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  • Krishnanand Tripathi

Recipient’s consent for cash deposit will curb black money; illegal deposits

Fight against Black Money: The Union government’s proposal to empower bank account holders to be able to approve or reject the transfer of funds or deposit of cash in their bank accounts will add another layer of checks and balance and will curb the menace of illegal deposits and black money in the country, said banking sector experts. Industry sources believe that the move will be helpful in avoiding fund transfers to wrong accounts or fraudulent use of someone’s bank account for illegal movement of money without their knowledge.

Finance minister Nirmala Sitharaman had announced the proposal in her maiden budget speech in July this year and the government has now started discussion with the Reserve Bank. The move comes more than two years after the reports of large scale misuse of Jan Dhan accounts to exchange banned currency in the immediate wake of demonetisation announced in November 2016. The government had received reports of Jan Dhan accounts being misused for depositing banned currency without the knowledge of account holders in some cases.

“It’s a welcome step as the unapproved transfer of funds can be used for illegally depositing money in someone’s account without his or consent,” said the managing director of a fintech company.

“At present, it is straight route and anybody can pay any amount to anybody’s bank account without his approval but there will be checks and balances in future,” he said.

“Transfer of money without someone’s consent is absolutely illegal. The primary thing is that the person getting the money should know that he is getting money from someone for some consideration,” the person cited earlier told Financial Express Online while requesting not to be named.

“In the legal parlance of banking law and practice it is well established that a consideration has to be there for the transfer of money from one person to another,” he said.

Under the proposed mechanism, banks will have to inform their customers and seek their approval if someone tries to deposit cash in their accounts or transfer funds online. Lack of this provision was often blamed for large scale deposits in Jan Dhan bank accounts in the immediate wake of Prime Minister Narendra Modi’s shock announcement in November 2016 to ban high-value currency notes.

According to reports, following the demonetisation in November 2016, over Rs 42,000 crore were deposited in 3.74 crore Jan Dhan accounts in less than two months. It revealed the loopholes in the existing system that can be used by money launderers for illegal movement of money.

“I think the government’s intent for putting these checks and balance is to ensure that the money is moving to the right persons,” added the industry source who is closely involved with the fraud and risk mitigation policies in the banking and financial technology sector.

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