Order in Original No. 13/DIR/FIU-IND/2024 in the matter of Union Bank of India u/s
Section 13 dated 01,10.2024
1. Union Bank of lndia by virtue of operating as a bank, is a 'reporting entity' for the purposes
of Section 2(1)(wa) of the Prevention of Money Laundering Act (PMLA), 2002 (hereinafter
referred to as 'the Act') and is registered as such with FIU-IND.
2. Pursuant to an observation by FIU-IND, a comprehensive review of the bank's operations
was undertaken, which uncovered certain irregularities related to KYC/AML cOmpliance.
An independent examination of specific current accounts maintained at Union Bank of
India, Hill Road Branch, Mumbai, revealed that the accounts of an NBFC and its associated
entities were engaged in substantial circular fund transfers, orchestrated through entities
under common control.
3. The FIU-IND identified several critical iregularities involving entities with a common
registered address and identical beneficial owners. Despite their authorized capital being
only 1 lakh each these entities exhibited credit turnovers disproportionate to their declared
business operations, with significant RTGS inflows from the accounts of the NBFC in
question. These funds were swiftly transferred to other group entities of the NBFC. The
Bank's scrutiny of these accounts appeared insüficient as only one Suspicious Transaction
Report (STR) was filed, despite the high volume oftransactions and a number of alerts that
were generated in the concerned account.Additionally, the alerts generated in these
accounts were closed with minimal justification, raising concerns about the adequacy of
the Bank's due diligence and monitoring. The handling of these transactions and alerts
suggested the need for further examination to ensure the Bank met its regulatory
obligations.
4. Based on the observations above, and other information available on record, the Bank was
issued a detailed Notice was issued for non-compliance to Section 12 of the Áct read with
relevant Rules
5. After considering the written and oral submissions of the Bank, Director, FIU-IND, based
on the material available on record, found that the charges against Union Bank of India
were substaDtiated. Consequently, the Director FIU-IND vide order dated 014 October,
2024 in exercise of powers under Section 13 PMLA, imposed a total fine of ? 54,00,000
(Rupees Fifty Four Lakh Only) on the Bank with reference to the following violations
committed by the Bank :
Violation of Section 12(1) of PMLA, 2002 read with Rule 7(2), Rule 8(2), Rule 3(1)(D)
and Rule 7(3) of PMLR, 2005 -Failure to report suspicious transactions as required
under the PMLA and PMLR in respect of the account/s of said entities and in respect
of several alerted transactions. Violation of Section 12(1) of PMLA, 2002 read with Rule 9(12)(i) of PMLR, 2005 for
failure to carry out ongoing due diligence and to examine the transactions to ensure that
they are consistent with the knowledge of the client, its business, risk profile and the
source of funds in respect of the accounts in question.
Violation of Section 12(1) of PMLA, 2002 read with Rule 9(12)(ii) of PMLR, 2005 for
failure to review the due diligence measures including verifying again the identity of
the clients and obtaining information on the purpose and intended nature of the business
relationship in respect of the accounts in question.
Violation of Section 12(1) of PMLA, 2002 read with Rule 9(12)(iii) of the PMLR, 2005
for failure to conduct client due diligence of existing clients on the basis of materiality
and risk in respect of the accounts in question.
Violation of Section 12(1) of PMLA, 2002 read with Rule 7(3), Rule 3(1)D) and Rule
8(2) of PMLR, 2005 for failure to evolve an internal mechanism to detet and report
suspicious transactions in respect of the accounts inquestion
6. In addition, in exercise of the powers under Section 13(2)(b), the Bánk: was directed to
implement the following measures:
a. The Bank shall undertake a comprehensive review of its due diligence
procedures. It is recommended that enhanced diligence be performed,
particularly where newly opened accounts exhibit transaction volumes
and velocities that are inconsistentwith their declared business activities
and turnover.
b. 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
Disclaimner: The summary of the instant order is only representational in nature and does
not boldany legal significance and cannot be relied upon or referred to as a precedence
in any:other case.