Union Bank of India Fined Rs 54 Lakh by FIU for Multiple Violations Under PMLA

Union Bank of India Fined Rs 54 Lakh by FIU for Multiple Violations Under PMLA

The Financial Intelligence Unit (FIU) has imposed a penalty of Rs 54 lakh on Union Bank of India for failing to report suspicious transaction reports (STRs) and for inadequate due diligence under the Prevention of Money Laundering Act (PMLA). The fine was levied following an investigation into certain accounts at the bank's Hill Road branch in Mumbai. The FIU's review uncovered several irregularities related to anti-money laundering (AML) and know-your-customer (KYC) compliance.

Investigation Reveals Multiple AML Violations

The investigation, which began after FIU's observation, revealed that accounts linked to a non-banking financial company (NBFC) and its associated entities were involved in substantial circular fund transfers. These accounts exhibited credit turnovers that were disproportionate to their declared business operations. The funds were funneled through real-time gross settlement (RTGS) from the NBFC to related entities under common control.

The FIU found that despite generating several alerts, the bank's monitoring of these accounts was insufficient. Only one STR was filed, despite the high volume of transactions, raising concerns about the effectiveness of Union Bank's due diligence and transaction monitoring mechanisms.

Bank Penalized for Failure to Report Suspicious Transactions

The FIU concluded that Union Bank failed to comply with several provisions of the PMLA, including the failure to report multiple suspicious transactions and to conduct adequate ongoing due diligence. It was also penalized for not ensuring that transactions were consistent with the clients' business activities, risk profile, and the source of funds.

In its final order issued on October 1, the FIU directed Union Bank to undertake a comprehensive review of its due diligence procedures and strengthen its internal transaction monitoring mechanisms.

Growth in Profits Amid Regulatory Scrutiny

Despite these regulatory challenges, Union Bank reported a 34% growth in its net profit, reaching Rs 4,720 crore for the second quarter ending September 2024. As a reporting entity under the PMLA, the bank is required to submit reports to the FIU in line with anti-money laundering laws.

Conclusion

Union Bank of India has been fined for multiple PMLA violations related to inadequate AML and KYC compliance, particularly in its handling of accounts with suspicious transactions. The FIU has called for a thorough review of the bank's due diligence measures to prevent further violations.