Page 52 - Banking Finance July 2024

ARTICLE

Identification of red flags- Bankers should timely In India, banks are confronting similar issues related to
identify the red flags to ensure timely escalation and TBML. A primary concern is the inadequate collection of
investigation of the red flags identified. Know Your Customer (KYC) information and due diligence
Qualified and trained staff- Employees that obtain performed by operations staff at the time of account
identification and perform the verification of the UBO openings, during the execution of import-export
should be qualified and understand how to deal with transactions, and throughout ongoing monitoring processes.
legal entities and how to track the UBO in complex This gap in the due diligence process underscores the need
structures that may be in offshore jurisdictions (Cayman for strengthened internal controls and compliance measures
Islands, Panama, etc.). to effectively identify and prevent TBML activities.
Quality control and quality audits- The tests and Therefore, enhancing the Know Your Customer (KYC) and
assessments conducted by quality control and auditors Customer Due Diligence (CDD) framework, with an emphasis
should be robust enough in assessing the weakness of on the identification and verification of Ultimate Beneficial
current processes and the opportunities for control Owners (UBOs), is crucial in combating money laundering
enhancement. through trade-based money laundering (TBML). Robust Anti-
Money Laundering (AML) programs and comprehensive
Conclusion: knowledge are essential to navigate the complexities of multi-
If implemented effectively, these preventive measures will layered and opaque offshore entities that are designed to
significantly contribute to the global fight against money obscure the identities of UBOs. The challenges include the
laundering through trade-based money laundering (TBML). need for specialized knowledge, qualified personnel, and
It is important to recognize that as economic growth robust compliance policies and procedures. Addressing these
accelerates, the significance of TBML escalates alongside challenges both domestically and internationally is imperative
the expansion of global trade. This has led to an increase in for achieving meaningful progress against TBML activities.
the volume of trade transactions processed by banks and
financial institutions, presenting unique challenges in References:
mitigating the diversion of funds into TBML channels. Various Sources.

Service charge by new-age Private Banks, SFBs seen as

reasonable
Axis Bank and Canara Bank appear to be relative stragglers in a comparative statistical study on the reasonableness
of service charges, with several new-age and small-finance lenders populating the upper quartiles on this 25-strong
list of financiers. IDFC First Bank, Bandhan Bank and AU Small Finance Bank are better placed on this metric, according
to a study by a statistics expert from IIT Bombay.

"The study found that services such as the SMS alert after an account is debited, which is mandated by the RBI, are
charged by many banks. Bank of India, for instance, charges for SMS alerts of payment OTPs," said Ashish Das, professor
of statistics at IIT Bombay, and the author of the study.
The Reserve Bank of India (RBI) has set mandates and directed banks on how they can fix the charges levied for the
services they provide andensure reasonableness, vesting this responsibility with the banks and their board members.
Canara Bank charges Rs. 20 plus GST for ATM or POS decline due to insufficient balance since 2017. The fee was
levied without board approval and without disclosing the penalty to the public. In 2023, the RBI allowed retrospective
aproval to charge Rs. 17 plus GST, asking Canara Bank to return the extra Rs. 3.
“When the RBI questioned Canara Bank on the rationale behind charging Rs. 20, it replied saying that it did so because
SBI charged the same,” Das said.

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