The Financial Intelligence Unit ( FIU ) has imposed a fine of Rs 54 lakh on the Union Bank of India for failing to report suspicious transactions and for not undertaking due diligence under the Prevention of Money Laundering Act ( PMLA ),
The penalty notice was issued under section 13 of the Prevention of Money Laundering Act ( PMLA ) as it was observed that the charges against the lender were “substantiated” after it considered written and oral submissions made by the Bank.
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The investigation started, pursuant to an observation by the FIU, and a “comprehensive review” of the Bank’s operations was undertaken, which uncovered certain “irregularities” related to KYC/AML ( know your customer/anti-money laundering laundering ) compliance.
It was reported that an independent examination of specific current accounts maintained at Union Bank of India, Hill Road Branch, Mumbai, revealed that the accounts of an NBFC ( Non-Banking Financial Company ) and its associated entities were engaged in substantial circular fund transfers, orchestrated through entities under common control.
The FIU found that there were several critical irregularities involving entities with a common registered address and identical beneficial owners.It was alleged that the bank’s scrutiny of these accounts were insufficient as only one suspicious transaction report ( STR ) was filed, despite the high volume of transactions and a number of alerts that were generated in the account concerned.
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A notice was issued to the Bank by the FIU and after considering its submissions, an order was passed by the FIU Director imposing a fine of Rs 54 lakh on the bank for violation of the PMLA on various counts. As per the order, the bank failed to report suspicious transactions as required under the PMLA in respect of the account/s of said entities and in respect of several alerted transactions.
The Bank was penalised for its failure to carry out ongoing due diligence and to examine the transactions to ensure that they are consistent with the knowledge of the client, its business, risk profile and the source of funds in respect of the specified accounts.
The lender was also charged with failing to review the due diligence measures, including verifying again the identity of the client’s failure to conduct due diligence of existing clients on the basis of materiality and risk and for failure to evolve an internal mechanism to detect and report suspicious transactions in respect of the accounts in question.
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The FIU further directed the Bank to undertake a comprehensive review of its due diligence procedures and implement some of the suggested measures. The authority said that the Bank shall reassess its internal mechanism and transaction monitoring approach, especially where a significant number of alerts are generated on a client account but are subsequently closed in a cursory manner.
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