India's central bank on Monday said it had fined a unit of US banking giant Citigroup $55,000 for flouting guidelines on customer background checks and money laundering. The Reserve Bank of India said it had imposed the 2.5-million-rupee penalty because a branch of Citibank in Gurgaon, in the northern state of Haryana, had failed to follow rules relating to the opening of accounts.
The fine comes after a police investigation was launched in January this year into claims that employees at the branch forged letters to divert funds and sell fake investment schemes in a multi-million-dollar scam. One Citibank executive in the satellite town, which is home to a number of international firms, was arrested on suspicion of defrauding wealthy customers.
The RBI said that "the failure in following the... guidelines while opening accounts led to the perpetration of a fraud at its (Citibank's) Gurgaon branch". The decision was based on an assessment of the case, including written and oral submissions from the bank, it added. "(The) violations were substantiated and warranted imposition of the penalty," the RBI said in a statement on its website.
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