23 November 2015 07:16:53 IST

Money laundering: probed HSBC India’s preventive processes in March-April, says RBI

Findings cannot be disclosed, says apex bank in response to BusinessLine RTI query

The Reserve Bank of India (RBI) said it has probed HSBC India’s operations for “purported irregularities” in the bank’s processes to prevent money laundering. The British banking and financial services multinational has been under the scrutiny of the US Justice Department and authorities in Geneva since 2009.

While the RBI had earlier said that it was only keeping a close watch on probes being conducted against HSBC in other countries, its response to a Right to Information (RTI) query filed by BusinessLine reveals that the central bank had conducted its own probe into HSBC’s India unit, between March and April this year.

“The probe by RBI was carried out under Section 35(1A) of the Banking Regulation Act, 1949,” the RBI said in response to the RTI query without disclosing the findings of the probe. The section relates to the scrutiny of the books of accounts of the bank.

The RTI reply added that the findings of the probe on the bank’s domestic operations were confidential in nature. “Its findings are intended for the supervised entity and for corrective measures by them. The disclosure of which would affect the interest of the State and harm the bank’s competitive position; therefore, such information was exempted under RTI Act,” it said.

The reply also added that the information received and held by the RBI is in its fiduciary capacity. HSBC’s Swiss unit had received a jolt in 2008 when a former IT manager, Herve Falciani, had leaked information about the bank’s clients and their alleged tax liabilities. He is facing charges in Switzerland over the leaks.

In a recent interaction with Indian media over a Skype call, Falciani had alleged that huge amounts of unaccounted money from India were flowing out into foreign bank accounts.

The bank’s global operations have also been under a cloud of suspicion as the US Senate Committee on Homeland Security and Governmental Affairs, in its July 17, 2012, report on HSBC’s Anti-money Laundering (AML) supervision, had said that the bank’s processes in this critical area were weak and vulnerable to the flow of money from terror elements.

It has been alleged that HSBC’s AML compliance department, which included employees in India, was highly understaffed.

Taking cognisance of the US Senate report, senior government officials, including then Financial Services Secretary DK Mittal and Home Secretary RK Singh, had said that the Centre and the RBI would look into the case.

However, the RBI’s response to the RTI query suggests that the investigation was not done until March this year.