FRAUD n Due Deligence in Banks Final

7/31/2019 FRAUD n Due Deligence in Banks Final

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GROUP MEMBERS

UBAB ASLAM MUNAZZA JABEENHUMA QASIMHIRA SHAMIM


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INTRODUCTIONIn this presentation we are going to explain

what is fraud and forgery in banks.

What are the modes and impacts of fraudsWhat are the main fraud prone areas in bank accountsHow frauds can be prevented What is the role of KYC and customer due diligence in

preventing frauds


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FRAUDFraud is an intentional deception made for personal

gain or to damage another individual.

Different types of business frauds include identitytheft, falsifying tax information, making false financial

statements, insurance fraud e.t.c.


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FORGERYThe creation of a false written document or alterationof a genuine one, with the intent to defraud.

Forgery may include:-signing another person's name to a check To write payee's endorsement or signature on a check without the payee's permission or authority. Making an instrument in a fictitious name or the name of a non-existing person.The making of a whole written instrument in the name of another with a fraudulent intent.


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REASONS OF FRAUD: Inordinate desire to posses wealth, beyond

the dictates of basic survival and comfort.

LACK OF TRANSPARENCY : Complex financial transactions are ideal method to hide fraud.

LACK OF ETHICS : lack of moral values in individualsleads them towards fraud.


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POOR MANAGEMENT INFORMATION : where acompanys management information system does not produce results that are timely and accurate.

FAST BUCKS : attitude of earning quickly and easilythrough short cuts leads to fraud.

COMPLEX ORGNISATIONAL STRUCTURE :

designed to obfuscate the revenue streams; and so hidereality from third parties.


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POOR ACCOUNTING CONTROLS : such as amonthly reconciliation of the bank account, are lapsethe signals that a fraud has occurred will be missed.

EXCESSIVELY GENEROUS PERFORMANCE

BONUS: the more generous the bonus, when coupled

to a demanding target; the more temptation there is tomanipulate results.


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IMPACT AND MODES OF FRAUD


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IMPACT OF FRAUDSEconomic decline due to direct physical damage.Indirect economic losses endured by prominent

corporations due to losses suffered by their clients.Physical injury or death to innocent victims caught inthe middle of a scam gone wrong.Emotional and psychological burdens placed on the

fraud victims


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MODES OF FRAUDS IN BANKS 1. Insider Bank Fraud

Identity theft Illegal insider trading Fraudulent loans Fraudulent institutions Forged documents Wire house

2. Outside Parties Bank Fraud Check Fraud Credit Card Fraud Fraudulent Accounting Stealing Identities Money Laundering


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FRAUD PRONE AREASIN DIFFERENT ACCOUNTS


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Current Account Fraud

The following types are likely to be committed in case of current accounts.(a) Opening of account in the names of limited companiesor firms by unauthorized persons;(b) Presentation and payment of cheques bearing forged signatures;(c) Breach of trust by the employees of the companies or firms possessing cheque leaves duly signed by theauthorized signatures;

(d) Fraudulent alteration of the amount of the cheques and getting it paid either at the counter or though another bank.


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Frauds In Case Of Advances

Following types may be committed in respect of

advances:(a) Spurious gold ornaments may be pledged.(b) Sub-standard goods may be pledged with the bank or their value may be shown at inflated figures.

(c) Same goods may be hypothecated in favour of different banks.


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Role of CUSTOMER DUE

DELIGENCE inFRAUD PREVENTION


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FRAUD PREVENTIONThese are the critical elements that all institutions must possess to most effectively combat fraud by employees:Strong corporate governance.

up to date accounting system.IT systems and operational risk management processesmust be up to date to reduce the risk of fraud due to systembreakdowns, hackers, and processing errors.Effective internal controls and risk management

Duplication of power Rotation of employeesTraining of employeesIndependent audit


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CUSTOMER DUE DELIGENCEObjective: To mitigate the risk of fraud and forgeryDue diligence is an investigative process companies useto inspect a clients operational or financial information.This process helps organizations make decisions aboutthe company and assess its strength in the businessenvironment.

Customer due diligence measures ensure thatbusinesses know who their clients are, so that they donot accept clients outside of their normal risk tolerance.


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KYCCDD involve use o f KYC ( Know your customer ) polices. Know ? What you should know?True identity and beneficial ownership of the accounts

Permanent address, registered & administrative address Making reasonable efforts to determine the true identity

and beneficial ownership of accounts;Sources of funds

Nature of customers business


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Know? What constitutes reasonable account activity? Who your customers customer are?

Your ? Who should know?

Branch manager, audit officer, monitoring officials.

Customer ? One who maintains an account, establishes business

relationship, on whos behalf account is maintained,beneficiary of accounts maintained by intermediaries, and one who carries potential risk through one off tr ansaction


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CONCLUSIONFrauds and forgery in banks can be controlled efficiently

if banker, while opening an account of a customer,consider and fulfil all elements of KYC.

Customer due diligence plays a vital role in mitigatingthe risks of fraud and forgery in banks.


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THANK YOU

FRAUD n Due Deligence in Banks Final

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