Now, Axis Bank suspends bullion dealers' accounts

MUMBAI: Axis BankBSE -2.56 %, stung by accusations that its employees have been involved in laundering black money , has temporarily suspended the accounts of some bullion dealers as part of "enhanced due diligence" to stamp out any attempt to legalise unaccounted wealth following the demonetisation announced on November 8.

The country's largest nominated importer of gold on consignment basis after Bank of Nova Scotia, Axis Bank has frozen the dealers' accounts, according to a top refiner and a Mumbai-based gold dealer. Others suspected to have dealt in abnormal values of the precious metal after the Rs 500 and Rs 1,000 notes ceased to be legal tender have also had their accounts suspended, they said. 

"We have temporarily suspended transactions in a few current accounts as part of a larger enhanced due diligence exercise being conducted on transactions post demonetisation," an Axis Bank spokesperson told ET. "Some of the accounts in which enhanced due diligence is being conducted are some bullion dealer accounts." 

The two people cited above said the exercise was begun after large sums in old noteswere deposited into accounts that had been opened without proper documentation in a few of the bank's branches in New Delhi after demonetisation. The money was subsequently transferred from these accounts, some of which were linked to the bullion trade. 

Banks have been cracking down on suspect behaviour by staff. Axis Bank has suspended nearly 30 employees for violating rules.Hundreds of crores have been unearthed in income tax raids in the past few weeks. 

One of these at the Chandni Chowk branch of Axis Bank reportedly led to the discovery of over Rs 100 crore in 44 suspect accounts. Earlier, the Enforcement Directorate arrested two Axis Bank managers from the bank's Kashmere Gate branch for alleged money laundering. "The suspicion is that if the bullion trade was linked to some of these accounts in a few branches, the same could be the case in other branches of the bank," said one of the people cited above. "Consequently , the bank has suspended accounts across the trade. Honest bullion dealers are paying the price for the malafide acts of a few." 

Axis Bank said it conducts checks before accounts are opened. 

"The bank has a robust account opening process with requisite checks and balances," the spokesperson said. "The entire account opening scrutiny is done by a team of experts in a centralised setup.Also, we have not delivered bullion to any new relationship account opened since demonetisation." The bank expects to complete the due diligence in the next few days. 

"A team of senior bank officials are looking into every aspect of KYCAML (know your customeranti-money laundering) standards for all the accounts and transactions handled by the bank in the post-demonetisation period. KPMG has also been involved in this process," it said."The bank has a zero-tolerance policy for any violations of the laid-down norms." 

India imports about 800 tonnes of gold in a normal year. Much of these imports on consignment basis are made through 21 banks authorised by the Reserve Bank of India. They sell it to bullion dealers who, in turn, supply bars to smaller dealers and the jewellery trade. 

Jewellers and bullion dealers have drawn government scrutiny for keeping their establishments open and selling gold at hefty premiums against Rs 500 and Rs 1,000 notes just after the announcement on November 8 and even beyond. The central excise department sent notices to 650 jewellers demanding details of sales volume and value between November 7 and 11. 

Axis Bank denies local media report of threat to its banking licence Read more at: http://economic