Citi fraud: RBI probes possible violation of KYC, STR norms

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New Delhi, Jan 16 (PTI) In the alleged Rs 400-crore fraudby a senior employee at a Gurgaon branch of Citibank, RBI isprobing whether there have been any violation of norms relatedto customer verification and monitoring of accounts.

The initial probe by the banking regulator has indicatedtransactions totalling hundreds of crores of rupees in about adozen Citibank accounts, presumably operated by Shivraj Puri,the main accused of the case, sources said.

Some of these accounts belonged to those Citibank clientswho have fallen victim to the fraud, while others could havebeen opened by Puri himself in the names of his relatives orfictitious people.

RBI is probing whether Citibank allowed these accounts tobe opened after following the mandatory KYC (Know YourCustomer) norms, which make it mandatory for verification ofcustomer details such as valid identity and residence proofwith documents like PAN card, Passport and utility bills.

The norms also require the bank to physically verify theidentity and address of the customers.

Besides, RBI is also probing whether Citibank followedthe STR (Suspicious Transaction Reporting) norms, whichrequires a bank to immediately inform the regulatory andenforcement agencies about high-value and unusual transactionsin any of its accounts, sources said.

Banks are required to observe a much stricter vigil aboutcompliance to KYC and STR norms in case of customers beinghigh-networth individuals (HNIs). In this case, it is mostlyHNIs who have been allegedly defrauded by Puri.

Citibank has maintained that it has followed all thenorms, including the KYC regulations, it immediately informedRBI and other agencies after it suspected irregularities onpart of Puri.

However, sources said that Citibank communicated to RBIafter receiving complaints from some clients against Puri andthe apex bank is conducting scrutiny of all transactions inthe accounts of the bank''s Gurgaon branch since 2009 toascertain whether any of them warranted STR filing.

RBI introduced KYC norms in 2001 and incidentally thefirst bank to be penalised for non-compliance was reportedlyCitibank in 2004.

As per the reports, RBI slapped a fine of Rs 5 lakhagainst Citibank for non-compliance of KYC norms in allowingAbdul Karim Telgi, the main accused in the fake stamp paperscam at that time, to open accounts with the bank.

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