Top banks see surge in suspicious dealings

Mumbai: Banks including State Bank of India, Bank of Baroda, ICICI Bank and HDFC Bank have started red-flagging transactions that defy traditional company patterns after witnessing a substantial spike in suspicious bank, cash and overseas transfers since the start of the Covid-19 pandemic. Especially under the scanner are companies where banks have noticed a sudden spurt in trading or increased dealing in unrelated goods and services or there’s a sudden outflow of money to other countries, people familiar with the development said.“Since April some of the top banks have seen a jump of around 30% and in some cases even 50% where they have come across as suspicious patterns,” said a person with direct knowledge of the matter. Financial Intelligence Unit – the central agency responsible for receiving and analysing information relating to suspicious financial transactions, and providing key details to intelligence and enforcement agencies – has been looking into several transactions and even pulled up some of the large public sector banks for taking the mechanism of red flags “casually”, a senior bank official told ET.As per regulations, banks, non-banking finance companies and insurance companies are required to report suspicious transactions to FIU every month. While there is no precise figures available, on an average around one million suspicious transactions are reported to FIU every year, insiders said. KV Karthik, partner, financial advisory services, at Deloitte India, said some people may try to take advantage of the current crisis to “mask illicit transactions due to a shift in transaction trends and patterns”. “With supply chains being altered, payment flows are also not following traditional transaction patterns and this can affect the current profiling rules for transactions monitoring,” he said.FIU has initiated investigations in several cases, people in the know said.78046877A public sector bank, for instance, was recently asked to provide capital market transactions of a New Delhi-based company carried out through banking channels. The company’s transactions were first flagged off by another bank.Email queries sent to SBI, Bank of Baroda, ICICI Bank, HDFC Bank and FIU on Tuesday did not elicit any response as of press time Thursday.Many banks are roping in forensic investigators to help with the red flags, insiders said. “Most banks directly report cash transactions (to FIU) but often do some preliminary investigations involving bank transactions before reporting,” said one of the persons quoted earlier.Gaganpreet Singh Puri, leader, forensic services, at PwC India, said “many companies and individuals that were using cash transactions or illegal ways to sidestep or circumvent regulations are now unable to do so" because of the pandemic and credit contraction. “Therefore, we now see fraud issues simmering and getting called out increasingly,” he said.

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