Banks witness 10-fold rise in 'suspect transactions'

Post demonetisation, banks have been facing a lot of pressure from the tax and enforcement authorities and keeping that in mind, banks are not taking any chances in reporting "suspicious transactions" with some of the private players reporting an increase of up to 10 times.

Reportedly, a private bank, which used to report around 275-300 transactions a month, saw the number for Suspicious Transaction Reports (STR) filings with the Financial Intelligence Unit rise to almost 3,000 during December.

Another large bank said that it had seen a seven to eight-fold jump in STRs which were typically made for cash deposits of over Rs 1 crore.

According to experts, the number of filings had increased as there were several more alerts in the wake of increased surveillance from tax authorities.

"We are being extra cautious. The number of cases that we used to report in a month, we are now doing in a week," a senior bank official, who did not wish to be named told ET.

The enforcement directorate and the tax department are also keeping an eye on the deposit of old Rs 500 and Rs 1,000 notes--especially in private banks-and have also arrest five executives on allegations of illegally helping people convert black money .

Separately, 547 branches have been identified by tax authorities for heightened scrutiny as they saw abnormal activity compared to the average daily business undertaken by them earlier.

The repeated queries and surveys from the agencies prompted the banks to increase the "alerts". A banker said that various parameters were used for generating the alerts with the non-KYC compliant being one of the key triggers. Similarly, banks looked at the transaction history as one of the other criteria. "If there was a dormant account or one where the volume was very low and suddenly it saw a spurt in the form of large deposits, we decided to play it safe and report it to FIU. We are not taking any chances," said an executive.

"Basically, any transaction which we think is suspicious is being reported. We do not want to face the blame," a bank executive told ET.

The government is analysing data on bank deposits and tallying it with tax returns in a bid to go after those who may have sought to use demonetisation as an initiative to deposit unexplained cash.