Suspicious activities since the demonetization policy

Daily India : UNDER PRESSURE from the RBI and the Finance Ministry’s Department of Financial Services (DFS), following multiple seizures of high-value notes and arrests of employees, several banks have asked hundreds of chartered accountants engaged in the concurrent audit of their branches to carry out additional checks, and report deviations and irregularities.

(News Source from Indian Express dated on 18/12/2016)


These checks will include, for the first time, monitoring of CCTV footage of each branch to red-flag suspicious activities since the demonetisation policy was announced on November 8.

While a number of banks had informed their auditing firms about the broader scope of the scrutiny days after the demonetisation move, successive guidelines and instructions from the RBI and the DFS have led to a more elaborate to-do list for these auditing firms over the last fortnight.

Other than verification of PAN for high-value transactions, the list includes scrutiny of bulk disbursement, heavier-than-usual transaction in basic/Jan Dhan accounts, unusual transactions in accounts opened after demonetisation, and NEFT/RTGS transactions following large cash deposits.

Given the scope of the task, many auditing firms have missed the December 7 deadline for submitting their concurrent audit reports for November. Unlike statutory audits, concurrent audits continue round the year at the branch level to provide early warning signals in areas such as revenue leakage, non-compliance of lending policy, credit monitoring, etc.

“We usually visit a branch thrice every week for the concurrent audit with help from bank staff. Facing cash shortage, queues and chaos, bank staff don’t have time for us now. At times, it is impossible to even enter a branch. With so many parameters under these circumstances, it will be difficult to do a thorough job and submit the December report by January 7. But we will try our best,” said a partner in a Chandigarh-based CA firm, which is auditing two nationalised banks.

Speaking on condition of anonymity, bank officials, however, downplayed the burden. “The so-called additional points are very much within the ambit of their concurrent audit assignment. Anyway, most auditors will check all these only at a sampling level. But any number of tickets raised will help the system,” said a deputy general manager of a nationalised bank.

While a number of auditing firms have asked for additional fees commensurate with the increased workload, the banks, it is learnt, are not likely to offer any extra payment. “As per my knowledge, a couple of banks have already turned down requests for additional fees,” said a Delhi-based chartered accountant.

The list of checks for auditing firms also include:

* Instances of commission in deals to deposit Rs 2.5 lakh or more in specified bank notes into new accounts and Jan Dhan accounts.

* Bulk transactions at back-end not reflected in individual accounts.

* Issue of demand draft/pay order/cheque below Rs 50,000 and subsequent cancellation and payment in cash.

* Sanction and disbursal of loans in cash on behalf of a third party.

* Cash deposit/withdrawal in suspense/sundry deposit accounts of bank branches and subsequent transfers to customer accounts.

* Wrong credits in loan accounts using specified bank notes and subsequent reversal entries using cash.

* Cash exchange after regular office hours.

* Deposits of more than Rs 1 lakh in cash in staff accounts.

* Verification of cash balance book of each branch at close of business as on November 8.

* Unauthorised utilisation of unlimited withdrawal facility to the extent of cash deposits in legal tenders (from November 29) for illegal tenders by depositing specified bank notes.

* Cash dispensed to exempted category like bank, post office, money-changers at international airports, ATMs, government departments, etc.

* All instances of distribution of entire packets of Rs 2,000 or the new Rs 500 notes.

* Verification of remittances of non-specified bank notes from currency chests to branches/ATM and from currency chests back to RBI.

* Reconciling cash remitted and received from branches.

* Reconciling cash handed over to ATMs or agencies as per branch/chest record with the amount of record of cash loaded in ATMs.

* Simultaneous credit and debit transactions in group/multiple accounts.

* Parking eligible amount of withdrawal in inoperative or dormant accounts by showing equivalent credit using specified bank notes.