The Financial Intelligence Unit of the Finance Ministry has begun a probe into the HSBC’s India operations after it was alleged that the country was exposed to terror funding and money laundering due to the banking giant’s weak safety mechanisms.

The FIU, an enforcement agency, is empowered to undertake investigations under the provisions of the Prevention of Money Laundering Act (PMLA).

“The FIU-India has begun a probe into the operations of the HSBC Bank. The output of the investigation will be shared with agencies like the Enforcement Directorate and the Income Tax department,” top sources in the Finance Ministry said.

India has termed as “serious” the alleged violation of safety compliance by HSBC staff in the country against anti-money laundering and terror financing instances in its economic channels.

The Union Home Secretary, Mr R.K. Singh, had said the government will “get to the bottom” of these reports which surfaced after a US Senate panel recently accused HSBC of exposing the American and Indian financial systems to various terror financing, money laundering and drug trafficking activities with transactions worth billions of dollars, due to poor risk control systems at the Bank.

The FIU probe, according to sources, will go into HSBC’s India operations from the year 2007.

It will collect and analyse all the Suspicious Transaction Reports (STRs) and Cash Transaction Reports (CTRs) that the Bank has sent to it all these years as part of the mandatory requirement in the law.

The FIU provides information to the country’s various enforcement and intelligence agencies about suspicious financial transactions that are done through banks and other financial institutions.

(This article was published on July 22, 2012)
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