Financial Intelligence Unit slaps Axis Bank with over Rs 1.66 crore fine

The Financial Intelligence Unit (FIU) has imposed a fine of over Rs 1.66 crore on Axis Bank for failing to establish a mechanism to detect and report suspicious transactions at one of its branches. This decision stems from a case involving the creation of a fraudulent account in the name of the National Security Guard (NSG), a counter-terrorist commando force.

Axis bank fined

The FIU issued the order on June 3 under Section 13 of the Prevention of Money Laundering Act (PMLA), empowering its Director to levy fines on entities like Axis Bank if they fail to meet legal obligations. Axis Bank has not yet responded to a request for comment.

According to the order accessed by PTI, an Axis Bank employee was allegedly involved in a large-scale fraud and corruption scandal, colluding with others to create a fake account for the NSG. Reports indicate that a manager at the bank played a significant role in this scheme to aggregate illicit funds.

The FIU's fine of Rs 1,66,25,000 was issued for alleged violations of the anti-money laundering law. The agency, under the Union Finance Ministry, is responsible for enforcing sections of the PMLA and examining measures taken by financial institutions to combat money laundering and financial fraud.

Money laundering case

This case dates back to 2021 in Gurugram, Haryana, and has been under investigation by local police and the Enforcement Directorate (ED). Last year, the ED attached assets worth Rs 45 crore belonging to an accused NSG officer and his family, including a sister employed as a manager at Axis Bank.

The FIU's probe found Axis Bank failed to detect and report suspicious transactions, did not investigate alerts adequately, and failed to file suspicious transaction reports (STRs) related to the fraudulent account. Additionally, the bank failed to verify if the employee was authorized to act on behalf of the NSG.

The FIU directed Axis Bank to review its transaction monitoring mechanism and certify the steps taken to implement a robust system within 90 days. The bank was also advised to streamline its data-sharing practices, enhance employee screening procedures, and maintain rigorous training programs to ensure compliance with regulatory standards.

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