“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”

Agencies/New Delhi

India’s second-largest bank by assets, ICICI, said yesterday it has suspended 18 employees in a probe into possible money laundering after a media sting targeting leading private lenders.

Online news outlet CobraPost said earlier this week one of its reporters had posed as a customer at three top private banks - ICICI, HDFC and Axis - seeking advice on investing up to $2.8mn.

The news outlet said the reporter used a hidden camera to record dozens of conversations with bank employees, which it posted on its website.

ICICI has suspended 18 employees, the bank said in a statement, as it investigated the allegations that employees offered advice on concealing funds from tax authorities.

“ICICI group conducts its business with the highest level of compliance to legal and regulatory requirements,” the bank said.

HDFC said separately it has appointed accounting and audit firm Deloitte Touche Tohmatsu India to conduct an inquiry into allegations that some of its officials were ready to facilitate money laundering activities.

The 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.

Axis meanwhile has launched an internal inquiry into the accusations, media reported.

The footage shot in so-called “Operation Red Spider” was said to show executives of the three banks agreeing to take cash from the undercover reporter, but no money actually changed hands.

“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,” CobraPost said.

Its editor 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.”

In one case, CobraPost said an ICICI executive suggested the reporter set up bank accounts under identities listed as drivers or security guards, so they would attract less scrutiny from tax officials.

CobraPost said staff at HDFC and Axis also advised opening multiple accounts under different names, as well as suggesting other options.

Banks are required to share with tax officials details of transactions involving more than Rs1mn ($18,510).

The finance ministry and central Reserve Bank of India are already looking into allegations of money laundering by private sector lenders.

The chief executives of two of the banks have denied all allegations, Finane Minister P Chidambaram told reporters in New Delhi on Thursday, without specifying which two. He said the third was travelling outside of India and so couldn’t be reached.

Rajeev Takru, secretary for financial services at the ministry of finance, said federal agencies are looking for violations, the Times of India reported yesterday.

Part of an investigation may be referred to the Financial Intelligence Unit, which looks into suspicious transactions, the newspaper cited an unnamed official as saying.

ICICI shares closed nearly 4.0% lower at Rs1,067.15 on Friday. HDFC closed 1.7% lower at Rs638.75, and Axis nearly 1% lower at Rs1,342.