FIU fines Rs 54 lakh on Union Bank of India for multiple PMLA violations

The Government Federal agency, Financial Intelligence Unit (FIU) has imposed a fine of Rs 54 lakh on the Union Bank of India for "failing" to report suspicious transaction reports and for not undertaking due diligence under the anti-money laundering law for certain accounts at one of its branches in Mumbai.

The agency issued the penalty notice under section 13 of the Prevention of Money Laundering Act (PMLA) on October 1 as it observed that the charges against the lender were "substantiated" after it considered written and oral submissions made by the Bank.

The investigation came as a "comprehensive review" of the Bank's operations that was undertaken, which uncovered certain "irregularities" related to KYC/AML (know your customer/anti-money laundering laundering) compliance.

The FIU found that there were "several critical irregularities" involving entities with a common registered address and identical beneficial owners.

"Despite their authorized capital being only Rs 1 lakh, each of these entities exhibited credit turnovers disproportionate to their declared business operations, with significant RTGS (real-time gross settlement) inflows from the accounts of the NBFC in question.

"These funds were swiftly transferred to other group entities of the NBFC," the FIU said. The agency said the bank's scrutiny of these accounts was "insufficient" as only one suspicious transaction report (STR) was filed, despite the high volume of transactions and some alerts that were generated in the account concerned.

Subsequently, a notice was issued to the Bank by the FIU and after considering its submissions, an order was passed by the FIU Director on October 1 imposing a fine of Rs 54 lakh on the bank for "violation" of the PMLA on various counts.

"The Bank shall reassess its internal mechanism and transaction monitoring approach, especially where a significant number of alerts are generated on a client account but are subsequently closed in a cursory manner," the FIU said and as per the order, the bank has "failed" to report suspicious transactions as required under the PMLA in respect of the account/s of said entities and respect of several alerted transactions.