Russia ticks off ICICI over reporting norms

MUMBAI: ICICI Bank’s Russian arm has received a warning from authorities for violating the country’s anti-money laundering laws. The bank was earlier pulled up by Hong Kong authorities. These disclosures have been made by the bank in its filings with the Securities Exchange Commission (SEC). The bank is hitting the capital market on June 19 with the country’s biggest follow-on issue. Of the $5-billion issue, the bank will raise half from the domestic markets and the remaining from the overseas markets.

In its SEC filings, the bank said, “On November 3, 2006, the prosecutor’s office in Borovsk District of Russia conducted an on-site inspection of ICICI Bank Eurasia LLC and issued a warning to ICICI Bank Eurasia LLC for some violations detected.

These violations pertained to delayed reporting on transactions under obligatory supervision, including a cash transaction, and errors in the matters reported to the Federal Service for Financial Monitoring during 2005 and up to March 31, 2006 and were contrary to the requirements under the Russian legislation on anti-money laundering. All such findings of the prosecutor’s office were based on the previous findings of the Central Bank of Russia audit which was conducted in April-May 2006.”

According to sources, the Russian regulator had conducted an audit on all banks’ anti-money laundering processes. The authorities were looking at some of the procedures, which were to be followed, and reports, which were to be filed. In ICICI Bank’s case, there were some delays in filing the reports, which in some cases were of one hour.

Also in some cash transactions, which had to be reported to the authorities, names were mis-spelt. Sources added the bank didn’t have to submit an explanation to the authorities. Incidentally, some other banks in the country have been fined, post-audit.

The bank added in its SEC report that it has “since reviewed its anti-money laundering processes and has taken appropriate measures to ensure compliance with the legal and regulatory requirements in this regard, including strengthening its anti-money laundering department, establishing an institution of further training, and revising its systems.”

The Securities and Futures Commission of Hong Kong (SFC) had filed charges against ICICI Bank for carrying on the business of dealing in securities in Hong Kong between June 15, 2004 and March 8, 2006 without having a licence. The Eastern Magistrate’s Court, Hong Kong, had consequently fined ICICI Bank a sum of HK$ 40,000 and ordered the bank to further reimburse prosecution costs of HK$ 54,860 to the SFC.

Incidentally, the bank has also said that its gross retail non-performing assets have more than doubled to Rs 3,131 crore as on March 31, 2007 from Rs 1,440 crore in the previous fiscal. As on year-end fiscal 2007, gross NPAs in the non-collateralised retail portfolio were around 8.8% of gross non-collateralised retail loans.

The bank is in the process of raising Rs 17,500 crore with a green-shoe option of 15%. The bank will go in for a simultaneous issue in local and the overseas markets. It has also decided to reserve 5% of the issue to existing shareholders who hold shares less than Rs 1,00,000.