FRAUDS IN BANKING

FRAUDS IN BANKING

Before we start discussing about frauds in banks, their reasons and their effects and ways to combat them it is necessary that we first understand the term.

FRAUDFraud is any dishonest act and behavior by which one person gains or intends to gain advantage over another person. Fraud causes loss to the victim directly or indirectly. Fraud has not been described or discussed clearly in The Indian penal code but sections dealing with cheating, concealment, forgery counter feiting and breach of trust has been discusses which leads to the act of Fraud as described in the Indian Contract Act, Sec 17 is any of the acts by a  party to a contract or with his connivance or by his agents with the intention to deceive another party or his agent or to induce him to enter in to a contract

BANK FRAUDBank fraud is the use of fraudulent means to obtain money, assets, or other  property owned or held by a financial institution. In many instances, bank fraud is a criminal offense. While the specific elements of a particular banking fraud law vary between jurisdictions, the term bank fraud applies to actions that employ a scheme or artifice, as opposed to bank robbery or theft. For this reason, bank fraud is considered a white coller crime Bank fraud is a big business in today,s world. with more educational qulaifications , banking becoming impersonal and increasing in banking sector have gave rise to this white collar crime. In a survey made till 1997 bank frauds in nationalized banks was of Rs.497.60crore

REASONS OF BANK FRAUDS

1. Lack of properly trained and experienced employees in banks.2 .There is a sudden and tremendous increase in banking business. This expansive explosion has created a vacuum of personnel.3. New recruits often do not have adequate training or experience before they are put in responsible positions.4. Bank employees feel overburdened due to excess pressure.5. Dilution of system and non-adherence to procedures.6. Unauthorized delegation at branches.7. Frauds in deposits accounts are mainly due to policy of “know your customer (KYC)” are not followed properly.

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Types of banking fraud

As a customer you may be seen as a potential target for fraudulent activities. However by arming yourself with information and tools you can protect yourself from becoming a victim of fraud.

Do you know the four biggest fraud threats you face?

Electronic fraud

Identity theft

Credit/Debit card fraud

Cheque fraud.

.ELECTRONIC FRAUDS

Email scams and fake websites

A number of customers from Australian financial institutions have been targeted with hoax emails. These emails appear to be genuine bank emails.

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.

ANZ will not send you an email asking for your Account Details, Financial Details, or login details for ANZ Phone Banking, ANZ Mobile Banking or ANZ Internet Banking.

If you have any concerns, call the Internet Banking Help Desk on13 33 50 or forward the suspicious email to us.

Also check our security alerts page for updated information on fraudulent communications.

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This is an example only, the content and look of the emails change.

.IDENTITY THEFT

Identity theft is where your personal details are obtained to get some sort of financial or other benefit, leaving you the owner of that identity often in large debt with a negative credit history and in some cases with legal implications.

Your information can be obtained in many ways:

Theft, including theft of mail from your mailbox at home

By going through your garbage bins

Telephone, Fax and Mail scams

Internet.

The following can be used to assume your identity:

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Date of birth

Utilities bills (phone, gas, water and rates notices)

Address.

Credit card and debit card fraud is a crime whereby your credit or debit card can be reproduced in order to use the credit balance to obtain a financial advantage. The creation and/or alteration of a credit/debit card occurs when the information contained on the magnetic strip is reproduced. This type of crime is known as ‘skimming’.

Credit or debit card fraud can also occur when your card is lost or stolen and used by a third party to purchase goods with those cards or to remove cash from the cards.

Credit or debit cards can also be intercepted in transit while being sent to you. Your cards can also be compromised by a dishonest merchant who undertakes unauthorised duplicate transactions on your card.

.Protect your credit / debit card:

Memorise your personal identification number (PIN). Don't use the same PIN for all your cards, and don't choose your birth date or other easily identifiable numbers that might be on something else in your wallet.

Check statements and call your credit card issuer immediately if you see anything suspicious on your bill. You could help the company uncover fraud—and save yourself from paying unauthorised charges.

Do not let your credit card out of your sight at anytime – for example, at a restaurant – go with the card.

Card fraud is not applicable in Australia only – be just as vigilant when travelling overseas, credit card skimming is an international crime.

Always sign your card in ink as soon as you receive it.

Keep track of when new and reissued cards should arrive, and call the credit card issuer if they don't come on time.

Make sure your mailbox is secure, and that only you and the postal carrier have access to it.

Tear up all credit card receipts and pre-approved credit card offers into small pieces before you throw them away. Keep your billing statements in a safe place.

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When you use your credit card online, make sure you are using a secure website. Look for a small key or lock symbol at the bottom right of your browser window.

Never give your card number to strangers or telemarketers who call you on the phone. Don't give your card number unless you initiated the call.

.CHEQUE FRAUDS

What is cheque fraud?

Cheque fraud is the use of a cheque to get financial advantage by:

altering the cheque (payee/amount) without authority

theft of legitimate cheques and then altering them duplication or counterfeiting of cheques

using false invoices to get legitimate cheques

depositing a cheque into a third party account without authority

depositing a cheque for payment knowing that insufficient funds are in the account to cover the deposited cheque.

TYPES OF CHEQUE FRAUD

How to protect yourself from cheque fraud

Reconcile your accounts promptly and regularly

Never sign blank cheques, and only sign cheques after all details have been completed.

Limit the number of signatures to your account to ensure control.

Ensure that your signature is not with documents that can be accessed by the general public.

Keep all cheques secure when not in use to deter theft.

Don’t leave any gaps in the completion of the payee name, amount in words and in figures.

If cheques are lost or stolen contact ANZ immediately and ask them to stop payment on the cheque.

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Ensure that any invoices are valid before payment.

Consider using electronic means of payment (if possible) for high value payments.

Ensure that your mailbox is secure to protect your inward cheques

BANKING FRAUD CAN BE CLASSIFIED AS:

1 . F r a u d b y i n s i d e r s

I . Rogue tradersA rogue trader is a highly placed insider nominally authorized to invests i z e a b l e   f u n d s   o n   b e h a l f   o f   t h e   b a n k ;   t h i s  t r a d e r   s e c r e t l y   m a k e s  progress ive ly  more  aggress ive  and  r isky   inves tments  us ing   the  bank 'smoney, when one investment goes bad, the rogue trader engages in further market speculation in the hope of a quick profit which would hide or cover the loss. Unfortunately, when one investment loss is piled onto another, the costs to the bank can reach into the hundreds of millions of rupees; there have even been cases in which a bank goes out of business due to market investment losses.

II. Fraudulent loansOne way to remove money from a bank is to take out a loan, a practice bankers would be more than willing to encourage if they know that the money will be repaid in full with interest. A fraudulent loan, however, is one in which the borrower is a business entity controlled by a dishonest bank officer or an accomplice; the "borrower" then declares bankruptcy or vanishes and the money is gone. The borrower may even be a non-existententity and the loan merely an artifice to conceal a theft of a large sum of money from the bank. III. Wire fraudWire transfer networks such as the international, interbank fund transfer systemare tempt ing as ta rge ts as a t ransfer , once made, i s d i f f icul t or   i m p o s s i b l e   t o   r e v e r s e .   A s   t h e s e   n e t w o r k s   a r e   u s e d   b y  b a n k s   t o   s e t t l e accounts with each other, rapid or overnight wire transfer of large amounts of money are commonplace; while banks have put checks and balances in place, there is the risk that insiders may attempt to use fraudulent or forged documents which claim to request a bank depositor's money be wired to another bank, often an offshore account in some distant foreign country.

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2 . F r a u d b y o t h e r s Forgery and altered chequesThieves have a l te red cheques to change the name ( in order to deposi t cheques intended for payment to someone else) or the amount on the face of a cheque (a few s t rokes of a pen can change 100.00 in to 100,000.00,although such a large figure may raise some eyebrows).Instead of tampering with a real cheque, some fraudsters will attempt toforge a depositor's signature on a blank cheque or even print their owncheques drawn on accounts owned by others, non-existent accounts or evenalleged accounts owned by non-existent depositors. The cheque will then bedeposited to another bank and the money withdrawn before the cheque can be returned as invalid or for non-sufficient funds.

Stolen chequesSome f raudsters  obta in  access   to   fac i l i t ies  handl ing   la rge  amounts of  cheques, such as a mailroom or post office or the offices of a tax authority(receiving many cheques) or a corporate payroll or a social or veterans' benefit office (issuing many cheques). A few cheques go missing; accountsare then opened under assumed names and the cheques (often tampered or altered in some way) deposited so that the money can then be withdrawn bythieves. Stolen blank cheque books are also of value to forgers who then sign as if they were the depositor.

Accounting fraudIn order to hide serious financial problems, some businesses have been known to use fraudulent bookkeeping to overstate sales and income, inflate the worth of the company's assets or state a profit when the company is operating at a loss. These tampered records are then used to seek investmenti n   t h e   c o m p a n y ' s   b o n d   o r   s e c u r i t y   i s s u e s   o r   t o   m a k e  f r a u d u l e n t   l o a n applications in a final attempt to obtain more money to delay the inevitable collapse of an unprofitable or mismanaged firm.

Bill discounting fraudEssentially a confidence trick, a fraudster uses a company at their disposalto  ga in  conf idence  wi th  a  bank,  by  appear ing  as  a  genuine ,  prof i tablecustomer. To give the illusion of being a desired customer, the company regularly and repeatedly uses the bank to get payment from one or more of i t s cos tumer . These payments are a lways made, as the cus tomers in ques t ionare par t of f raud, actively paying any and all bills raised by the bank. After certain time, after the bank is happy with the

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company, the company requests that the bank settles its balance with the company before billing the customer. Again, business continues as normal for the fraudulent company, its fraudulent customers, and the unwitting bank. Only when the outstanding balance between the bank and the company is sufficiently large, the company takes the payment from the bank, and the company and its customers disappear, leaving no-one to pay the bills issued by the bank.

Cheque kitingCheque Kiting exploits a system in which, when a cheque is deposited to a bank account, the money is made available immediately even though it isnot removed f rom the account on which the cheque i s drawn unt i l the cheque actually clears.Deposit 1000 in one bank, write a cheque on that amount and deposit it toyour account in another bank; you now have 2000 until the cheque clears.In-transit or non-existent cash is briefly recorded in multiple accounts.A cheque is cashed and, before the bank receives any money by clearing thecheque, the money is deposited into some other account or withdrawn bywriting more cheques. In many cases, the original deposited cheque turnsout to be a forged cheque.Some perpetrators have swapped checks between various banks on a daily basis, using each to cover the shortfall for a previous cheque.What they were actually doing was check kiting; like a kite in the wind, itflies briefly but eventually has to come back down to the ground.

Credit card fraudC r e d i t   c a r d   f r a u d   i s   w i d e s p r e a d   a s   a   m e a n s   o f   s t e a l i n g   f r o m  b a n k s , merchants  and  c l ients .  A credi t  card   i s  made  of   three  p las t ic   sheet  of    polyvinyl chloride. The central sheet of the card is known as the core stock. These cards are of a particular size and many data are embossed over it. But credit cards fraud manifest in a number of ways. They are:•Genuine cards are manipulated•Genuine cards are altered•Counterfeit cards are created•Fraudulent telemarketing is done with credit cards.G e n u i n e   c a r d s   a r e   o b t a i n e d   o n   f r a u d u l e n t  a p p l i c a t i o n s   i n   t h e names/addresses of other persons and used.I t i s feared tha t wi th the expansion of E-Commerce , M-Commerce andInternet facilities being available on massive scale the fraudulent fundfreaking via credit cards will increase tremendously.Counterfeit credit cards are known as white plastics.

.Booster cheque

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A booster cheque is a fraudulent or bad cheque used to make a payment to acredit card account in order to "bust out" or raise the amount of availablecredit on otherwise-legitimate credit cards. The amount of the cheque iscredited to the card account by the bank as soon as the payment is made,even though the cheque has not ye t c leared . Before the bad cheque i sd iscovered,   the  perpet ra tor  goes  on  a   spending  spree  or  obta ins  cashadvances until the newly-"raised" available limit on the card is reached. Theoriginal cheque then bounces, but by then it is already too late.

.Stolen payment cardsOften, the first indication that a victim's wallet has been stolen is a 'phonecall from a credit card issuer asking if the person has gone on a spendingspree; the simplest form of this theft involves stealing the card itself andcharging a number of high-ticket items to it in the first few minutes or hours before it is reported as stolen.A variant of this is to copy just the credit card numbers (instead of drawingattention by stealing the card itself) in order to use the numbers in onlinefrauds.

.Duplication or skimming of card informationThis takes a number of forms, ranging from a dishonest merchant copying clients' credit card numbers for later misuse (or a thief using carbon copies from old mechanical card imprint machines to steal the info) to the use of tampered credit or debit card readers to copy the magnetic stripe from a  payment card while a hidden camera captures the numbers on the face of the card. Some thieves have surreptitiously added equipment to publicly accessible automatic teller machines; a fraudulent card stripe reader would capture the contents of the magnetic stripe while a hidden camera would sneak a peek at the user's PIN. The fraudulent equipment would then be removed and the data used to produce duplicate cards that could then be used to make ATM withdrawals from the victims' accounts.

.Impersonation and theft of identityTheft of identity has become an increasing problem; the scam operates by obtaining information about a victim, then using the information to apply for identity cards, accounts and credit in that person's name. Often little more than name, parents' name, date and place of birth are sufficient too b t a i n   a   b i r t h   c e r t i f i c a t e ;   e a c h   d o c u m e n t   o b t a i n e d  t h e n   i s   u s e d   a s identification in order to obtain more identity documents. Government-issued standard identification numbers such as "Social security numbers, PAN numbers" are also valuable to the identity thief .Unfortunately

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for the banks, identity thieves have been known to take out loans and disappear with the cash, quite content to see the wrong persons blamed when the debts go bad.

.Fraudulent loan applicationsT h e s e   t a k e   a   n u m b e r   o f   f o r m s   v a r y i n g   f r o m   i n d i v i d u a l s  u s i n g   f a l s e informat ion   to  h ide  a  credi t  h is tory   f i l led  wi th   f inancia l  problems  andunpaid loans to corporations using accounting fraud to overstate profits inorder to make a risky loan appear to be a sound investment for the bank.Some corporations have engaged in over-expansion, using borrowed moneyto finance costly mergers and acquisitions and overstating assets, sales or i n c o m e   t o   a p p e a r   s o l v e n t   e v e n   a f t e r   b e c o m i n g   s e r i o u s l y  f i n a n c i a l l y overextended. The resulting debt load has ruined entire large companies,such  as   I ta l ian  da i ry  conglomera te  Parmala t ,   leaving  banks  exposed   tomassive losses from bad loans..Phishing and Internet fraudPhishing operates by sending forged e-mail, impersonating an online bank,auction or payment site; the e-mail directs the user to a forged web sitewhich is designed to look like the login to the legitimate site but which claims that the user must update personal info. The information thus stolenis then used in other frauds, such as theft of identity or online auction fraud.A number of malicious "Trojan horse" programmes have also been used tosnoop on Internet users while online, capturing keystrokes or confidentialdata in order to send it to outside sites.

.Money launderingThe term "money laundering" dates back to the days of Al Capone Moneylaundering has since been used to describe any scheme by which the trueorigin of funds is hidden or concealed.T h e   o p e r a t i o n s   w o r k   i n   v a r i o u s   f o r m s .   O n e   v a r i a n t  i n v o l v e d   b u y i n g securities (stocks and bonds) for cash; the securities were then placed for safe deposit in one bank and a claim on those assets used as collateral for aloan at another bank. The borrower would then default on the loan. Thesecurities, however, would still be worth their full amount. The transactionserved only to disguise the original source of the funds.

.Forged currency notesPaper currency is the usual mode of exchange of money at the personallevel, though in business, cheques and drafts are also used considerably.Bank note has been defined in Section 489A. If forgery of currency

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notescould be done successful ly then i t could on one hand made the forger  m i l l i o n a i r e   a n d   t h e   o t h e r   h a n d   d e s t r o y   t h e   e c o n o m y  o f   t h e   n a t i o n .   A currency note i s made out of a specia l paper wi th a coat ing of p las t ic laminated on both sides of each note to protect the ink and the anti forgerydevice from damage. More over these notes have security threads, water marks. But these things are not known to the majority of the population.Forged currency notes are in full circulation and it’s very difficult to catchhold of such forgers as once such notes are circulated it’s very difficult totrack its origin.But the la tes t f raud which i s cons idered as the safes t method of c r ime without making physical injury is the Computer Frauds in Banks.Computerization of banks had started since 1994 in India and till 2000 4000  b a n k s   w e r e   c o m p l e t e l y   a n d   9 0 0 0   b r a n c h e s   h a v e  b e e n   p a r t i a l l y computerized. About 1000 branches had the facilities for International bank Transaction. Reserve Bank of India has evolved working pattern for LocalThe Reserve Bank of India has come up with different proposals to maket h e   w a y   e a s i e r ,   t h e y   h a v e   e n a c t e d   e l e c t r o n i c   f u n d  t r a n s f e r   a c t   a n d regulations, have amended, The Reserve Bank of India Act, Bankers book evidence act etc., experience of india in relation to information and technology is limited and is in a very immature state. It is very much imperative that the state should seek the help of the experienced and developed nations.

HOW TO TACKLE BANK FRAUDS Nowhere in the world the fraud can be avoided hence the banks can be noexceptions. It is a human tendency of taking the risk to commit the frauds if he finds suitable opportunities. So it is wise to expect the occurrence of thefraud. If the fraud is expected, efforts can be concentrated on the areas,which are fraud prone. Fraud is the game of two. The rule makers and rule breakers. Whoever is strong in the anticipation of the situations wins thegame of frauds. Fraud is a phenomenon, which cannot be eliminated, but itneeds to be managed.Develop a fraud policy:The policy should be written and distributed to all employees, Borrowersand deposi tors .  This  g ives  a  mora l   tens ion   to   the  potent ia l  Fraudster .Maintain a zero tolerance for violations. The Indian bank needs to roar against the action that is taken against the Fraudsters. The media publicityagainst the fraudsters at all the levels is necessary. The announcement byUS pres ident  George  W.  Bush   tha t   the  "Corpora te  crooks  wi l l  

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not  bespared" gave the deep impact to the Corporate America. In India also weneed to consider it as a severe problem and need to fight against it.Assess Risk:Look at the ways fraud can happen in the organization. It is very importantto s tudy the t rend and the s ty le of f rauds in the bank. Some of the b ignationalized banks maintain the databases of the fraud cases reported intheir banks. But the databases are dumb. They yield nothing unless they areanalyzed effectively. Establish regular fraud-detection procedures. It could be in the form of internal audit or it could also be in the form of inspections.These procedures alone discourage employees from committing fraud. Inaddition to this the Institute of Chartered Accountants of India has issued an "Accounting and Assurance standard on internal controls which is a realguideline to test internal controls. Controls break down because peopleaffect them, and because circumstances change.

Segregate duties in critical areas:It is the absolutely basic principle of auditing a single person should nothave the control of the books of accounts and the physical asset. Becausethis is the scenario which tempts the employee to commit the fraud. Henceit becomes essential to see that no one employee should be able to initiateand complete a critical transaction without involving someone else.Most of the banks in India have the well-defined authorization procedures.The a l loca t ion of the sanct ioning l imi ts i s a l so observed in most of the cases. But still the bankers violate the authorities very easily. They just needto collude with the outside parties. However the detection of the collusionsis possible in most of the cases if the higher authorities are willing to dig thefrauds.

Maintain the tone of Ethics at the top:The subordinates have the tendency to follow their superiors. When thes i g n a l s   a r e   p a s s e d   o n   t o   t h e   m i d d l e   m a n a g e m e n t   a b o u t  t h e   u n e t h i c a l  behavior of the top management the fear of punishment gets reduced andthe tendency of following the superior dominates. Fear vanishes when thetendency of "If I have to die I'll take along the superior and die" tendencyrises.

Review and enforce password security:The incidences of hacking and the Phishing have troubled the Indian PrivateSector banks to a great extent. In addition to this most of the Indian banksare running behind the ATM and credit cards to compete with each other  but have conveniently forgone the fact that ATM cards and the credit cardsare the best tools available

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in the hands of the fraudsters. Inappropriatesys tem access makes i t poss ib le to s tea l la rge amounts of money very quickly and, in many cases, without detection. Hence the review and theenforcement of the security policy are going to be a crucial.

Promote the Whistle blowing Culture:Many of the surveys on Frauds have shown that the frauds are unearthed bythe "TIPS" f rom ins ider or may be f rom outs iders . In ternal audi ts andinternal  cont ro ls  come much  la ter .  The  message  about  contac t ing   thevigilance officers is flashed in most of the branch premises. However theethics lines are very rarely seen. The ethics lines are the help lines to theemployees or the wel l -wishers of the bank which te l l s them whether a  particular activity constitutes a fraud or not.

Conduct pre-employment screening:Since the raw material of the Banks is cash the banker needs to be morealert than any other employer before they recruit. Only testing the aptitudeof a person is not of any use. Know whom you are hiring. More than 20 percent of resumes contain false statements. Most employers will onlyconfirm dates of employment. Sometimes post employment condition mightcreate the greed in the minds of employee, hence at least the bankers shouldtest check the characters of their subordinates by creating real life scenariossuch as offering the bribes by calling on some dummy borrower.

Screen and monitor Borrowers:Bad borrowers cause the biggest losses to the banks. What are they? Whot h e y   r e p r e s e n t   t h e m s e l v e s   t o   b e ?   L o o k   a t   t h e i r  o w n e r s h i p ,   c l i e n t s , references, and litigation history. In many cases the potential fraudstershave history of defaulting in some other bank or Financial Institution.

Forged currency notesPaper currency is the usual mode of exchange of money at the personallevel, though in business, cheques and drafts are also used considerably.Bank note has been defined in Section 489A. If forgery of currency notescould be done successful ly then i t could on one hand made the forger  m i l l i o n a i r e   a n d   t h e   o t h e r   h a n d   d e s t r o y   t h e   e c o n o m y  o f   t h e   n a t i o n .   A currency note i s made out of a specia l paper

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with a coat ing of p las t ic laminated on both sides of each note to protect the ink and the anti forgerydevice from damage. More over these notes have security threads, water marks. But these things are not known to the majority of the population.Forged currency notes are in full circulation and it’s very difficult to catchhold of such forgers as once such notes are circulated it’s very difficult totrack its origin.But the la tes t f raud which i s cons idered as the safes t method of c r ime without making physical injury is the Computer Frauds in Banks.Computerization of banks had started since 1994 in India and till 2000 4000  b a n k s   w e r e   c o m p l e t e l y   a n d   9 0 0 0   b r a n c h e s   h a v e  b e e n   p a r t i a l l y computerized. About 1000 branches had the facilities for International bank Transaction. Reserve Bank of India has evolved working pattern for Local area Network and wide area Network by instituting different microwavestations so that money transactions could be carried out quickly and safely.The main banking tasks which computers perform are maintaining debit-credit records of accounts, operating automated teller machines, and carryout electronic fund transfer, print out statements of accounts create periodic balance sheets etc.Internet facilities of computer have revolutionized international banking for fund transfer and for exchanging data of interest relating to banking and tocarry  out  o ther  banking   funct ions  and provides  cer ta in  secur i ty  to   thecustomers by assigning different pin numbers and passwords.

C o m p u t e r   d e p r e d a t i o n s   h a v e   b y   s o m e  b e e n   c l a s s i f i e d   a s :Computer frauds;Computer frauds are those involve embezzlement or defalcations achieved by tampering with computer data record or programme, etc.Computer crimesComputer c r imes are those commit ted wi th a computer tha t i s where acomputer ac ts as a medium. The d i f ference i s however academic only .Bank computer crimes are committed mainly for money, however other motive or The Mens rea can be:• Personal vendetta;• Black mail;• Ego;• Mental aberrations;• Mischief Bank computer crimes have a typical feature, the evidence relating to crimeis intangible. The evidences can be easily erased, tampered or secreted.More over it is not easily detectable. More over the evidence connecting thecriminal with the crime is often not available. Computer crimes are differentfrom the usual crimes mainly because of the mode of investigation.

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Therea r e   n o   e y e w i t n e s s ,   n o   u s u a l   e v i d e n t i a r y   c l u e s   a n d   n o  d o c u m e n t a r y evidences.W H Y   I S   I T   D I F F I C U L T   T O   T R A C K   B A N K   FRAUDS?• Hi-tech crimeThe information technology is changing very fast. The normal investigator does not have the proper background and knowledge .special investigatorshave to be created to carry out the investigations. The FBI of USA have ac e l l ,   e v e n   i n   l a t e s t   s c e n a r i o   t h e r e   h a s   b e e n   c e l l s  o p e r a t i n g   i n   t h e Maharashtra police department to counter cyber crimes. CBI also has beenasked to create special team for fighting cyber crimes.•International crimeA computer crime may be committed in one country and the result can be inanother country. There has been lot of jurisdictional problem a though theInterpol does help but it too has certain limitations. The different treatiesand conventions have created obstructions in relation to tracking of cyber criminals hiding or operation in other nations•No-scene crime:The computer satellite computer link can be placed or located anywhere.The usual crime scene is the cyber space. The terminal may be anywhereand the criminal need not indicate the place. The only evidence a criminalleaves behind is the loss to the crime.•Faceless crime:The major advantage criminal has in instituting a computer crime is thatthere   i s  no  personal  exposure ,  no  wri t ten  documents ,  no  s ignatures ,  nofingerprints or voice recognition. The criminal is truly and in strict sensefaceless.There are certain spy software’s which is utilized to find out passwords andother vital entry information to a computer system. The entry is gainedthrough a spam or bulk mail.The existing enacted laws of India are not at all adequate to counter cyber crimes. The Indian Penal code, evidence act, and criminal procedure codehad no clue about computers when they were codified. It is highly requiredto frame and enact laws which would deal with those subjects which arenew to the country specially cyber law; Intellectual property right etc.

The Reserve Bank of India has come up with different proposals to maket h e   w a y   e a s i e r ,   t h e y   h a v e   e n a c t e d   e l e c t r o n i c   f u n d  t r a n s f e r   a c t   a n d regulations, have amended, The Reserve Bank of India

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Act, Bankers Book Evidence  Act  e tc . ,   exper ience  of   India   in   re la t ion   to  informat ion  andtechnology i s l imi ted and i s in a very immature s ta te . I t i s very muchimpera t ive   tha t   the  s ta te   should  seek   the  he lp  of   the  exper ienced  anddeveloped nations.

HOW TO TACKLE BANK FRAUDS Nowhere in the world the fraud can be avoided hence the banks can be noexceptions. It is a human tendency of taking the risk to commit the frauds if he finds suitable opportunities. So it is wise to expect the occurrence of thefraud. If the fraud is expected, efforts can be concentrated on the areas,which are fraud prone. Fraud is the game of two. The rule makers and rule breakers. Whoever is strong in the anticipation of the situations wins thegame of frauds. Fraud is a phenomenon, which cannot be eliminated, but itneeds to be managed.Develop a fraud policy:The policy should be written and distributed to all employees, Borrowersand deposi tors .  This  g ives  a  mora l   tens ion   to   the  potent ia l  Fraudster .Maintain a zero tolerance for violations. The Indian bank needs to roar against the action that is taken against the Fraudsters. The media publicityagainst the fraudsters at all the levels is necessary. The announcement byUS pres ident  George  W.  Bush   tha t   the  "Corpora te  crooks  wi l l  not  bespared" gave the deep impact to the Corporate America. In India also weneed to consider it as a severe problem and need to fight against it.Assess Risk:Look at the ways fraud can happen in the organization. It is very importantto s tudy the t rend and the s ty le of f rauds in the bank. Some of the b ignationalized banks maintain the databases of the fraud cases reported intheir banks. But the databases are dumb. They yield nothing unless they areanalyzed effectively. Establish regular fraud-detection procedures. It could be in the form of internal audit or it could also be in the form of inspections.These procedures alone discourage employees from committing fraud. Inaddition to this the Institute of Chartered Accountants of India has issued an "Accounting and Assurance standard on internal controls which is a realguideline to test internal controls. Controls break down because peopleaffect them, and because circumstances change.

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Segregate duties in critical areas:It is the absolutely basic principle of auditing a single person should nothave the control of the books of accounts and the physical asset. Becausethis is the scenario which tempts the employee to commit the fraud. Henceit becomes essential to see that no one employee should be able to initiateand complete a critical transaction without involving someone else.Most of the banks in India have the well-defined authorization procedures.The a l loca t ion of the sanct ioning l imi ts i s a l so observed in most of the cases. But still the bankers violate the authorities very easily. They just needto collude with the outside parties. However the detection of the collusionsis possible in most of the cases if the higher authorities are willing to dig thefrauds.Maintain the tone of Ethics at the top:The subordinates have the tendency to follow their superiors. When thes i g n a l s   a r e   p a s s e d   o n   t o   t h e   m i d d l e   m a n a g e m e n t   a b o u t  t h e   u n e t h i c a l  behavior of the top management the fear of punishment gets reduced andthe tendency of following the superior dominates. Fear vanishes when thetendency of "If I have to die I'll take along the superior and die" tendencyrises.Review and enforce password security:The incidences of hacking and the Phishing have troubled the Indian PrivateSector banks to a great extent. In addition to this most of the Indian banksare running behind the ATM and credit cards to compete with each other  but have conveniently forgone the fact that ATM cards and the credit cardsare the best tools available in the hands of the fraudsters. Inappropriatesys tem access makes i t poss ib le to s tea l la rge amounts of money very quickly and, in many cases, without detection. Hence the review and theenforcement of the security policy are going to be a crucial.

Promote the Whistle blowing Culture:Many of the surveys on Frauds have shown that the frauds are unearthed bythe "TIPS" f rom ins ider or may be f rom outs iders . In ternal audi ts andinternal  cont ro ls  come much  la ter .  The  message  about  contac t ing   thevigilance officers is flashed in most of the branch premises. However theethics lines are very rarely seen. The ethics lines are the help lines to theemployees or the wel l -wishers of the bank which te l l s them whether a  particular activity constitutes a fraud or not.Conduct pre-employment screening:Since the raw material of the Banks is cash the banker needs to be morealert than any other employer before they recruit. Only testing the aptitudeof a person is not of any use. Know whom you are hiring. More than 20 percent of resumes contain false statements. Most employers will

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onlyconfirm dates of employment. Sometimes post employment condition mightcreate the greed in the minds of employee, hence at least the bankers shouldtest check the characters of their subordinates by creating real life scenariossuch as offering the bribes by calling on some dummy borrower.Screen and monitor Borrowers:Bad borrowers cause the biggest losses to the banks. What are they? Whot h e y   r e p r e s e n t   t h e m s e l v e s   t o   b e ?   L o o k   a t   t h e i r  o w n e r s h i p ,   c l i e n t s , references, and litigation history. In many cases the potential fraudstershave history of defaulting in some other bank or Financial Institution.

TYPES OF SCAMS

Scams are attempts to intentionally mislead a person, usually with the goal of financial or other gain. Many Australian customers have fallen prey to various different scams. It's important for you to understand how to recognise scams and avoid them. So here’s a few tips to help you.

Top tips to avoid scams

1. If it looks too good to be true—it probably is.2. ALWAYS get independent advice if an offer involves significant money, time or

commitment.3. Remember there are no get-rich-quick schemes: the only people who make money

are the scammers.4. NEVER send money or give credit card or online account details to anyone  do not

know and trust.5. Check your bank account and credit card statements regularly. If you see a

transaction you cannot explain on your ANZ account, contact us on 13 13 14.6. Keep your credit and ATM cards safe. Do not share your personal identity number

with anyone. Do not keep any written copy of your PIN with the card.

Scams come in all shapes and sizes, it’s good to understand what the latest and most common scams affecting Australian consumers are. So here’s some descriptions of scams and how they work to try and take your money.

Job scams Mystery shopper scams Dating and Bogus friend scams Online purchasing scams

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Direct debit scams Lottery scams Genealogy scams

Job scams

Be wary of various job scams advertised via the Internet. Bogus overseas companies have been targeting Australian consumers to act as ‘money transfer agents’ in the sale of goods and services via methods such as fake job advertisements, unsolicited emails and online chat rooms.

‘Employees’ are asked to use their own bank accounts to transfer money overseas made from ‘sales’ in Australia. In fact, they will be transferring stolen money. In most cases, employees are instructed to send these funds to Eastern European countries. Employees are promised a percentage of the transfer as their commission.

The fake job advertisement websites look very professional and convincing. Some job advertisements contain malicious software that allow the job advertiser to access the person’s computer and collect their personal details, including bank account details. Exercise extreme caution if you receive an email from any person or company asking for your personal and banking details.

Finally, if it sounds too good to be true it probably is.

 Mystery shopper scams

You might apply for a job as a mystery shopper and are sent some money to purchase a few small goods. Then you are asked to mystery shop the services of money transfer companies like Western Union and send money overseas. This money is from Internet Banking Fraud, counterfeit Traveler’s cheques or business cheques.

 Dating and bogus friend scams

Dating and Bogus Friend scams aim to appeal to your romantic or compassionate nature. It may start as a friend request on Facebook from someone you don’t know or via Internet dating sites.

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Scammers will attempt to build your trust over what could be a number of months, revealing personal information to you, sending you gifts or promising to visit you.

Once they’ve gained your trust, they’ll ask you for money either directly or subtly by telling you of an ill relative that needs the funds for medical treatment or how they’re enduring financial hardship and need some funds. You could lose your money doing this, and many Australians have.

In other cases they may ask you for your banking/credit card details because they need to get some money out of the country or want to share some with you. This may be money laundering.

 Online Purchasing Scams

There are a range of online purchasing scams for buyers and sellers alike. Some include:

Direct debit scam

Direct debit fraud happens when you receive a couple or even just one small credit to your account – as small as 1 cent. The credit is made with a six digit code, which once confirmed by the bank allows direct debits to come from that account. Scammers use your compromised Internet Banking to get this code and go about direct debiting your account of funds.

 Lottery scams

This is when you get a phone call, email or letter letting you know you’ve won an online lottery or a lottery draw overseas. But before you can get your prize money you are asked to send them money to claim your prize. There is no prize money and the money you send is lost.

Genealogy site scams

These happen when you are contacted by someone letting you know that you are the last living relative of a wealthy person who has passed away. For you to inherit their fortune you need to pay some legal fees. Again there isn’t any inheritance and the money you send goes to the scammers.

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SECURITY Arm yourself with the knowledge to avoid bank fraud----the below information will guide you in keeping your money safe.Identity TheftBe careful with your personal identification information. People who steal identities use a variety of methods:• Dumpster Diving-rummaging through trash searching for personal information.• Skimming-stealing credit/debit card numbers by using a special storage device when processing your card. (Sometimes found on ATM’s.)• Phishing-pretending to be financial institutions in an attempt to scam a customer into surrendering personal information that will be used for identity theft.• Changing Your Address-Diverting billing statements to another location by completing a change of address form.• Old-Fashioned Stealing-stealing wallets and purses; mail, including bank and credit card statements; pre-approved credit offers; and new checks or tax information.• Pretexting-using false pretenses to obtain your personal information from financial institutions, telephone companies, and other sources.Best Practices for Online Banking How to use different means to help make sure the financial institution is legitimate and it's safe to transact: Banks should not solicit you for passwords, account numbers, or other

personal information—if you receive an email requesting such; call your financial institution using the number on your statement or credit card, not the one in the email.

Access the online banking website by typing the URL (www.wsfsbank.com) into the address bar, rather than any link embedded in an email.

Always check the browser for a "lock" icon. It is important to understand that the lock signifies a secure communication channel to a website, however it does not indicate a legitimate website.

When logging into the Online Banking system be sure to check for your personalized image. This image indicates that you are performing Online Banking on a legitimate website which has confirmed your identity.

Check for anything that looks unfamiliar, unprofessional, or out of place to you.

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  Securing your PC for online transacts: Maintain active and up-to-date antivirus, spyware, and firewall protection. Keep your operating system (for example, Windows® XP), browser (for

example, Internet Explorer), and other applications (such as RealPlayer or iTunes) updated with the latest security patches.

Avoid transactions at wireless hot spots, Internet cafés and public Internet access points.

Password protection: Use a strong password—at least eight characters, with a combination of

numbers, letters, and punctuation symbols. DO NOT use the same password for banking that you use for other online

accounts. Keep your password safe—DO NOT leave your password stored in a file

your computer or written on paper. Change your password periodically.

  Checking your statements:Online banking can actually help you protect your identity—log in and check your financial statements regularly. Report any unauthorized transactions immediately. Check your free annual credit report to spot accounts that may have been opened without your knowledge.Check FraudCheck fraud is one of the largest scams in the United States. It occurs when someone steals checks from your home, office or mailbox and forges your signature. Check fraud can also occur when thieves alter the amount or name on a checks that you have previously written. Always be aware of who you write check to as well as how many checks you have. Credit Card FraudThere are many ways that a person can be a victim of credit card fraud. If you card is stolen or you receive a credit card statement from a card you did not request these are warning signs of possible credit card fraud. A few ways to protect yourself include, protecting your credit cards and card numbers, don’t keep PIN numbers near your cards, properly destroy all credit card receipts and statements when no longer needed, limit the number of credit cards by canceling those you don’t use and cut up old cards after they expire.The Phony Investigator

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In this scam, a consumer is approached by someone claiming to be a bank examiner, bank security officer, police officer, Internal Revenue Service (IRS) auditor or some other “agent” involved in an “official” review or investigation. The successful thief walks away with the cash or the confidential information that can be used to raid the consumer’s bank account. Be wary of anyone who approaches you claiming to be a government employee investigating a bank, a bank employee, or otherwise asking for access to your cash or bank records. Government agencies do not turn to bank customers to withdraw personal funds or give account information as part of an investigation. Also, in cases such as IRS audits, you’ll be notified in advance by mail.Telemarketing FraudWith this type of fraud, people receive unsolicited phone calls or mailings with an offer of prizes, merchandise or other opportunities. People agree over the phone to give cash or bank account information up-front to take care of a supposedly minor fee or tax. Only later do people discover that the thief has taken their money. Be wary of high-pressure sales people offering prizes, goods or services that can only be delivered upon receipt of cash, a credit card number or checking account number. To avoid telemarketing fraud, buy only from a reputable telemarketing firm. Never pay a fee to receive something “free.” If you have doubts about a particular firm, contact the Better Business Bureau and/or the Federal Trade Commission to identify if any complaints have been registered against the firm. Also be aware that no one at WSFS Bank will ever call you asking you for your credit card or account information.

S O M E   R E A L   L I F E   E X A M P L E S   O F   B A N K  FRAUDS:-ILLUSTRATION: A classic case is the recent loan racket busted by the Uppal police inSta te  Bank of   India   (SBI) ' s  Chikkadpal ly  branch.  The  modus  operandia d o p t e d   b y   t h e   r a c k e t e e r s   w a s   i n t e r e s t i n g .   A   g a n g   of   f o u r   m e m b e r s approached owner of a newly-constructed apartment building saying theywere interested in buying the flats. The gang took xerox copies of the building documents after entering into anoral agreement of sale with the builder by paying Rs. 2 lakhs as an advance.Later ,   they  crea ted   forged  documents   in   the  name of  bui ld ing ' s  owner  establishing that the latter had sold five flats to five defence

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employees.Incidentally, the salary slips and other documents submitted by the loanseekers were found to be genuine. "This was made possible because thegang paid money to the defence employees to utilize their documents," saysan investigator. The gang hired an impostor who executed the sale deed posing as the original building owner." W e   c o u l d   n o t   e s t a b l i s h   c r i m i n a l   n e g l i g e n c e   o n   t h e   p a r t o f   t h e   b a n k   manager and hence he was not arrested," say the detectives. The policelearnt that the main lapse in the system is that the banks never asked for theoriginal documents at any stage except for the sale deed for execution of which the offenders planted an impostor.

ILLUSTRATION:October 2009:The special CBI court of Bela Trivedi convicted three people in a bank f raud  case .  They were  g iven   f ive  years  of   r igorous  impr isonment .  Theconvicted were identified as Minesh Dave, agriculture officer and bank manager Edar branch Bank of Baroda, Natwar Lal Patel and Jasu Patel.Prosecution lawyer, JN Parmar said, "The three submitted fake chequeso f   S t a t e  b a n k   o f   I n d i a ,   M a n e k c h o w k   b r a n c h   a n d   w i t h d r e w   m o n ey amounting to Rs22.45 lakhs from Bank of Baroda (Edar branch) from 1982to 1986." NRI lost Rs4.62 lakhs in ICICI bank fraud - There is a reported case of multiple fraudulent transaction on the ICICI account of Mr. Govind Mishra.The incident happened when Mr. was on a 2 weeks leave in Australia withhis family. Some people by some means busted into the account (mobile  phone transactions) and drained out about Rs 4.62 lakhs. Mr. Mishra has  been in contac t wi th the bank author i t ies but the response i s not veryencouraging. The Bank is citing answering to fraudulent e-mail which Mr.Mishra denied.

Mumbai is number one for banking fraud in country

Mumbai has lost Rs1,882 crore in fraud cases in 5 years. The amount recovered is Rs63 crore.

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Mumbai tops the list of cities with the highest number of frauds reported by banks, with the money involved totalling Rs400 crore per year for the past five years.

While for the financial year 2010-11, banks in Mumbai reported 787 fraud cases involving Rs1,049 crore, the tally for the national capital was 335 cases, with the net amount lost being Rs269 crore, according to the documents obtained under the Right to Information (RTI) Act from the Reserve Bank of India (RBI).

Interestingly, the total number of banking frauds reported in Mumbai every year is more than those of Delhi, Chennai, Kolkata and Bangalore taken together. While a five year average figure for Mumbai is about 800 cases, the number for other cities is approximately 200.

As per the report, of the 4,099 cases registered in Mumbai since 2006, only 564 cases (those where the amount involved is above Rs1 lakh) have been closed.

The city lost Rs1,882 crore over these five years, of which only Rs63 crore has been recovered, reveals the RTI response. Experts blame the low recovery rate on the lack of know-how in detecting and preventing frauds in the era of internet and mobile banking.

Firstly, the banks do not even seem to have the required classification of internet-related frauds. According to the RBI, “there is no distinct category of ‘Phishing Complaints’’, and as such no separate data/information is classified/compiled in this regard.” But phishing is a common method of online identity theft where information such as usernames, password and other bank details are acquired.

According to the internet banking guidelines issued by the RBI in 2001, banks need to assess the risks arising out of phishing, consider them as ‘operational risk’ and cover it with insurance.

“Either they are ignoring the RBI mandate or are hiding the information,” said Na Vijayashankar, cyber law expert. Banks evade responsibility 

DNA also has found out that bank managements’ reluctance to own up to such frauds is also a factor causing a pile-up of banking fraud cases, and consequently, a low recovery rate.  Sources in the banking industry confirm that banks do not follow up fraud cases and pass the buck to the customers despite RBI guidelines directing banks to take complete responsibility.

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A former top official of Indian Overseas Bank said that banks avoid owning up to such cases out of fear that it will damage their reputation, with a resultant loss of customer base. “Most of the time banks pass the responsibility of recovering the money to the customers themselves,” he said.

There are several cases where banks have refused to take any responsibility for banking fraud. Gujarat Petrosynthese Ltd, a Mumbai-based company lost Rs.39, 00,550/ from its account with Axis Bank, Bangalore, on 20th June 2011 to hackers. “The police are investigating. But the banking sector has not been sympathetic,” said Urmi N Prasad, executive director with Gujarat Petrosynthese Ltd.

Similarly, Pramod B Bauskar from Mumbai lost Rs 1,97,000 from ICICI bank to an internet fraud in mid-2011. “Bank officials rejected my plea outright, saying it was my fault and the bank will not do anything about it,” said Bauskar.Some Cases Not Registered . Apart from the registered cases where the recovery rate has been pathetic, many fraud cases are not even registered. Several bankers told DNA that most internet banking frauds cases at the customer level itself, as banks bully the customers into believing that they themselves are responsible. 

RBI guidelines for fraud casesThe RBI requires banks to pursue fraud cases vigorously with the CBI or police authorities, and in court. In the case of public sector banks, all fraud cases below Rs1 crore should be reported to the local police, except when the CVO and CMD consider it serious, and when the cases cannot be classified in monetary terms. In those cases, the frauds are referred to the CBI. Cases above Rs 1 crore must be referred to a different wing of the CBI depending on the category it falls into. 

In the case of private sector banks, frauds of Rs1 lakh and above committed by an outsider in connivance with a bank official should be referred to the local police. So should cases of fraud committed by a bank employee involving funds of Rs10,000/- and above. DNA found that in many of the cases the banks do not follow the RBI guidelines.

Man held in bank fraud case

HYDERABAD: Cyberabad police have arrested a former ICICI Bank employee for siphoning off Rs 32 lakh from a Canadian national's bank account in a fraudulent manner.Police arrested B Raghu Kishore Reddy, an ex-employee of ICICI Bank's international banking group call centre located at its Gachibowli office. According

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to the Cyber Crime sleuths of the Cyberabad police, Pierre Courtot, a Canadian national who has an account (A/C No.101252291) with the ICICI Bank, on January 24 called up the bank's call centre to reactivate his account which had become inactive.Raghu attended Pierre's call. As per the customer's request, he reactivated his account after following the necessary guidelines. However, while reactivating the account, Raghu noticed that there was an amount equivalent to Rs 32, 09,819 lying in Pierre's account since a long time and decided to steal it.

To steal the money, Raghu first reactivated the inactive internet banking account of Pierre using the personal details given by him during the previous transaction. Raghu then added a bank account of a dead private college employee from Bangalore as a beneficiary account to the Pierre's internet banking account. "Unlike Indian customers, ICICI Bank's international customers do not get an SMS alert when a beneficiary account is added to their net banking account. The culprit knew this and used to loophole to execute his plan," sub-inspector (SI) Srinivas said.

After adding the beneficiary, Raghu transferred the entire amount in Pierre's account into that and withdrew it from various ATMs.

Based on a complaint lodged by Pierre on May 17, Roopesh Trivedi, AGM, phone banking division at ICICI Bank's Head Office in Hyderabad, lodged a complaint with the Cyberabad police and a case was registered under sections 409, 419,420 of the IPC & sections 66 (C& D) of the IT Act, 2000.

After a quick probe, police zeroed in on Raghu at his house in Maseedbanda near Kondapur on Tuesday and recovered Rs 2.47 lakh cash and Rs 33,000 worth gold from his possession. Police have launched a man-hunt to apprehend Srinivas Chimili, an employee of Narayana educational group who had assisted Raghu in opening the beneficiary account.

One held in Mumbai's   Rs. 1 crore e-banking fraud

One accused was arrested Saturday and a hunt launched for 11 others in connection with a Rs.1 crore illegal transfer from a businessman's bank account here, police said.

"We have arrested one person in this connection and are on the lookout for another

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11 who are suspected to be involved in this fraud," Additional Police Commissioner (East) Quaiser Khalid told IANS.

The financial crime - considered to be among the biggest online banking and business fruads - took place Thursday in Mulund in north Mumbai.

Ankur Korane, 29, a director in a cosmetic company, suspected something amiss that morning when he received 12 SMSes informing him of debits of Rs.12 lakh, Rs.5 lakh, Rs.15 lakh and other amounts totalling Rs.1 crore.

After the first two messages, Korane asked his bank to freeze his account but was told to furnish a police complaint.

Korane went to Mulund police station and lodged his complaint of cheating, fraud and impersonation.

Police said that the Rs.1 crore siphoned off from his account was transferred to 12 different bank accounts all over India.

Investigators suspect that Korane's e-banking details may have been stolen to perpetrate the fraud

Fraudulent bank loans hit   Rs.   6,000 cr in 2011, CBI probe on

 Indian banks are headed for more trouble after the bank fraud cell at the Central Bureau of Investigation registered cases worth Rs. 6000 crore in calendar year 2011, sources told NDTV Profit. The Mumbai division of the unit alone registered cases involving Rs.2,000 crore.

Sources said most of these loans could turn into non-performing assets (NPAs), or bad loans. The numbers will hurt the balance sheets of Indian banks, most of whom are already struggling with rising NPAs.

 

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In fiscal 2012, Indian banks sought to restructure $12 billion (aboutRs. 65,000 crore), up 156 percent from a year earlier. In In April 2012, at least 18 cases, accounting for more than Rs7,300 crore were referred to the Reserve Bank of India’s corporate debt restructuring (CDR) cell.

All of these cases involve fraudulent loans taken out by companies that, in most cases, have no assets or businesses to back it up. The CBI has registered cases against the promoter of such companies and some bank officials could also be held, the sources said. In many of these cases, the banks failed to check and implement their Know Your Customer (KYC) norms that are meant to protect against such fraud.

Since January 2012, cases worth Rs. 150 crore have already been registered by the CBI.

The deception has hit both state-owned and private sector banks, but 80 per cent of the loans involve public sector banks.

In wake of the large amount involved, the CBI is also planning to write to the Reserve Bank of India, asking it to direct banks to implement KYC norms more strictly.

Increasingly, banks are approaching t CBI cell to investigate suspected cases of bogus companies taking out loans and then defaulting.

However, it is not just customers that are defrauding banks – in some cases, the banks are doing it to themselves.

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In a major scandal last year, the CBI found that four nationalised banks -- Bank of Maharashtra, Central Bank, Oriental Bank of Commerice and IDBI – had themselves opened about 10,000 fictitious accounts and transferred various loans worth Rs. 1,500 crore into them.

The single largest instance was of a non-existent firm based in Gujarat – Biotor Industries – that was given loans of Rs. 500 crore, allegedly in the names of farmers.

OBC & Central Bank of India had the maximum exposure of Rs. 120 crore each, while IDBI had Rs. 115 crore and Bank of Maharashtra, Rs.50 crore.

The CBI is investigating that case, and has also questioned senior management on how KYC norms were flouted on such a large scale.

Bank employees swipe   Rs.   17 lakh from model Anupama Verma's account These crooks had really long-term plans. Borivli police have arrested two bank employees after they applied for a debit card in the name of model/actress Anupama Verma and withdrew more than Rs. 17 lakh from her account. Verma realised her account was empty when a cheque that she had issued bounced. 

According to the police, the two culprits identified as Rakesh Vishwakarma and Nitin Sharma were working for ICICI Bank's Nariman Point branch in 2010 when Verma had opened the account and deposited the money. In June last year, the actress had gone abroad and so had not been able to check her account for many months, which was observed by the two accused. Police officers investigating the case said the duo was also aware of the fact that Verma had received a debit card but hadn't activated it.

Cashing inCops added that the crooks then applied for a debit card in Verma's name, claiming the previous one had gone missing. After they had quit their jobs they accessed

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various ATMs in Borivli more than 170 times during which they withdrew Rs. 17.3 lakh (Rs. 13.3 lakh from her savings account and Rs. 4 lakh from a fixed deposit).After the withdrawal, the two started working for other banks.

"When I gave a cheque of Rs. 7,500 to someone and it bounced, I was shocked. However, I approached the bank and lodged a complaint. When I contacted the relationship manager I was told that the next cheque would not bounce. However, the cheque bounced twice more before being passed in July, when some interest from my FD had been transferred to the savings account. It was only in December last year when I realised that my account was completely empty," said Verma.

"I had also issued a cheque of Rs. 700 for another transaction. When that cheque bounced, that's when I learnt about the theft," added Verma who later approached the bank's head office, after which the institution paid her the full amount and reported the matter to the police. However, the actress says she is not done. 

'Don't bank on anyone'"I will also file a case against the bank. It was due to their negligence that I had to face so many problems and harassment. If my money isn't safe in a bank, then where else do I go? How can two bank employees create a debit card in my name with false documents and then use it to withdraw such a large sum and the bank doesn't realise something is amiss," she said. 

Police officers investigating the case said that they had traced the ATM centre from where the withdrawals had been made. CCTV recordings revealed the two culprits making cash withdrawals. 

"We then tracked down the duo and arrested them on Wednesday for forgery and theft. We are also trying to find out if any other present or former bank officials are involved in the matter," said an officer from the Borivli police station.

The two will be presented in court on Friday.

"First her money goes missing. Then the bank puts the blame on her and makes her

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wait four months to recover her own money. This is totally preposterous. We'll be sending a legal notice to the bank on Thursday," said advocate Hitesh Jain, who is advising Anupama Verma.

Bank says"A fraud was detected in the account of a customer. ICICI Bank filed a police complaint based on which the main accused and his accomplice have been arrested. Bank has taken all steps to ensure customers financial interest is safeguarded," said an ICICI Bank spokesperson in response to a detailed email from MiD DAY

Four bank employees jailed for   Rs.   1.7 crore fraud

Four former Central Bank of India officials have been sentenced to imprisonment with terms ranging from five to six years by a Mumbai CBI Special Court for cheating the bank of approximately Rs. 1.7 crore, an official said here on Monday.

Central Bureau of Investigation (CBI) Special Judge RG Asmar found four of the six accused guilty of fraud and convicted them to jail terms along with fines.

Between 1993 and 2000, the six accused used forged documents and bank accounts misusing their official positions to cheat the bank of the huge amount, a CBI official said. They were booked in 2001 by the CBI and a charge sheet was filed against them in 2003.

Those booked by the CBI were: Vijay Dattatray Deshpande was assistant branch manager at Central Bank of India, Worli; Vaishali Vijay Desphande was assistant manager at Santacruz branch; Sanjay Hari Velingkar, telephone operator-cum-clerk at the Lamington Road branch; Jyoti Sanjay Velingkar who was clerk in the same branch; and Sopan Anand Tiwari and Ratna Shetty, both clerks, at the Grant Road branch of the bank.

Vijay Dattatray Deshpande, Vaishali Vijay Desphande and Jyoti Sanjay Velingkar

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were awarded five years' rigorous imprisonment and fine of Rs. 1,20,000 each, and Sanjay Hari Velingkar was sentenced to six years' jail term and fine of Rs. 100,000.

ATM fraud case: Mumbai Police zero in on 2 Bulgarians

 The Mumbai Police, who are probing a recent ATM skimming fraud here, have established the identity of two foreign nationals involved in the case. 

The duo was identified from the CCTV footage of the Axis Bank's ATM located outside the Maharashtra police headquarters in south Mumbai, a senior police officer said. 

Sources said the two suspects were Bulgarians and they had installed a 'skimmer' in the ATM machine. 

Earlier this month, a case was registered against unknown persons at Colaba police station under IT Act and IPC after 37 people, including 15 policemen, fell victim to card-cloning fraud to the tune of Rs 15.47 lakh, in which their money was withdrawn in Greece.

e-Banking fraud- Navi Mumbai firm robbed of Rs 22 lakhs

In a latest case of e-banking fraud, a Navi Mumbai based firm was robbed of Rs 22 lakhs via 14 transactions. However in this case the suspect used forged documents to get a duplicate SIM in the name of the CEO of Rheno International Agencies, then the suspect who obviously had gained access to the firm’s bank account password used the SIM card to receive OTP (One Time Password) being sent over by Kotak Mahindra Bank 9the firm’s banker) to transfer funds. Upon realising that the CEO’s SIM card had stopped working, the CEO approached his Mobile Service Provider, who informed him of the Duplicate SIM card issuance. The Navi Mumbai police have filed a case under IPC and the IT act.In this case however the Mobile company should have been more vigilant; normally a Mobile Service Provider should not accept any application for issuance of Duplicate SIM card without a copy of Police complaint from the subscriber and should not have issued a SIM card without a Authority letter coupled with verification over phone.

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We sincerely appeal our readers to be safe and do not click on any unauthorised mails. Also, please force your bankers to move to three step authentication just like some banks do where a transaction password with mobile validation code is required.

Lessons from Citi Bank fraud

Fraud is defined as “Deceit, trickery or breach of confidence, perpetrated for profit or to gain some unfair or dishonest advantage.”  Whereas mis-selling is defined as “Ethically questionable practice of a salesperson misrepresenting or misleading an investor about the characteristics of a product or service. In an effort to make a sale to a potential customer, a financial products salesperson could leave out certain information or describe a financial product as something the investor urgently needs, even though sound financial judgment would come to the opposite conclusion.” Indian Financial Services sector are replete with instances of fraud and misselling which occur time and again.CITI Bank CaseThe modus operandi  of recent frauds on wealth management at CITI Bank, Gurgaon has  unraveled how combinations of greed  and promise of higher returns has facilitated the relationship manager to manipulate the system and expose the

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NRIs and Corporates to  the risk of  losing their money. The customers were promised high returns by misrepresenting  a nonexistent SEBI circular. The investors were driven by greed of higher return and therefore easily influenced by the relationship manager to act according to his direction. The funds were diverted  to the security market and  used for  derivative  transactions without hedging the downside risk. Once the market moved against the leveraged positions, the margin calls were triggered which resulted in the inevitable.

Lessons from Bank Fraud

Firstly, the back ground and professional qualifications of the sales person or the relationship managers should be verified before trusting them   to manage or take decisions on the customers money. Secondly customers should not get carried away by big names or large size of wealth management entities. Thirdly customers should be clear on their own financial goals and should not be driven by greed . Fourthly the sales person and the relationship managers should undertake a due diligence on the risk bearing capacity of the customers. Fifthly the customers should not be promised high returns and the risk appetite of the customer should be factored in deploying their funds  in various asset classes. Sixthly the internal controls and systems of the wealth management entities should be clearly defined. The last but not the least; the customers should not lend their signature to any document without understanding the implications of the document.What should the customers do?Firstly, the customers should depend on trusted financial planners and advisers who are professionally qualified and governed by a sound code of professional

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conduct. For example, the CERTIFIED FINANCIAL PLANNERS of the FPSB India are governed by the code of ethics like integrity, objectivity, Competence, Fairness, Confidentiality, Professionalism, Diligence and Compliance    and  fifty eight  rules of code of conduct under these code of ethics.Secondly the customers should share the financial goals and the time frame by which the funds are required to meet these goals.Thirdly the customers should decide and share the risk bearing capacity. The risk appetite will depend on the  life stage  needs. At the beginning of the career, one may take high risk. If someone is approaching  retirement  or already retired, the risk appetite will be low since he/she cannot afford to lose money. Further the customers should keep in mind that the higher the return they expect, the higher the risk. In case of equities, the return may be higher but the capital invested may be eroded if the market crashes. Similarly in case of derivatives, the leveraged position gives scope for high profit if the market moves with the expectation of the customer and vice versa. In case of fixed income securities, the benefit comes out of coupon income and capital appreciation/depreciation. When the interest rate goes up, the value of securities comes down and when the interest rate goes down, the value of securities goes up. The simple formula for equity exposure is 100 minus the age. Asset allocation amongst various asset classes’ e.g equities, fixed income securities, Mutual Funds, Real estate, Gold etc will ensure diversification amongst various asset classes and mitigate the concentration risk.Fourthly the customer should enquire what can go wrong in investing and what can be done about it. Volatility is a way of life in the market and periodical and long term investing through SIPs are recommended strategy to overcome volatility. It is also advisable to go for  periodical rebalancing of the portfolio to bring the asset allocation to its recommended proportion.Fifthly the customer should inquire about the portfolio periodically and what has happened to his/her money. In case the portfolio has not delivered as per the expectation, the customer should ask what has gone wrong and if any corrective actions are required. It also may happen that the needs undergo change during the various life stages and it also requires a review of the portfolio.Lastly the customer should enquire about the fees to be paid directly to the  planner /adviser and the commission to be earned indirectly. It has to be remembered that it is always advisable to pay to get reliable and trusted advice rather than expecting to get it free.

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Biblogarphy

http://en.wikipedia.org/wiki/Bank_fraud

http://www.anz.com/personal/ways-bank/security/online-security/threats-banking-safety/fraud-types/

http://www.dnaindia.com/mumbai/1634788/report-mumbai-is-number-one-for-banking-fraud-in-country

http://www.ndtv.com/article/cities/one-held-in-mumbai-s-rs-1-crore-e-banking-fraud-325768

http://profit.ndtv.com/news/banking-finance/article-fraudulent-bank-loans-hit-rs-6-000-cr-in-2011-cbi-probe-on-305708

http://www.ndtv.com/article/cities/bank-employees-swipe-rs-17-lakh-from-model-anupama-verma-s-account-172659

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http://www.ndtv.com/article/cities/four-bank-employees-jailed-for-rs-1-7-crore-fraud-160963

http://zeenews.india.com/news/maharashtra/atm-fraud-case-mumbai-police-zero-in-on-2-bulgarians_857251.html

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