Can someone tell me what is illegal in these videos from banks perspective. I was specifically looking for illegal portion.

Here is my understanding of the things.

a. Person says he has crores of cash.(Banker sees a large customer. Of course he won't care how money came, as it is not his duty. Bankers never ask us about the source of money so they will never ask anyone.The person is more eager to tell about black money, politician and other things to make it interesting).

b. Banker tells the client that he can open multiple accounts. I think that is legal. I think most of us have multiple accounts.

c. Banker says that if the person has cash, he can deposit it in multiple chunks. 1 crore over 10 years using 4 accounts. Nothing illegal here as well. The banker is only suggesting a legal way to deposit large sum of money without specifying PAN.

d. Banker offers to open locker. Bankers never bother about the contents of a locker. Its a rule. Here the client is eagerly telling I will keep cash which is immaterial for a banker.

e. The person wants to use hawala route to send money abroad. The banker says he will do it in personal capacity. Bank cannot do it. But saying to do something in personal capacity is very different from promising something as a bank.

f. The person wants returns on the money in the bank. The banker explains to him various products through which the person can get the returns.

g. The person wants safety of his account as it will become a large account. The banker explains the safety features of the account.

I am yet to find anything illegal here. Please let me know if you have found one.




Edited by gyansr - 16/Mar/2013 at 10:27am

I am surprised market hasn't reacted at all. Usually these kind of allegations result in a sell off. What could be the reason?
A related article by business line
http://www.thehindubusinessline.com/features/investment-world/the-scam-that-didnt-shock/article4516239.ece
The author talks about fee based income by selling ULIP based products to customers.

I have not seen any banker asking for the source of money while depositing money. As far as I know, he has no rights to ask. If he has no rights to ask, he cannot be held responsible for money deposited in any account. The banker will be found responsible only if he facilitates it by not asking for necessary documents as applicable , which no banker has promised in this case. Where is money laundering if someone is depositing money in a account in multiple tranches.

Multiple bank accounts and multiple IPO application for cornering economic benefits are vastly different as no economic benefit can be achieved by having multiple accounts. If that was the case, government would have made it a rule to have only one account per person which is not the case. One bank account per person is not the law, but one IPO application per person is. Question of motive or mode is immaterial here.

As far as I know, banker never checks (again he has no rights to question) what goes in a locker. I have been operating locker for a long time and its contents are known only to me. Banker cannot ask me to show what I have in my locker. He has no audit rights over the contents of a locker. Only a law enforcement agency may ask a banker to open a locker. Banker has no business knowing what is inside the locker.

The source of money is not bankers duty. It is the duty of other law enforcement agencies. A banker can not be held responsible even if a terrorist has kept his money there. His duty is only to cooperate with law enforcement agencies by providing details of an account when asked for.

Think about the implication of what you are saying here. If a criminal gets caught, we will immediately find the banks where he has account and put all the bank employees of those places behind the bar as they will be deemed to have helped the criminal. That way the largest number of prisoners in the world would be bankers.

Originally posted by FutureBull well the individual steps might look like legal but join together and what you get, is money laundering. This is punishable offence in India and anywhere else. Banking industry is the first place to detect illegal money. This is their fiduciary responsibility. The biggest crime in one sentence is "you are personally liable if you help anyone in de-linking identity and source of money". I am very surprised you find no offence here. > Folks have been punished for opening multiple accounts in an IPO scam. The key thing is the motive not the mode. > Keeping cash in locker is illegal. If any banker allows it means he enjoys certain kind of immunity in the system. Banks do their own audit and not impossible to detect. Can you tell me in this whole thing how would you know where the money is coming from drugs, child/women trafficking, prostitution, terror havens and of course black money of politicians? If you can not, these bankers should be tried for waging war against the country.

Edited by gyansr - 17/Mar/2013 at 12:40pm

Agreed that a banker is not an investigative authority and that's why you have standard operating practices which includes denying banking services till your doubt is gone. If he/she is facilitating large cash transactions without clearing his doubts, either he is not trained properly or there is willful ignorance from his/her part. He is PERSONALLY liable for consequences if knows/suspect that the source could be illegal but failed to act. This is beyond doubt for me at least. one needs to go into regulations concerning retail banking to get the perspective.

Edited by FutureBull - 17/Mar/2013 at 4:07pm