News Overview

BB takes moves to check fraud in banking sector.

Published : Tuesday, 08 October 2013 Siddique Islam The central bank has taken some e!!ecti"e re#ulatory initiati"es includin# installation o! so!t$are !or checkin# !raud and !or#ery in the country s bankin# sector, an o!!icial said %onday& 'nder the latest mo"es, the (an#ladesh (ank )((* $ill introduce the so!t$are + inte#rated su,er"ision system )ISS* + today )Tuesday* !or collection o! !inancial statements on monthly basis !rom all bank branches across the country& The !orei#n e-chan#e branch, o!!icially kno$n as authorised dealer )./* branch, and headquarters o! all banks ha"e already been instructed to ,ro"ide their key indicators includin# credit and de,osit ,ositions usin# the ISS& 01e re #oin# to issue a circular in this connection soon askin# the chie! e-ecuti"e o!!icers o! all scheduled banks to ,ro"ide necessary in!ormation !rom all their branches usin# the ISS,0 %ohammad 2aushad .li 3ho$dhury, e-ecuti"e director o! ((, told the 45 %onday& 6e also said the central bank has taken the latest mo"es aimin# to check irre#ularities in the bankin# sector throu#h stren#thenin# its monitorin# and su,er"ision& 01e "e undertaken di!!erent re!ormati"e and redesi#ned actions !or the !inancial sector su,er"ision !rame$ork $ith a "ie$ to ener#i7in# and encoura#in# su,er"ision acti"ity,0 the central banker said $hile e-,lainin# (( s latest mo"es relatin# to its monitorin# and su,er"isory acti"ities& .s ,art o! the mo"es, the (( has !ormed a !our+member committee, headed by a de,uty #eneral mana#er, to u,date its ,rocedural #uidelines !or ins,ectors !or im,ro"in# their quality o! ins,ection& 0The amended #uidelines $ill hel, the ins,ectors to identi!y "arious irre#ularities in the bankin# sector throu#h usin# latest techniques,0 another (( o!!icial said& 6e also said the check+list !or core risk mana#ement #uidelines ins,ection $ill be re"ie$ed under the amended #uidelines aimin# to minimise !inancial risks o! the banks&

The central bank earlier identi!ied si- core risk areas in the bankin# sector& The risk !actors are: credit, asset and liability, !orei#n e-chan#e, in!ormation technolo#y, internal control and com,liance, and money launderin#& (esides, ins,ection strate#ies o! the central bank ha"e been amended to address the recent !orei#n e-chan#e irre#ularities usin# acce,ted bills and inland bill ,urchases )I(Ps* in both !orei#n and local currencies& /urin# the ins,ection o! ./ branches, the ins,ectors are collectin# di!!erent in!ormation includin# !orei#n bills ,urchases )4(Ps*, loans a#ainst trust recei,ts )8T9s*, ,ayment a#ainst documents )P./s*, loan a#ainst im,orted merchandise )8I%*, !orced loans and o!!+balance e-,osures&

Types of banking fraud

Identity theft: Identity the!t is $here your ,ersonal details are obtained to #et some sort o! !inancial or other bene!it, lea"in# you the o$ner o! that identity o!ten in lar#e debt $ith a ne#ati"e credit history and in some cases $ith le#al im,lications& Credit/ ebit card fraud: 3redit card and debit card !raud is a crime $hereby your credit or debit card can be re,roduced in order to use the credit balance to obtain a !inancial ad"anta#e& The creation and:or alteration o! a credit:debit card occurs $hen the in!ormation contained on the ma#netic stri, is re,roduced& This ty,e o! crime is kno$n as ;skimmin#<& Che!ue fraud: 3heque !raud is the use o! a cheque to #et !inancial ad"anta#e by alterin# the cheque ),ayee:amount* $ithout authority, the!t o! le#itimate cheques and then alterin# them, du,lication or counter!eitin# o! cheques, usin# !alse in"oices to #et le#itimate cheques, de,ositin# a cheque into a third ,arty account $ithout authority, de,ositin# a cheque !or ,ayment kno$in# that insu!!icient !unds are in the account to co"er the de,osited cheque& "#ectronic fraud Some emails inform the customer that their security details and passwords need to be updated by logging into an authentic looking, but fake website. The purpose of these websites is to obtain your log on details to access your bank accounts.

Others communicate security messages and advise you to install software from the email that checks and removes viruses. By downloading the software you are in fact tricked into downloading a virus.

Steps Taken by Bangladesh Bank

(an#ladesh (ank has a,,ointed a !raud detection ad"iser and taken some other su,er"isory ste,s to sto, irre#ularities in the bankin# sector in the backdro, o! the recent 6all+%ark loan scam& Introducin# ;ISS<

3ollectin# di!!erent in!ormation includin# !orei#n bills ,urchases )4(Ps*, loans a#ainst trust recei,ts )8T9s*, ,ayment a#ainst documents )P./s*, loan a#ainst im,orted merchandise )8I%*, !orced loans and o!!+balance e-,osures& 3heck+list !or core risk mana#ement #uidelines ins,ection $ill be re"ie$ed & 'sin# acce,ted bills and inland bill ,urchases )I(Ps* in both !orei#n and local currencies& 3heckin# irre#ularities in the bankin# sector throu#h stren#thenin# its monitorin# and su,er"ision&

The details o! the 28+,oint su,er"isory measures $ere ,resented at a meetin# o! the (( board&

. $eb+based cor,orate memory mana#ement system )3%%S* has also been de"elo,ed to record "iolation o! bankin# rules by the o!!icials and directors o! banks and other !inancial institutions& Some irre#ularities by bank o!!icials and directors ha"e already been recorded in the 3%%S and these $ill be re"ie$ed later !or takin# !urther actions&

(( board ad"ised the authorities to !ind out the reasons behind the 6all+%ark scam and $anted to kno$ about the measures the central bank is #oin# to take to sto, such !rauds&

.t the board meetin#, the central bank made a ,resentation, $hich hi#hli#hted its e-istin# and !uture measures to sto, such !inancial irre#ularities& . (( re,ort ,laced at the board meetin# also ,ortrayed the !ailure o! Sonali (ank s treasury mana#ement, and #a"e details ho$ a hu#e amount o! money

$as embe77led by dubious 6all+%ark =rou, $hen the bank $as #oin# throu#h !inancial crisis& The (( has asked the banks to !orm a se,arate risk mana#ement unit& The units $ill do risk modellin#, determinin# their risk limit, and analysin# and su,er"isin# all the e-istin# risks& The (( has already taken actions a#ainst the o!!icials concerned o! these banks !or $hich the "olume o! !raud+related bill ,urchase has come do$n no$& 9e#ular ins,ections are bein# carried out to ensure $hether due dili#ence is bein# !ollo$ed in case o! inland bill ,urchase and acce,ted bills& The (( also has started re#ular ,re,aration o! dia#nostic re"ie$ re,ort o! the banks to brin# the concerned banks under intensi"e monitorin# a!ter e"aluatin# the #ra"ity o! irre#ularity throu#h distant cautionary si#nal&

Conc#usion
The im,act o! !rauds on entities like banks, $hich are en#a#ed in !inancial acti"ities, is more si#ni!icant as their o,erations in"ol"e intermediation o! !unds& The economic cost o! !rauds can be hu#e in terms o! likely disru,tion in the $orkin# o! the markets, !inancial institutions, and the ,ayment system& (esides, !rauds can ha"e a ,otentially debilitatin# e!!ect on con!idence in the bankin# system and may dama#e the inte#rity and stability o! the economy& It can brin# do$n banks, undermine the central bank<s su,er"isory role and e"en create social unrest, discontent and ,olitical u,hea"als& The "ulnerability o! banks to !raud has been hei#htened by technolo#ical ad"ancements in recent times& I! the ste,s taken by (an#ladesh (ank can be !ully im,lemented, the threats o! the !rauds in bankin# sector $ill be remo"ed&

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4inancial 5-,ress )8 October, 2013* /aily Star& (an#ladesh (ank 1ebsite 4iles > 4olders& ?ournals > .rticles&