Axis Bank Slapped with Rs1.66 Crore Penalty by FIU for Not Detecting Fraud Account in the Name of NSG

Moneylife Digital Team 12 June 2024

Economy & Nation

The financial intelligence unit-India (FIU-IND) has slapped a penalty of over Rs1.66 crore on Axis Bank for 'failing' to detect a fraud account in the name of the National Security Guard (NSG), the country's counter-terrorist commando force. According to FIU-IND, the lender failed to establish a mechanism to detect and report suspicious transactions carried out at one of its branches by creating a bogus account in the name of NSG.

In a regulatory filing, Axis Bank says, "FIU-IND vide their order dated 3 June 2024, has imposed a monetary penalty amounting to Rs1,66,25,000 on the Bank for non-compliance of Section 12(1) of the Prevention of Money Laundering Act (PMLA) read with PML (Maintenance of Records) Rules, 2005, in respect of opening and monitoring of certain accounts."

"This penalty has been imposed in the exercise of powers conferred under Section 13(2)(d) of the PMLA. The Bank has already initiated and taken corrective measures, as necessary, to align the operations and procedures in line with the stipulations of the FIU-IND and Reserve Bank of India (RBI)," it says.

According to media reports, the case pertains to an instance where an employee of Axis Bank was alleged to have been complicit in a large-scale fraud and corruption scandal in collusion with others.

Quoting from the FIU order, a report from Economic Times says, "....a manager at Axis Bank played a role in establishing this account, purportedly for the purpose of aggregating illicit funds."

FIU monitors money laundering and other financial frauds by banks and other financial institutions designated as 'reporting entities' under the PMLA.

Last June, the enforcement directorate (ED) attached 52 movable and immovable properties worth Rs45.20 crore related to a former deputy commandant of the NSG and his family members in connection with an alleged fraud case.

According to the ED, Parveen Yadav, the ex-deputy commandant of NSG, opened a forged bank account in the name of 'Earnest Money Deposit (EMD) for Central Warehouse NSG in Manesar', in the Gurugram branch of Axis Bank.

The Gurugram police registered a first information report (FIR) against Mr Yadav, Dinesh Mohan Sorkhi, Kamal Singh, Mamta Yadav, Koshia Enterprises Private Limited, Rituraj Yadav, Naveen Khatodia, Axis Bank and unknown persons.

He gave forged documents to all the complainants, projecting them as those issued by the commando force for the upcoming tenders for various works on the NSG campus.

The ED says Mr Yadav allegedly received money from the complainants in the EMD and other bank accounts. "The funds so collected were laundered, invested in the trading accounts or used for making payments for the purchase of movable and immovable properties with the help of Mamta Yadav, Rituraj Yadav, Naveen and Dinesh Kumar," the FIR says.

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