RBI imposed penalty on Citi

The Reserve Bank of India has imposed a penalty of Rs 25 lakh on Citibank for last year’s Rs 400-crore fraud at its Gurgaon branch perpetrated by a rogue official who was handling the accounts of the bank’s high net worth clients. According to the central bank, Citibank contravened Know-Your-Bank (KYC)/Anti-Money Laundering (AML) guidelines and its failure to follow the norms led to the fraud. The RBI imposed the penalty in exercise of powers vested in it under the provisions of Section 47(A)(1)(b) of the Banking Regulation Act, 1949. The apex bank added that it had issued a show-cause notice to the bank on April 21 in response to which the lender submitted a written reply on May 6. “After considering the facts of the case and the bank’s reply and also oral submissions made during the personal hearings held on June 7, the RBI came to the conclusion that the violations were substantiated and warranted imposition of the penalty,” it added. The fraud at the Gurgaon branch of Citibank was uncovered late last year. An employee of the bank — Shivraj Puri — allegedly diverted close to Rs 400 crore from accounts of 40 high net worth clients and corporate entities. Some of them who were hit by the fraud included the promoters of the Hero Group and Helion Advisors managing director Sanjeev Aggarwal, who alleged that he was duped of around Rs 33 crore. The allegations were that Puri sold investment products to high net worth clients claiming that they would generate high returns. Since then, the central bank has stepped up its vigil against frauds. In order to check such practices, recently the RBI asked public sector bank to immediately report cases of cheating involving Rs 1 crore and above to the Central Bureau of Investigation, and of lesser amount to the police. On the other hand, private and foreign banks have been asked to report cases of fraud involving an amount of Rs 1 lakh and above to the police.