactions related to Indian entities and businessmen where the Indian shippers or recipients have addresses in foreign jurisdictions.

The documents reviewed show that Indian banks mentioned in the SARs include: the Punjab National Bank, which is state owned (290 transactions); State Bank of India (102); Bank of Baroda (93); Union Bank of India (99) and Canara Bank (190), among others.

Among the private banks listed in SAR are HDFC Bank (253 transactions); ICICI Bank (57); Kotak Mahindra Bank (268); Axis Bank (41) and IndusInd Bank (117) among others.

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Foreign banks that have filed these tax returns include Deutsche Bank Trust Company Americas (DBTCA), BNY Mellon, Citibank, Standard Chartered, and JP Morgan Chase, among others.

Indian banks are included in SAR primarily because they are “correspondent banks” of foreign banks that have deposited these SARs and are part of the network through which these transactions were conducted.

There are cases, according to the records, where “suspicious transactions” were made through the international payment gateway of foreign banks. In others, foreign branches of Indian banks such as a State Bank of India account in Canada and a Union Bank of India account in the UK have been used by clients to carry out part of the transactions. in question.

Key to this is the correspondent banking relationship – an arrangement that is causing growing concern as regulators crack down on secrecy in offshore transactions.

By virtue of this, a (correspondent) bank holds deposits owned by other (respondent) banks and provides payment and other services to those respondent banks. Through correspondent banking relationships, banks can access financial services in different jurisdictions and provide cross-border payment services to their customers.

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In these SARs, foreign banks cited a large number of reasons for reporting these transactions: “high-risk jurisdiction for money laundering or other financial crimes”, adverse media / public information about the customer, parties “no identified ”and the fact that“ the source of funds and the purpose of the transaction could not be determined. ”

Meanwhile, the idea of ​​correspondent banking is increasingly concerned with banks. According to a report by the Payments and Market Infrastructures Committee (CPMI) of the Bank for International Settlements, on correspondent banking, prepared in 2016, banks providing these services are reducing their relationships.

The report says rising costs and uncertainty over the extent to which due diligence should be exercised to ensure regulatory compliance have been among the main reasons banks have downsized their correspondent relationships.

The report made several recommendations, including the standardization of KYC standards and the use of legal entity identifiers in correspondent banking. It also recommended that global watchdogs such as the Financial Action Task Force and the Group Anti-Money Laundering Workshops should explore ways to tackle barriers to information sharing, with the aim of identifying potential best practices.

While letters sent to 10 banks for their comments on SARs did not elicit any response, an SBI spokesperson said in his response: “The information sought is not available from the Bank due to the rules of SAR confidentiality.

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The Financial Crimes Enforcement Network (FinCEN) has issued an advisory that any unauthorized disclosure of a SAR is a violation of US federal law… Civil and criminal penalties may be imposed for SAR disclosure violations.

“This obligation applies not only to the SAR itself, but also to information that would reveal the existence (or non-existence) of the SAR. All foreign branches of State Bank of India go through the whole process in accordance with applicable local regulations to report any suspicious transaction. SBI works with the highest level of compliance with legal and regulatory requirements not only in India but also overseas. At the same time, the Bank maintains a zero tolerance policy with regard to any breach of compliance. “

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