CHAPTER ABSTRACT:

I​ndian banking sector has witnessed a massive growth since liberalisation of the Indian
economy in governed with stringent laws and regulations in place. It is widely believed
that it was because of of 2008 that were felt all over the world. However, the banking
sector in India faces its own challenges a detailed analysis of these issues using an
interview-based approach, spanning across all players involved in reporting financial
misconduct. It therefore provides a 360 degree viewpoint and seeks to pitch
recommendations for the same.

Banks are the engines that drive the operations in the financial sector, money markets
and growth of an economy. With the rapidly growing banking industry in India, frauds in
banks are also increasing very fast, and fraudsters have started using innovative
methods. As part of the study, a questionnaire-based survey was conducted in 2012-13
among 345 bank employees “to know their perception towards bank frauds and
evaluate the factors that influence the degree of their compliance level.” The study
revealedthat “there are poor employment practices and lack of effective training;
over-burdened staff, weak internal control systems, and low compliance levels on the
part of Bank Managers, Offices and Clerks. Although banks cannot be 100% secure
against unknown threats, a certain level of preparedness can go a long way in
countering fraud risk. Internal audit professionals should play an integral role in their
organization‟s fraud-fighting efforts. Some of other promising steps to control frauds
are: educate customers about fraud prevention, make application of laws more
stringent, leverage the power of data analysis technologies, follow fraud mitigation best
practices, and employ utiny. In 2015, the RBI has introduced new mechanisms for
banks to check loan frauds by

multipoint scr taking pro-active steps by setting up a Central Fraud Registry, introduced
the concept of Red Flagged Account, and Indian investigative agencies (CBI, CEIB) will
soon start sharing their databases with banks.

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CHAPTER 2: INTRODUCTION

Ban​king sector is an integral part of any nation, the access to banks has increased
manifold in recent past, even though there are certain categories of people who still
cannot avail of the opportunities that a banking sector provides. Inspite of such
improvement of this sector the main concern amongst the customers and service
providers is the impact of banking fraud which is increasing at a massive growth which if
cannot be curtailed could lead to serious negative issues. According to section 1344 title
18 of United States Code a bank fraud is defined as an act by any person who
knowingly executes, or attempts to execute, a scheme or artifice defrauds a financial
institution or obtains any of the moneys, funds, credits, assets, securities, or other
property owned by, or under the custody or control of, a financial institution, by means
of false or fraudulent pretenses, representations, or promises. A literal meaning of the
definition points out that there has to be an intention of duping any persons, be it a
financial institution or a natural person with the object of obtaining any of the moneys,
funds or credits that the concerned financial institution or a natural person possesses.
With the growth of technology, banking frauds through online mediums have gained
popularity amongst the cyber fraudsters

Bank fraud​ is the use of potentially illegal means to obtain money, assets, or other
property owned or held by a ​financial institution​, or to obtain money from ​depositors​ by
fraudulently posing as a bank or other financial institution.​[1]​ In many instances, bank
fraud is a ​criminal offence​. While the specific elements of particular banking fraud laws
vary depending on 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
sometimes considered a ​white-collar crime​.

2
CHAPTER 3 : DEFINITION AND MEANING​:

Definition of Bank Fraud:

Noun
1. The ​act of using illegal means to obtain money or other assets held by a financial
institution.
2. The act of obtaining money from people by posing as a financial institution.
Noun
3. A deception practiced in order to induce another to give up possession of
property or surrender a right.
4. A piece of trickery; a trick.
5. A ​One that defrauds; a cheat.
b. ​One who assumes a false pose; an impostor.
Origin of fraud
Middle English ​fraude​ ​from​ Old French ​from​ Latin ​fraus​ ​fraud-

Origin
1300-1350 Middle English f​ raude

MEANING OF FRAUDS:
The criminal offense of bank fraud is deliberately engaging in a secret scheme or
deception intended to defraud a bank or financial institution, to obtain money or property
owned by the bank or financial institution. Bank fraud is considered to be a ​white collar
crime​. In the United States, a criminal charge of bank fraud generally applies when an
individual knowingly executes, or attempts to execute, at act (1) in order to defraud a
financial institution, or (2) to receive money, assets, credits, securities, or property from
a bank or financial institution using false information, pretenses, or insincere promises.

3
Bank Fraud is a way of life for some people and a means to a short-term loan for others.
In either case it is a criminal offence and aside from having to face the Judge when
charged criminally it will also result in a bad credit history as most Financial Institutions
report illegal bank activity to the major Credit Bureaus. Prior to appearing before the
judge, you can locate a lawyers.com criminal attorney to help represent you. There are
many Individuals who never consider the consequences when obtaining a short-term
loan without the bank's authorization and often it can put a damper on an otherwise
bright future. Others, however, for whom fraud has become a way of life, don't care
what happens to them or their credit rating. Following are some examples of criminal
fraud.

Fraud is any dishonest act and behaviour 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 counterfeiting and breach of trust
has been discusses which leads to the act of fraud.

In Contractual term as described in the Indian Contract Act, Sec 17 suggests that a
fraud means and includes 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.

Banking Frauds constitute a considerable percentage of white-collar offences being

probed by the police. Unlike ordinary thefts and robberies, the amount misappropriated
in these crimes runs into lakhs and crores of rupees. Bank fraud is a federal crime in
many countries, defined as planning to obtain property or money from any federally
insured financial institution. It is sometimes considered a white collar crime.

The number of bank frauds in India is substantial. It in increasing with the passage of

4
time. All the major operational areas in banking represent a good opportunity for
fraudsters with growing incidence being reported under deposit, loan and inter-branch
accounting transactions, including remittances.
Bank fraud is a big business in today’s world. With more educational qualifications,
banking becoming impersonal and increase in banking sector have gave rise to this
white collar crime. In a survey made till 1997 bank frauds in nationalised banks was of
Rs.497.60 crore.

CHAPTER 4:OBJECTIVES AND METHODOLOGY​:

The objective of this study was three fold.

1. To study Indian banking and financial system along with current processes and
regulations in
2. To identify issues in the current system and reasons for these issues
3. To suggest recommendations that can help the system tackle these issues

METHODOLOGY:

The methodology adopted by us was a survey – based and interview – based

approach. We started
with a comprehensive study of financial regulations in place across the world and
then in India. We then identified issues that concern Indian banking and financial
system. A 360 degree analysis was conduct by interviewing prominent figures
belonging to each of the major players involved in detection and reporting of
fraudulent activities in a bank. To understand the role of senior
management, board of directors and employees of a bank we interviewed a

5
 retired Chairman and Managing Director of a major public sector bank. In order
to study the role of third parties and
judiciary, we spoke with a senior official of a top auditing firm in India and a highly
experienced lawyer of an esteemed banking regulatory authority in India. Chief
Vigilance Officer of another major public sector bank helped us understand
challenges faced by the vigilance department inside the bank as well as the
Central Vigilance Commission of India. Chairman and Director of a top
multinational engineering and electronics company helped us assess the issue
from the viewpoint of a borrower investigating agencies involved in inspection of
cases involving financial frauds. All these interactions with top personalities from
both government and private entities in India helped us come up with
recommendations that we believe can address existing issues to resolve frauds
in banking to a great extent.

CHAPTER 5: RBI GUIDELINES FOR FRAUD CASES:

The RBI, being the central bank and an overall regulator of the Indian banking industry,
has laid down in detail the policy guidelines, and procedures to follow for detection,
investigation, taking legal action; as well as, prevention and reporting of various types of

6
bank frauds. It is a well-known fact, that in a large majority of fraud cases, banks do not
follow the guidelines prescribed by the central bank. As part of their routine, the central
bank takes various pro-active steps to control frauds in banks. For example, after the
RBI learns of the fraud cases, they examine the case in detail, and advise the
concerned bank to report the case to the Central Bureau of Investigation, police, or
Serious Fraud Investigation Office (SFIO). Also, bank should take prompt action to
recover the amount involved from the fraudster .The RBI also issued several
notifications and circulars sensitizing banks about common types of fraud examples,
fraud prones areas, and issued caution notices against the repeat offenders. As
remarked by E&Y (2010), “The evolving fraud landscape around banking and the
increase in fraud-related losses requires automated detection systems and robust fraud
defense processes.”

CHAPTER 6:BANKING FRAUDS CAN BE CLASSIFIED INTO:

• Fraud by insiders

• Fraud by others

Fraud by Insiders

Rogue traders

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A rogue trader is a highly placed insider nominally authorized to invest sizeable funds
on behalf of the bank; this trader secretly makes progressively more aggressive and
risky investments using the bank's money, 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.

Fraudulent loans
One 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-existent entity and the loan merely an artifice to conceal a theft of a large sum of
money from the bank.

Wire fraud:
Wire transfer networks such as the international, interbank fund transfer system are
tempting as targets as a transfer, once made, is difficult or impossible to reverse. As
these networks are used by banks to settle 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

8
wired to another bank, often an offshore account in some distant foreign country.

Forged or fraudulent documents:

Forged documents are often used to conceal other thefts; banks tend to count their
money meticulously so every penny must be accounted for. A document claiming that a
sum of money has been borrowed as a loan, withdrawn by an individual depositor or
transferred or invested can therefore be valuable to a thief who wishes to conceal the
minor detail that the bank's money has in fact been stolen and is now gone.

Uninsured deposits:
There are a number of cases each year where the bank itself turns out to be uninsured
or not licensed to operate at all. The objective is usually to solicit for deposits to this
uninsured "bank", although some may also sell stock representing ownership of the
"bank". Sometimes the names appear very official or very similar to those of legitimate
banks. For instance, the "Chase Trust Bank" of Washington DC appeared in 2002 with
no license and no affiliation to its seemingly apparent namesake; the real Chase
Manhattan bank, New York. There is a very high risk of fraud when dealing with
unknown or uninsured institutions.

Theft of identity:
Dishonest bank personnel have been known to disclose depositors' personal
information for use in theft of identity frauds. The perpetrators then use the information
to obtain identity cards and credit cards using the victim's name and personal
information.

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Demand draft fraud:
DD fraud is usually done by one or more dishonest bank employees that is the Bunko
Banker. They remove few DD leaves or DD books from stock and write them like a
regular DD. Since they are insiders, they know the coding, punching of a demand draft.
These Demand drafts will be issued payable at distant town/city without debiting an
account. Then it will be cashed at the payable branch. For the paying branch it is just
another DD. This kind of fraud will be discovered only when the head office does the
branch-wise reconciliation, which normally will take 6 months. By that time the money is
unrecoverable.

Fraud By Others:
Forgery and altered cheques
Thieves have altered cheques to change the name (in order to deposit cheques
intended for payment to someone else) or the amount on the face of a cheque (a few
strokes of a pen can change 100.00 into 100,000.00, although such a large figure may
raise some eyebrows).

Instead of tampering with a real cheque, some fraudsters will attempt to forge a
depositor's signature on a blank cheque or even print their own cheques drawn on
accounts owned by others, non-existent accounts or even alleged accounts owned by
non-existent depositors. The cheque will then be deposited to another bank and the
money withdrawn before the cheque can be returned as invalid or for non-sufficient
funds.

Stolen cheques:
Some fraudsters obtain access to facilities handling large 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; accounts are then opened under assumed names and the

10
cheques (often tampered or altered in some way) deposited so that the money can then
be withdrawn by thieves. Stolen blank cheque books are also of value to forgers who
then sign as if they were the depositor.

Accounting fraud:
In 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 investment in the company's bond or security
issues or to make fraudulent loan applications in a final attempt to obtain more money to
delay the inevitable collapse of an unprofitable or mismanaged firm.

Bill discounting fraud:

Essentially a confidence trick, a fraudster uses a company at their disposal to gain
confidence with a bank, by appearing as a genuine, profitable customer. 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 its customers. These payments are always
made, as the customers in question are part of the fraud, actively paying any and all
bills raised by the bank. After certain time, after the bank is happy with the 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.

11
Cheque kiting:
Cheque Kiting exploits a system in which, when a cheque is deposited to a bank
account, the money is made available immediately even though it is not removed from
the account on which the cheque is drawn until the cheque actually clears.

Deposit 1000 in one bank, write a cheque on that amount and deposit it to your 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 the cheque,
the money is deposited into some other account or withdrawn by writing more cheques.
In many cases, the original deposited cheque turns out 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, it flies briefly but
eventually has to come back down to the ground.

Credit card fraud:

Credit card fraud is widespread as a means of stealing from banks, merchants and
clients. A credit card is made of three plastic 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.

12
They are:
„« Genuine cards are manipulated
„« Genuine cards are altered
„« Counterfeit cards are created
„« Fraudulent telemarketing is done with credit cards.
„« Genuine cards are obtained on fraudulent applications in the names/addresses of
other persons and used.

It is feared that with the expansion of E-Commerce, M-Commerce and Internet facilities
being available on massive scale the fraudulent fund freaking via credit cards will
increase tremendously.

Counterfeit credit cards are known as white plastics.

Booster cheques:
A booster cheque is a fraudulent or bad cheque used to make a payment to a credit
card account in order to "bust out" or raise the amount of available credit on
otherwise-legitimate credit cards. The amount of the cheque is credited to the card
account by the bank as soon as the payment is made, even though the cheque has not
yet cleared. Before the bad cheque is discovered, the perpetrator goes on a spending
spree or obtains cash advances until the newly-"raised" available limit on the card is
reached. The original cheque then bounces, but by then it is already too late.

Stolen payment cards:

13
Often, the first indication that a victim's wallet has been stolen is a 'phone call from a
credit card issuer asking if the person has gone on a spending spree; the simplest form
of this theft involves stealing the card itself and charging 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 drawing attention by
stealing the card itself) in order to use the numbers in online frauds.

Duplication or skimming of card information:

This 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 identity:

Theft 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 to obtain a birth certificate; each document

14
obtained then is used as 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 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 applications:

These take a number of forms varying from individuals using false information to hide a
credit history filled with financial problems and unpaid loans to corporations using
accounting fraud to overstate profits in order to make a risky loan appear to be a sound
investment for the bank.

Some corporations have engaged in over-expansion, using borrowed money to finance

costly mergers and acquisitions and overstating assets, sales or income to appear
solvent even after becoming seriously financially overextended. The resulting debt load
has ruined entire large companies, such as Italian dairy conglomerate Parmalat, leaving
banks exposed to massive losses from bad loans.

Phishing and Internet fraud:

Phishing operates by sending forged e-mail, impersonating an online bank, auction or
payment site; the e-mail directs the user to a forged web site which is designed to look
like the login to the legitimate site but which claims that the user must update personal
info. The information thus stolen is then used in other frauds, such as theft of identity or
online auction fraud.

15
A number of malicious "Trojan horse" programmes have also been used to snoop on
Internet users while online, capturing keystrokes or confidential data in order to send it
to outside sites.

Money laundering:

The term "money laundering" dates back to the days of Al Capone Money laundering
has since been used to describe any scheme by which the true origin of funds is hidden
or concealed.

The operations work in various forms. One variant involved buying 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 a loan at another bank. The borrower would
then default on the loan. The securities, however, would still be worth their full amount.
The transaction served only to disguise the original source of the funds.

Forged currency notes

Paper currency is the usual mode of exchange of money at the personal level, though in
business, cheques and drafts are also used considerably. Bank note has been defined

16
in Section 489A.If forery of currency notes could be done successfully then it could on
one hand made the forger millionaire and the other hand destroy the economy of the
nation. A currency note is made out of a special paper with a coating of plastic
laminated on both sides of each note to protect the ink and the anti forgery device 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 its very difficult to catch hold of such forgers as once such notes are
circulated its very difficult to track its origin.

But the latest fraud which is considered as the safest method of crime without making
physical injury is the Computer Frauds in Banks.

Computerization of banks had started since 1994 in India and till 2000 4000 banks were
completely and 9000 branches have been partially computerised. 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
microwave stations 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 carry out 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 to carry out other banking
functions and provides certain security to the customers by assigning different pin
numbers and passwords.

Computer depredations have by some been classified as:

# Computer frauds; and

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# Computer crimes
Computer frauds are those involve embezzlement or defalcations achieved by
tampering with computer data record or proggramme, etc.Where as computer crimes
are those committed with a computer that is where a computer acts as a medium. The
difference is 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 crime is
intangible. The evidences can be easily erased, tampered or secreted. More over it is
not easily detectable. More over the evidence connecting the criminal with the crime is
often not available. Computer crimes are different from the usual crimes mainly because
of the mode of investigation. There are no eyewitness, no usual evidentiary clues and
no documentary evidences.

It is difficult to investigate for the following reasons:

• Hi-tech crime
The information technology is changing very fast. the normal investigator does not have
the proper background and knowledge .special investigators have to be created to carry
out the investigations. the FBI of USA have a cell, even in latest scenario there has
been cells operating in the maharashtra police department to counter cyber crimes.C.B.I
also have been asked to create special team for fighting cyber crimes.

18
• International crime
A computer crime may be committed in one country and the result can be in another
country. there has been lot of jurisdictional problem an though the Interpol does help but
it too has certain limitations. the different treaties and 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 any where. The usual
crime scene is the cyber space. The terminal may be anywhere and the criminal need
not indicate the place. the only evidence a criminal leaves behind is the loss to the
crime.

• Faceless crime:
The major advantage criminal has in instituting a computer crime is that there is no
personal exposure, no written documents, no signatures, no fingerprints or voice
recognition. The criminal is truly and in strict sense faceless.

There are certain spy software’s which is utilized to find out passwords and other vital
entry information to a computer system. The entry is gained through 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 code has no clue about

19
computers when they were codified. It is highly required to frame and enact laws which
would deal with those subjects which are new to the country

specially cyber law; Intellectual property right etc.

The Reserve Bank of India has come up with different proposals to make the way
easier, they have enacted electronic fund transfer act and 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 inimmature state. It is very much
imperative that the state should seek the help of the experienced and developed nations

CHAPTER NO 7: TYPES OF BANKING FRAUDS:

TYPES OF BANKING FRAUD:

Stolen checks​:

A scan of a counterfeit ​cashier's check​that is made to appear to be issued by​Wells

Fargo Bank​.

Fraudsters may seek access to facilities such as mailrooms, post offices, offices of a tax
authority, a corporate payroll or a social or veterans' benefit office, which
process ​cheques​ in large numbers. The fraudsters then may open bank accounts under

20
assumed names and deposit the cheques, which they may first alter in order to appear
legitimate, so that they can subsequently withdraw unauthorised funds.

Alternatively, forgers gain unauthorised access to blank ​chequebooks​, and forge

seemingly legitimate signatures on the cheques, also in order to illegally gain access to
unauthorized funds.

Cheque kiting​:

Cheque kiting​ exploits a banking system known as "​the float​" wherein money is
temporarily counted twice. When a cheque is deposited to an account at Bank X, the
money is made available immediately in that account even though the corresponding
amount of money is not immediately removed from the account at Bank Y at which the
cheque is drawn. Thus both banks temporarily count the cheque amount as an asset
until the cheque formally clears at Bank Y. The float serves a legitimate purpose in
banking, but intentionally exploiting the float when funds at Bank Y are insufficient to
cover the amount withdrawn from Bank X is a form of fraud.

21
Forgery and altered cheques​:

Fraudsters have altered cheques to change the name (in order to deposit cheques
intended for payment to someone else) or the amount on the face of cheques, simple
altering can change $100.00 into $100,000.00, although transactions of this value are
subject to investigation as a precaution to prevent fraud as policy.

Instead of tampering with a real cheque, fraudsters may alternatively attempt to forge a
depositor's signature on a blank cheque or even print their own cheques drawn on
accounts owned by others, non-existent accounts, etc. They would subsequently cash
the fraudulent cheque through another bank and withdraw the money before the banks
realise that the cheque was a fraud.

Accounting fraud​: ​In 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 investment in the company's bond
or security issues or to make fraudulent loan applications in a final attempt to obtain
more money to delay the inevitable collapse of an unprofitable or mismanaged firm.
Examples of accounting frauds: ​Enron​and ​WorldCom​ and ​Ocala Funding​. These

22
companies "cooked the books" in order to appear as though they had profits each
quarter, when in fact they were deeply in debt.

Uninsured bank:

A bank soliciting public deposits may be uninsured or not licensed to operate at all. The
objective is usually to solicit for deposits to this uninsured "bank", although some may
also sell stock representing ownership of the "bank". Sometimes the names appear very
official or very similar to those of legitimate banks. For instance, the unlicensed "Chase
Trust Bank" of ​Washington D.C.​ appeared in 2002, bearing no affiliation to its seemingly
apparent namesake; the real ​Chase Manhattan Bank​[3]​ is based in New
York. ​Accounting fraud​has also been used to conceal other theft taking place within a
company.

Demand draft fraud​:

Demand draft​ (DD) fraud typically involves one or more ​corrupt​ bank employees. Firstly,
such employees remove a few DD leaves or DD books from stock and write them like a
regular DD. Since they are insiders, they know the coding and punching of a demand
draft. Such fraudulent demand drafts are usually drawn payable at a distant city without
debiting an account. The draft is cashed at the payable branch. The fraud is discovered
only when the bank's head office does the branch-wise reconciliation, which normally
take six months, by which time the money is gone.

Rogue traders​:

A rogue trader is a trader at a financial institution who engages in unauthorized trading

to recoup the loss he incurred in earlier trades. Out of fear and desperation, he
manipulates the internal controls to circumvent detection to buy more time.​[4]

Unfortunately, unauthorized trading activities invariably produce more losses due to

time constraints; most rogue traders are discovered at an early stage with losses
ranging from $1 million to $100 million, but a very few working out of institutions with
extremely lax controls were not discovered until the loss had reached well over a billion

23
dollars. The size of the loss is a reflection of the laxity in controls instituted at the firm
and not the trader's greed. Contrary to the public perception, rogue traders do not have
criminal intent to defraud his employer to enrich himself; he is merely trying to recoup
the loss to make his firm whole and salvage his employment.​[4]

Some of the largest unauthorized trading losses were discovered at ​Barings Bank​ (​Nick
Leeson​), ​Daiwa Bank​ (​Toshihide Iguchi​), ​Sumitomo
Corporation​ (​YasuoHamanaka​), ​Allfirst Bank​ (​John
Rusnak​), ​SociétéGénérale​ (​JérômeKerviel​), ​UBS​ (​KwekuAdoboli​), and ​JPMorgan
Chase​ (​Bruno Iksil​).

Fraudulent loans​: ​One 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 knew that the money
will be repaid in full with interest. A fraudulent loan, however, is one in which the
borrower is a business entity controlledby 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-existent entity and the loan merely an artifice to conceal a theft of a
large sum of money from the bank. This can also seen as a component within ​mortgage
fraud​ (Bell, 2010).

Fraudulent loan applications:

These take a number of forms varying from individuals using false information to hide a
credit history filled with financial problems and unpaid loans to corporations using

24
accounting fraud to overstate profits in order to make a risky loan appear to be a sound
investment for the bank

Forged or fraudulent documents​:

Forged documents are often used to conceal other thefts; banks tend to count their
money meticulously so every penny must be accounted for. A document claiming that a
sum of money has been borrowed as a loan, withdrawn by an individual depositor or
transferred or invested can therefore be valuable to someone who wishes to conceal
the minor detail that the bank's money has in fact been stolen and is now gone.

Wire transfer fraud​: ​Wire transfer networks such as the

international ​SWIFT​ interbank fund transfer system are tempting as targets as atransfer,
once made, is difficult or impossible to reverse. As these networks are used by banks to
settle 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.

There is a very high risk of fraud when dealing with unknown or uninsured institutions.

The risk is greatest when dealing with offshore or Internet banks (as this allows
selection of countries with lax banking regulations), but not by any means limited to

25
these institutions. There is an annual list of unlicensed banks on the ​US Treasury
Department​ web site which currently is fifteen pages in length.

Also, a person may send a wire transfer from country to country. Since this takes a few
days for the transfer to "clear" and be available to withdraw, the other person may still
be able to withdraw the money from the other bank. A new teller or corrupt officer may
approve the withdrawal since it is in pending status which then the other person cancels
the wire transfer and the bank institution takes a monetary loss.

Bill discounting fraud:

Essentially a confidence trick, a fraudster uses a company at their disposal to gain

confidence with a bank, by appearing as a genuine, profitable customer. 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 its customers. These payments are always
made, as the customers in question are part of the fraud, actively paying any and all
bills raised by the bank. After time, after the bank is happy with the 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

26
payment from the bank, and the company and its customers disappear, leaving no-one
to pay the bills issued by the bank.

Payment card fraud:

Credit card fraud​ is widespread as a means of stealing from banks, merchants and
clients.

Booster cheques:​A booster cheque is a fraudulent or bad cheque used to make a

payment to a credit card account in order to "bust out" or raise the amount of available
credit on otherwise-legitimate credit cards. The amount of the cheque is credited to the
card account by the bank as soon as the payment is made, even though the cheque
has not yet cleared. Before the bad cheque is discovered, the perpetrator goes on a
spending spree or obtains cash advances until the newly-"raised" available limit on the
card is reached. The original cheque then bounces, but by then it is already too late.

Stolen payment cards:​

Often, the first indication that a victim's wallet has been stolen is a phone call from a
credit card issuer asking if the person has gone on a spending spree; the simplest form

27
of this theft involves stealing the card itself and charging 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 drawing attention by
stealing the card itself) in order to use the numbers in online frauds.

Duplication or skimming of card information:T

​ his takes a number of forms, ranging from

merchants copying clients' credit card numbers for use in later illegal activities or
criminals 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 fraudsters have attached fraudulent card stripe readers to publicly accessible
ATMs, to gain unauthorised access to the contents of the magnetic stripe, as well as
hidden cameras to illegally record users' authorisation codes. The data recorded by the
cameras and fraudulent card stripe readers are subsequently used to produce duplicate
cards that could then be used to make ATM withdrawals from the victims' accounts.

Empty ATM envelope deposits​:​A criminal ​overdraft​ can result due to the account
holder making a worthless or misrepresented deposit at an ​automated teller machine​ in
order to obtain more cash than present in the account or to prevent a check from
beingreturned due to ​non-sufficient funds​. United States banking law makes the first
$100 immediately available and it may be possible for much more uncollected funds to
be lost by the bank the following business day before this type of fraud is discovered.
The crime could also be perpetrated against another person's account in an "account
takeover" or with a counterfeit ATM card, or an account opened in another person's
name as part of an ​identity theft​ scam. The emergence of ATM deposit technology that
scans currency and checks without using an envelope may prevent this type of fraud in
the future.

CHAPTER 8:TOP TEN REASONS WHY FRAUDS OCCURS IN BANKS:

28
● Greed​ – good old fashioned human nature intervenes when an
individual, or group of individuals, sees a chance to make ‘a fast buck’.
A good example being those cases where people ‘adjust’ their expense
claims upwards.

● Lack of transparency ​– complex financial transactions that are

difficult to understand are an ideal method to hide a fraud. The Barings
fraud was perpetrated by use of an accounting ‘dump account’ that no
one understood.

● Poor management information ​– where a company’s management

information system does not produce results that are timely, accurate,
sufficiently detailed and relevant; the warning signals of a fraud, such
as ongoing theft from the bank account, can be obscured.

● Excessively generous performance bonus payments ​– the more

generous the bonus, when coupled to a demanding target; the more

29
 temptation there is to manipulate results, such as year end sales figures,
to reach that target.

● Non independent internal audit department ​– where an

organisation’s internal audit department is not independent, e.g. where
it does not report to a truly independent audit committee but to the
Finance Director, the more likely that when there are signals that a
fraud is occurring the more likely they will be ignored. It is indeed
interesting to note that Cynthia Cooper (Head of Internal Audit at
WorldCom) had to bypass her boss (the CFO) and go directly to the
audit committee to report the discovery of the capital expenditure fraud.

● Lack of clear moral direction from senior management ​–

leadership comes from the top. Where the senior management indulge
themselves in ‘semi corrupt’ behaviour, e.g. adjusting their expense
claims upwards, others will follow adopting the well worn mantra
‘everyone’s at it’.

● Excessively complex organisational structure ​– designed to

obfuscate the revenue streams; and so hide reality from third parties,
such as the Internal Revenue Service. Enron, with its complex off
balance sheet structure and transactions, is a textbook example of this.

30
 ● Poor accounting controls​– where the accounting controls, such as a
monthly reconciliation of the bank account, are lapse the signals that a
fraud has occurred will be missed.

● Arrogance​ – some people believe that they are better than ‘the
system’, and that they can get away with anything. The late Robert
Maxwell plundered his company pension scheme, arrogantly assuming
that since he was chairman of the company he could get away with it;
he almost did!

● Complacency​ – I have met many a manager who has an almost

childlike faith, based in part on the ‘old boy’ network, in the probity of
their colleagues; believing that fraud ‘is not the sort of thing that could
happen here’. Others will, and do, take advantage of that trust.My
simple advice is, if you think that a fraud may be happening then fear
the worst; because it probably is.

CHAPTER 9 : 5 TIPS TO REDUCE BANKING FRAUDS:

1. ​Multi-Factor Authentication

The best approach is to start with a multi-factor authentication/multi-layered security structure.

This is what Romeo is seeing from the institutions that are successfully thwarting fraud.

31
"Remember, there is no one silver bullet that will solve this problem, so if you put all your hope
in a single solution, you'll get compromised, and the intruder will have everything."

This multi-layered approach from a software perspective, combined with old-fashioned

out-of-band phone calls to the customer to confirm a questionable transaction, can cut the
institution's headaches and the business' fraud losses.

In the old days, Romeo says, calendars were put in place for all set transactions for all accounts,
whether they were large corporates or small businesses. "If they had a weekly payroll, that only
went out once a week, and then all of a sudden we saw something going out every day -- that
would be a red flag; we would question it," he says.

2. Banks: Monitor Transactions

In his days in bank operations, Romeo says, the bank used to set up daily limits on each
user. "We used to set these limits on our mainframe processor in the bank, along with file
limits and batch limits, so if there were something added, or out of the ordinary, we
would spot it." Another thing to watch for is a whole lot of activity right under $9,000.
"Because the fraudsters know they won't draw suspicion of a bank if they fly under
$10,000 mark."

3.​ Businesses: Reconcile Corporate Accounts Daily

For businesses, Romeo recommends reconcilement of banking accounts and transactions on a

daily basis -- either at end of day or at least at the beginning. "This will help catch any
transactions you didn't make, and the sooner you bring it to your bank's attention, the better
chance to retrieve the money, with the bank doing a recall or reversal of the transaction. The
longer you wait, the less likely it is that you'll see that money recovered."

4. ​Employ Dual, Triple Controls

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Dual controls at the corporate side are, at the very least Romeo suggests even triple controls,
where one person creates the transaction, a second person approves it, and then a third person
actually sends the transaction.

"If you don't have the people, then set up the ACH transactions with the institution, an out of
band confirmation, whether it is a phone call to confirm that you've sent it, and confirmation of
the correct information was received," he notes. This can be done live or through an automated
voice response system. Usually, only one person would have the password and ID to call the
bank, which would be totally separate from the person's computer.

6. Raise Fraud Awareness

Finally​, ​Romeo says, continuous education of business customers is important. At

the national level, this problem of corporate account takeover has gotten real
attention. But real solutions won't come until financial institutions and their corporate
accounts alike realize the real risks they face - and simple solutions they can
implement to help mitigate those risks​.

CHAPTER 10:RELEVANT MEASURES TO TACKLE BANKS

FRAUDS IN BANKS:

Segregate duties in critical areas​ ​: ​It is the absolutely basic principle of

auditing a single person should not have the control of the books of accounts and
the physical asset. Because this is the scenario which tempts the employee to
commit the fraud. Hence it becomes essential to see that no one employee should
be able to initiate and complete a critical transaction without involving someone else.

33
Most of the banks in India have the well-defined authorization procedures. The
allocation of the sanctioning limits is also observed in most of the cases. But still the
bankers violate the authorities very easily. They just need to collude with the outside
parties. However the detection of the collusions is possible in most of the cases if
the higher authorities are willing to dig the frauds.

Maintain the tone of Ethics at the top​:​ ​The subordinates have the tendency
to follow their superiors. When the signals are passed on to the middle management
about the unethical behavior of the top management the fear of punishment gets
reduced and the tendency of following the superior dominates. Fear vanishes when
the tendency of “If I have to die I’ll take along the superior and die” tendency rises.

Review and enforce password security ​:​.​The incidences of ​hacking​ and

the ​Phishing​ have troubled the Indian Private sector banks to a great extent. In
addition to this most of the Indian banks are running behind the ATM and credit
cards to compete with each other but have conveniently forgone the fact that ATM
cards and the credit cards are the best tools available in the hands of the fraudsters.
Inappropriate system access makes it possible to steal large amounts of money very
quickly and, in many cases, without detection. Hence the review and the
enforcement of the security policy is going to be a crucial.

Promote the Whistle blowing Culture​: ​Many of the surveys on Frauds have
shown that the frauds are unearthed by the “TIPS” from insider or may be from
outsiders. Internal audits and internal controls come much later. The message about
contacting the vigilance officers is flashed in most of the branch premises. However
the ethics lines are very rarely seen. The ethics lines are the help lines to the
employees or the well-wishers of the bank which tells them whether a particular
activity constitutes a fraud or not.

34
 Conduct pre-employment screening​: ​Since the raw material of the Banks is
cash the banker needs to be more alert than any other employer before they recruit.
Only testing the aptitude of a person is not of any use. Know whom you are hiring.
More than 20 percent of resumes contain false statements. Most employers will only
confirm dates of employment. Some timespost employment condition might create
the greed in the minds of employee,henceatleast the bankers should test check the
characters of their subordinates by creating real life scenarios such 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 ? Who they represent themselves to be? Look at their
ownership, clients, references, and litigation history. In many cases the potential
fraudsters have history of defaulting in some other bank or Financial Institution

● Internal fraud includes employees undertaking any of the

following actions:

•​ " Theft of cash or stock.

• "Theft from other employees.
• Not charging friends, family or
accomplices.
• Allowing accomplices to use bad credit.
• Supplying receipts for refunds.
• Allowing friends to steal, or
• Participating in delivery scams.

● Sometimes employees will rationalise

35
the fraud by:
● Trivialising the offence: “" ey can affordit”,
● “No harm done”, “Everyone does it”.
● Claiming unfair treatment as a justification.
● Missing out on promotion.
● Feeling remuneration is inadequate.
● Unfair treatment compared
● to colleagues.
● Disciplinary action.

The risk of internal fraud includes:

•​ Stolen, embezzled or ‘discounted’ stock.
• Loss of cash or securities.
• Loss of company funds or critical
information, and/or
• Loss or damaged business reputation
and custom.

You may be at risk of internal fraud

by employees who:
•​ Work long hours.
• Return to work after hours.
• Are unusually or overly inquisitive about
the company’s payment system.
• Resist taking annual or sick leave.
• Avoid having others assist or relieve them.
• Resign or leave suddenly.
• Have a large number of voids.

36
External fraud by suppliers includes:
• Short or inferior supply of goods.
• Payment for services and goods
not supplied.
• Kickbacks for biased selection
of suppliers.
• Payments to bogus vendors for
false claims.
• Cheques written for cash only
or not property authorised.
• Purchase of goods for private use.
Fraud by suppliers can be prevented by:
• Ensuring staff are appropriately
trained in accounts payable and
stores functions.
• Ensure that supervision occurs over
processing receipts and payments
for expenditure.
• Ensure that purchasing, receipting
and payment functions are segregated
so that no single person performs all
three duties.
• Ensuring there are guidelines for
relationships between your business
members and suppliers to avoid bias
and inducements from suppliers (gifts).
• Ensuring audits are conducted on
all areas of purchasing including

37
 petty cash, non-receipted items and
all invoices.

CHAPTER 11:Fraud Detection & Prevention Guidelines:

At Bank, we take great care to protect our customers from any type of frauds which may
occur during the course of a banking transaction resulting into wrongful gain to any
unauthorised person by way of concealment of facts or otherwise.We request our
customers to do the proper due diligence while doing any banking transactions/
interacting with the Bank's authorised representatives.

Important Guidelines which will help prevent fraudulent transactions:

1. Verify the authenticity of the Executive visiting you to collect any outstanding dues.
Always check their Identity Card issued by the Bank. In case, the Executive is unable to
display the same, please do not handover any money to the Executive.
2. Stamp on the Executive’s Identity Card should be partially on the photograph and on the
ID card.
3. Always ask for the 'Customer Copy' of the physical/ online receipt for the payment
made.
4. In case of a physical receipt, please check the hologram on the 'Customer Copy'.
5. In case of a physical receipt, please do not accept 'Customer Copy' if the details are
written directly, since it is a 'Carbon Copy'.
6. Do not pay any amount without taking proper receipt/s from the authorised Executive.
7. Always check for details mentioned in the ‘Customer Copy’ as well as the ‘Bank's Copy’.
In case of any discrepancy, highlight the same to the Bank official.
8. Check the mode of payment in the receipts issued.

38
9. Always keep a photocopy of the electronic receipt/s for future reference.
10. A single receipt is valid only for cash payment up to Rs. 49,999
11. To prevent misuse, please fill all the details on the cheque and sign it yourself with your
own pen before handing over the cheque to the authorised Executive.
12. Check the details filled on the receipts and strike out whichever is not applicable.
13. Do not sign on any physical blank receipt/s provided by the authorised Executive.
14. Always check whether the deposited money is updated in your loan/ card account or
not. In case it is not updated, inform the ICICI Bank Customer Care/ visit the nearest
branch within 15 days, post which the Bank's record will be considered as final.
15. Never share your Card Number, CVV, PIN, expiry date, OTP, Internet Banking User ID,
Password or URN with anyone, even if the caller claims to be a Bank employee.
Sharing these details can lead to unauthorised access to your account. Your Bank will
not ask for such details.
16. Always check the URL of the websites while making the payment through online mode
i.e. RTGS/ NEFT/ Click to pay, etc. Also, the websites should ideally start with 'https:' ('s'
stands for security).
17. Only Bank officials are authorised to provide settlement offers. For any clarification or
more information, please contact them or our Customer Care.
18. In case of a settlement, do not pay prior to receiving a settlement letter from the Bank.
19. Do not open/ reply to any unknown e-mail from unauthorised persons.
20. Check the inventory sheet of the surrendered asset and keep a copy of the same.
21. Handover the asset to the Bank's authorised representative only.

CHAPTER 12: What is contributing to rise in frauds:

Fraud tends to be committed primarily due to the presence of three major factors:
financial pressure, opportunity, and rationalization. While these factors are present in a
growing economy, they can get exacerbated during an economic downturn, when

39
margins are tight and profitability is a challenge. This has been clearly brought out in our
survey results, where respondents have attributed the increase in fraud to the lack of
oversight by line managers or senior management on deviations from existing process/
controls; business pressure to meet targets; and collusion between employees and
external parties.

​What constitute a fraud? Can it be classified?

Let us understand the crucial elements of a fraud. Fraud is defined in section 421 of the
Indian Penal Code and section 17 of the Indian Contract Act and has the following
essential elements:

a. There must be a representation and assertion;

b. It must relate to a fact;
c. It must be with the knowledge that it is false or without belief in its truth; and
d. It must induce another to act upon the assertion in question or to do or not to do
certain act.

Internet frauds in India are recent phenomena but over the years, it has emerged like an
organized crime. Hackers may be anywhere in the world and employ any technique to
commit the fraud. Even mobile transactions are hit by the frauds. There are three crucial
elements which are considered responsible for the commission of frauds in banks:

a. Involvement of bank's employee or in connivance with outsiders;

b. Failure of the bank staff to follow the instructions and guidelines; and
c. External elements or collusion between various parties or by a hacker.

40
Though there are various kinds of frauds, but purely from reporting standpoint, RBI has
classified frauds on the basis of the provisions of the Indian Penal Code (​"IPC"​):

a. Misappropriation (​Section 403 IPC)​ and criminal breach of trust (​Section 405
IPC)​ ;
b. Fraudulent encashment through forged instruments, manipulation of books of
account or through fictitious accounts and conversion of property (​Sections 477A,
378 and 120 A)​ ;
c. Unauthorized credit facilities extended for reward or for illegal gratification;
d. Negligence and cash shortages;
e. Cheating (​Section 415 IPC​) and forgery (​Section 463 IPC)​ ;
f. Irregularities in foreign exchange transactions; and
g. Any other type of fraud not coming under the specific heads as above

CHAPTER 13: REPORTING OF BANKING FRAUDS ?

To keep the above frauds at bay, RBI prescribes that bank should conduct annual
review of frauds and apprise its board regarding the findings. While conducting the
review, the most crucial aspect that must be taken into account by banks includes the
following:

a. Has the bank employed adequate system to detect frauds?

b. How are frauds examined?
c. What kind of action bank takes and within how much time if a person is found
responsible for fraud?
d. What are the reasons for the fraud - laxity in following the systems and
procedures or loopholes in the system?

41
 e. What measures have been taken to ensure that the systems and procedures are
scrupulously followed by the staff concerned or the loopholes are plugged?
f. Whether frauds are reported to the local police for investigation?
g. Whether bank maintains the data and records of these facts: ​(i)​ total number of
frauds detected during the year; ​(ii)​ amount involved as compared to the
previous two years; ​(iii)​ modus operandi of major frauds reported during the year
along with their present position; ​(iv)​ estimated loss to the bank; ​(v)​number of
cases ​(with amounts)​ where staff are involved and the action taken against
staff; ​(vi)​ time taken to detect frauds ​(number of cases detected within three
months, six months, one year, more than one year of their taking
place);​ ​(vii)​ status of the matters reported to the police
and ​(viii)​preventive/punitive steps taken by the bank.

In order for the RBI to continue doing this work, it is essential that banks should have
proper reporting mechanism in place to report to the RBI all information about frauds
and the follow-up action taken.

So, what should banks do to safeguard the interests of its

customers?

Banks can secure and preserve the safety, integrity and authenticity of the transactions
by employing multipoint scrutiny – cryptographic check hurdles. Banks should rotate the
services of the persons working on sensitive seats, keep strict vigil of the working,
update the technologies employed periodically and engage more than one person in
larger transactions. Banks can verify the credentials of the person approaching the
bank, the documents they produce, the details provided in the forms they fill and utmost
care in recruiting the staff. Banks should educate and make its customers aware about
such frauds by sending e-mails and also providing tips on their websites. Banks can
give confidence to its customers if they have prescribed and follow best practices and

42
also the guidelines provided by RBI, have a fraud free culture and in-house grievance
redressal mechanism​.

CHAPTER 14: CASE STUDY:

1)​Syndicate Bank fraud case accused attempts suicide​:

JAIPUR: City businessman ​Shankar Khandelwal​, who was last year arrested
in a case related to multi-crore Syndicate Bank fraud case, is undergoing
treatment after overdosing on medicines meant for cancer treatment.

"He attempted to kill himself by consuming all the medicines he had. He is

undergoing treatment for cancer and had some medicines with him. He
consumed all of them. He was rushed to a private hospital for treatment
immediately," said Gopal Singh Bhati, station house officer (SHO) Vaishali
Nagar. The Vaishali Nagar police will now file a case against him for
attempted suicide.

According to Bhati, Khandelwal had alleged in a letter that he was being

blackmailed by some people for money. In the letter, he also mentioned that
there were some people who were after his life, and alleged that they were
involved in moneylending.

Bhati said that a case would be filed against Khandelwal under Section 309 of
the IPC for attempted suicide.

43
2)Surat businessman arrested for bank fraud:

AHMEDABAD: The Central Bureau of Investigation (​CBI​) has arrested a former zonal
head of ​Bank of Maharashtra​— Pune city zone — Padmakar Deshpande, and the
director of the Surat-based Siddhi Vinayak Logistics Ltd, Rajkumar Baid, in a bank fraud
case. The fraud allegedly caused a loss of Rs 836.29 crore to Bank of Maharashtra.

According to CBI sources, three more cases have been registered against Siddhi
Vinayak Logistics, its directors, and others in connection with the alleged defrauding of
Oriental Bank of Commerce, Bank of Baroda, and Indian Overseas Bank to the tune of
Rs 1,566.39 crore.

A search was conducted at the residence of Deshpande in Pune, leading to the

recovery of electronic gadgets, LIC policies, FDs, two locker keys of banks, and related
documents. Senior CBI officials said that a case was registered against the logistics
company based in Surat and ten other persons, entities, and unknown bank officials of
Bank of Maharashtra on the allegation that during the 2012-2014 period, Bank of
Maharashtra had sanctioned various credit facilities to Siddhi Vinayak Logistics
including working capital, term loans, and loans to 2,802 drivers of the company under
"Chalak Se Malak" scheme for the purchase of trucks.

"It is alleged that the loans given to the drivers were sanctioned, using forged

44
documents, without their knowledge," said a senior CBI official."These loans were
allegedly processed by Deshpande and Baid was the authorized signatory to operate
company's account," the CBI official said.

3)Man cheated of Rs 37 lakh in online bank fraud:

NASHIK: ​A ​government contractor​ was cheated by an unidentified person of Rs 37

lakh on Thursday. The ​contractor Satish Patil​, a resident of ​Nashik Road​ has an
account in a ​nationalised bank in Eklahara​. All his transactions were through internet
banking.

On Thursday morning, Patil noticed that his cellphone was not working, and took the
phone to the cellphone showroom in Nashik Road. When Patil went to an ATM of for a
mini statement, he found there was only Rs 55 left in his account. Patil, said he had Rs
37 lakh in his bank account and someone had withdrawn the money. When he logged
into his email account, he found that it was also hacked. ​Cybercrime police​ have
registered a case of cheating.

4)​Bank told to pay back Rs14 lakh lost to fraud:

Aug 10, 2017, 12:06 AM

45
MUMBAI: In a welcome respite for victims of online banking ​fraud​ cases, the state
consumer commission has ordered Axis ​Bank​ Ltd to deposit back Rs 14 lakh into the
account of a Dombivli man after it was transferred to other banks' accounts in
transactions not authorised by him.

The commission said on Monday that the bank was duty-bound to intimate Thomas
Ninan, by alerting him with emails or text messages about electronic transactions
exceeding Rs 50,000 done on his behalf. The commission referred to a July 6 Reserve
Bank of India (RBI) circular on limiting liability of customers in unauthorised electronic
banking transactions.

"The shift in RBI's policy fixing zero liability on the bank customer in case of sending
funds by internet transfers through other banks, that too without alerting the customer
by emails or text alerts must be adhered to by nationalized and recognized banks doing
business in In​d​ia," the Maharashtra State Consumer Disputes Redressal Commission
said. It held that the burden to disown liability was heavy on the bank and it was not
discharged satisfactorily.

​
5)​ Bank manager, four others held for cheque fraud:

Apr 12, 2017, 01:30

NEW DELHI: Five people, including a senior ​manager​ of a government ​bank​, were
arrested on charges of running a pan-India racket that involved forging of cheques and
depositing them into other accounts opened on fake papers.

The ​fraud​ was discovered when a south Delhi businessman's ​cheque​ of Rs 95 lakh was
found to be misappropriated. The businessman lodged a complaint at the Hauz Khas
police station and said the money was paid to a company in Kurukshetra.

A team led by ACP Rajender Pathania and SHO Sunjay Sharma was formed to
investigate. They found that the money had gone into the account of one Amarjeet
Singh, a Malviya Nagar resident. He was questioned, during which he said he knew one
Rajeev Gupta, the alleged kingpin of the racket.
Police said Gupta along with Shanu Thakur and Chirag Chaudhary used to procure
cheques from agents. They used to copy the cheques, and change the MICR and IFSC
codes printed on them. This was done very cleverly by Chaudhary and another person
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named ​Ashish Kumar Parashar​. They would chip away the numbers and superimpose
new ones with a special ink that couldn't be detected by a UV ray machine. A cheque
would then be encashed.
The crooks took out money from 30 bank accounts, many of them belonging to
businessmen, of which 17 were with government banks.
Bank manager Pritam Das from Khanpur was arrested for conniving with the fraudsters.
Police suspect other employees of different banks may be involved too. "One of the
accused is based in the US, while others are spread all over India. We are trying to
track them as well," said additional DCP (south) Chinmoy Biswal.

CHAPTER 15:QUESTIONNAIRES​:

● WHAT ARE THE MAJORS TYPES OF FRAUDS CONDUCTED?

ANS: Phishing, forgery altered cheques,fraudulent loans application.

● WHAT ARE THE GENERALS PREVENTIVES MEASURES

TAKEN?

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ANS: There is a department which looks after frauds and their preventions i.e. Risk
Content Unit (RCU).They go through the frauds conducted and take necessary
steps. Know Your Customer (KYC) is an important tools to prevent frauds in banks.

● DO YOU THINK THAT COMPUTERISATION HAVE INCREASED

FRAUDS ? WHY?
ANS: No, Because due to computers there has been increase in work. A work which
would take 3hrs is done in11/2hrs,thus providing better service. More over out of
entire customers 2% conduct frauds .Because of this 2%, we can’t avoid providing
better services to 98%customers
● EFFECT OF FRAUDS ON BANKS?
ANS:The customer are affected. The banks reputation is shattered. Many customers
try to avoid the bank branch. Negative views are spread to the customers.
● WHAT ARE THE MEASURES TAKEN AGAINST FRAUDS?
ANS: 1) Core banking solution (EXEL report) to find out frauds.
2)Know the introducer while opening the account etc.

CHAPTER 16:SURVEY FORM:

SHAILENDRA EDUCATION SOCIETY’S ARTS,COMMERCE &

SCIENCE COLLEGE

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NAME:- AGE:-
CONTACT NO:-

1) Do you know about bank frauds?

● Yes
● No
2) Are you aware of any of the following type of frauds?

● Yes
● No
3) Do you know about ATM frauds, Credit Cards frauds or Online Bank
frauds?
● Yes
● No

CHAPTER 17:CONCLUSION​ :

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Banks provide security and convenience for managing your money and sometimes allow you to
make money by earning interest. Convenience and fees are two of the most important things to
consider when choosing a bank.

● Writing and depositing checks are perhaps the most fundamental ways to move money
in and out of a checking account, but advancements in technology have added ATM and
debit card transactions, ACH transfers, online bill pay and mobile transfers to the mix.
● All banks have rules about how long it takes to access your deposits, how many debit
card transactions you're allowed in a day, and how much cash you can withdraw from an
ATM. Access to the balance in your checking account can also be limited by businesses
such as gas stations and hotels that place holds on your funds when you pay with a
debit card.
● Debit cards provide easy access to the cash in your account, but can cause you to rack
up fees if you overdraw your account or visit out-of-network ATMs.
● While debit cards encourage more responsible spending than credit cards, they do not
offer the same protection or perks.
● Regularly balancing your checkbook or developing another method to stay on top of your
account balance is essential to successfully managing your checking account and
avoiding fees, declined transactions and bounced payments.
● If you have more money than you need to manage your day-to-day expenses, banks
offer a variety of options for saving, including money market accounts, CDs, high-interest
online savings accounts and basic savings accounts.
● To protect your money from electronic theft, identity theft and other forms of fraud, it's
important to implement basic precautions such as shredding account statements, having
complex passwords, safeguarding your PIN and only conducting online and mobile
banking through secure internet connections.

BIBLOGRAPHY:

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● www.google.com
● www.news.com
● www.wikipedia.com
● www.scribd.com
● www.fraudindianbankingsector.com
● www.bankfraudsinfo.com

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