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RBI widens scope of probe against money laundering to other foreign banks

27 Aug 2012 Evaluate

The Reserve Bank of India (RBI) has widened its scope of probe for alleged breach of controls against money laundering and terror financing, from the affairs of British banking giants HSBC to a host of other foreign banks. In double trouble for these foreign players, capital market regulator SEBI too may join the investigations, as there are qualms of funds from these banks being routed to the stock market through foreign investors and other entities.

The investigations, which are made to ensure that the foreign banks' compliance to various fair banking norms in the wake of certain global event follow developments in the US, where a host of European banks, besides HSBC and Standard Chartered, are being probed for their alleged role in exposing the American financial system to money laundering and terror-financing risk.

The RBI, in the previous week, initiated inspection of the Anti- Money Laundering (AML) and Know Your Customer (KYC) systems of StanChart and HSBC, following the news reports of involvement of HSBC, USA, in money laundering activities and of Standard Chartered Bank, USA, for violating sanctions imposed on Iran by US Government.

Earlier this month, the New York State Department of Financial Services blamed Standard Chartered of hiding about 60,000 secret transactions with the Iranian government, involving a whopping $250 billion, besides exposing the US financial system to terrorists, weapon dealers and drug kingpins.

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