Different areas of frauds in banks

The Different areas of frauds in banks and RBI guidelines given by RBI in respect of those frauds are as follows. 1. Misappropriation and criminal breach of trust Preventive/ curative measures a. Persons of doubtful integrity not to be posted in sensitive post. b. watch list to be prepared for staff of doubtful integrity outgoing manager of a branch to handover the list to the incoming manager who can have idea about whom to be relied upon for confidential/ sensitive work.

2. Illegal/irregular manipulation of records, documents, withdrawl of money, etc. Preventive/ curative measures a. Cross checking of transactions by staff other than the one effecting the transaction initially. b. Careful and continuous monitoring of the work done in sensitive areas, particularly deposits and advances. 3. Forgery of document/voucher/records Preventive/ curative measures a. Keeping under safe custody to avoid fraudulent manipulation.

b. Inspection officer to cross checks at random, particularly records relating to large value transaction. c. Loan document taken ought to be vetted by banks lawyers- more so in case of equitable mortgage. 4. Falsification of financial documents Preventive/ curative measures a. Reinforcements of instructions emanating from controlling offices regarding execution of documents. Instructions are to be carried out within laid down timeframe and deviation must be followed-up with appropriate actions. b. All ledgers are to be periodically balanced by staff other than the concerned ledger keeper and the same must be checked by supervisors. 5. Unauthorized credit facilities extended for consideration Preventive/ curative measures a. Inspection reparts raised on branches must be meaningfully analyzed at controlling offices and any lacunae pointed out therein should be taken up with the concerned branch for removal of such shortcomings. b. Controlling offices must monitor and various statements send to them relating to credits disbursed and deviation noticed are to be rectified within reasonable time, keeping close watch on the producers undertaken for rectification.

6. Forgery in demand drafts and issuance of fake drafts Preventive/ curative measures a. Blanks demand drafts books to be kept under dual custody. b. Meaningful scrutiny of draft leaves to be made before making payment therefore. c. When instance of fake/forged drafts comes to notice, the incidents are circulated among all branches /offices to exercise caution for obviating recurrence of such incidence. d. Master list of the previous notified stolen/fake security documents to be maintained at branch level. 7. Cash storage too frequently Preventive/ curative measures a. Cash keys are to be kept under dual custody, properly recording movement of keys. b. Cash safes to be operated by both by custodians together. c. No unauthorized person to be allowed in cash strong room and cash departments enclosures. d. Physical verifications of cash to be invariably undertaken each day after the close of business hours. 8. Irregularities in foreign exchange transaction Preventive/ curative measures a. Strict enforceability/ observance of rbi guidelines related to such transactions.

b. Establishing in foolproof manner, the credentials of the prospective customer before embarking on banking transaction with him. c. Judicious approach to be undertaken while dealing with such matters. 9. False letter of credit submission Preventive/ curative measures a. Confirmation to be called for from issuing bank immediately on submission of letter of credit by the party. b. Through scrutiny of the letter of credit to detect ant onerous clause. c. Evaluating the terms/conditions to verfy their practical enforceability or otherwise. d. L/C not to be opened for those who do not enjoy credit facilities. e. The customer ability to retire bills under L/C has to be considered and ensured.