fraud prevention and vigilance management

Bank Frauds : 

Bank Frauds And Vigilance

Bank Frauds : 

Bank Frauds In the broadest sense, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent .

Bank Frauds : 

Bank Frauds The specific legal definition varies by legal jurisdiction. Fraud is a crime , and also a civil law violation. Defrauding people or entities of money or valuables is a common purpose of fraud, but there have also been fraudulent "discoveries", e.g. in science , to gain prestige rather than immediate monetary gain.

Bank Frauds : 

Bank Frauds A hoax also involves deception, but without the intention of gain, or of damaging or depriving the victim; the intention is often humorous .

Bank Frauds : 

Bank Frauds Money is life blood of the Nation.' - Said Swift. Banks, admittedly, are the premier `money handling' institutions in any Country and in the Vigilance language, this `money' - is the lifeblood of the Nation.  It not only `speaks' but also `works' and delivers the required results. In the very first sentence of Chapter VIII, Kautilya has observed `all undertakings depend upon Finance.  Hence foremost attention shall be paid to the Treasury.'  In the present day context, it is the Banks that play the pivotal role in Nation's Economy

Bank Frauds : 

Bank Frauds As Banking is based on trust, dishonesty is against the very concept of Banking. Dishonesty on the part of customers who transact their business with Bank or the Bank employees, who handle their business, creates mistrust. Being trustees of public funds, Bankers must display the highest degree of integrity. Banks have their own system and procedures for their smooth and efficient functioning. Yet, statistics reveal that Frauds in Banks are increasing year after year.

Bank Frauds : 

Bank Frauds After the Nationalization of the Banks, the activities of the Banks increased enormously . Banks were required to deal with a much wider clientele than before. Many of these clients had never had dealings with a Bank.  Consequently, the responsibility of the Banks towards the customers has also increased. Though the Banks continue to work as commercial institutions, their employees who are public servants, are expected to serve the public with utmost integrity

Bank Frauds : 

Bank Frauds Frauds are an attack on systems and procedures in Banks. Frauds are perpetrated not because of any lacunae in the systems and procedures, but because of non-adherence to or utter neglect of the prescribed procedures and practices and lack of alertness and involvement of the staff.

Bank Frauds : 

Bank Frauds In almost all cases of fraud, the `staff element' is always present. Since without negligence or connivance or involvement of staff, it is impossible to commit a fraud in a Bank

Bank Frauds : 

Bank Frauds What is a fraud? Fraud involves all acts of omission and commission that involve breach of trust, misrepresentation or misfeasance etc. According to Section 25 of Indian Penal Code, a person is said to have done a thing fraudulently if he did that thing with intent to defraud, but not otherwise. Hence, fraud can be interpreted as an act of criminal deception carried out singly or in collusion with others with a view to deriving gains to which one is not legally entitled.

Bank Frauds : 

Bank Frauds What is a fraud? A . For adoption of a common perception and approach by the bankers to identify fraud element, RBI’s Study group on large value frauds (under the chairmanship of Shri B.D. Narang ) has defined the fraud as under: B. “A bank fraud is a deliberate act of omission or commission by any person carried out in the course of a banking transaction or in the books of account maintained manually or under computer system in banks, resulting into wrongful gain to any person for a temporary period or otherwise, with or without any monetary loss to the bank ”.

Bank Frauds : 

Bank Frauds What is a fraud? C. In terms of RBI‘s Master Circular , frauds have been classified as under, based mainly on the provisions of the Indian Penal Code: i ) Misappropriation and criminal breach of trust. ii) Fraudulent encashment through forged instruments, manipulation of books of account or through fictitious accounts and conversion of property. iii) Unauthorized credit facilities extended for reward or for illegal gratification.

Bank Frauds : 

Bank Frauds What is a fraud? C . In terms of RBI‘s Master Circular , frauds have been classified as under, based mainly on the provisions of the Indian Penal Code: Misappropriation and criminal breach of trust. Fraudulent encashment through forged instruments, manipulation of books of account or through fictitious accounts and conversion of property. Unauthorized credit facilities extended for reward or for illegal gratification.

Bank Frauds : 

Bank Frauds What is a fraud? . ( In terms of RBI‘s Master Circular) E. Cases of attempted fraud , where the likely loss would have been Rs. 100 lakh or more, had the fraud taken place, are to be reported to Reserve Bank of India indicating the modus operandi and how the attempted fraud was detected. Such cases should not be included in the other returns to be submitted to the Reserve Bank. F. To ensure uniformity and to avoid duplication, frauds involving negotiable instruments may be reported only by the paying banker and not by the collecting banker. G. Cases of theft, burglary, dacoity and robbery should not be reported as fraud.

Bank Frauds : 

Bank Frauds What is a fraud? .( In terms of RBI‘s Master Circular) H . For the sake of convenience and simplicity, the study group and also the RBI master circular on frauds has further clarified that, transactions broadly having one or more of the following features may be categorized as fraud :  Shortage of Cash  Fraudulent encashment of drafts / cheques / Travelers' Cheque / Dividend Warrant etc.   Fraudulent endorsement of cheques, draft, bill, etc. with an intention of conversion to encash the same. Opening bogus bank accounts in the name of non-existing person and collecting fake instruments with or without connivance of bank staff.

Bank Frauds : 

Bank Frauds What is a fraud? .( In terms of RBI‘s Master Circular) H T ransactions broadly having one or more of the following features may be categorized as fraud :   Siphoning off funds through the fake telegraphic/mail transfers, unauthorized debits of impersonal accounts and/or concealment of any unauthorized transaction by manipulating entries in the books of account. Creation of fixed deposit, credit balances and issuance of drafts, pay orders, etc. without consideration. Sudden disappearance of stocks as compared to the figures shown in the previous statement or fraudulent removal of pledged stock/ disposing of hypothecated stocks without the bank’s knowledge/inflating the value of stocks in the stock statement and drawing excess bank’s finance .

Bank Frauds : 

Bank Frauds What is a fraud? .( In terms of RBI‘s Master Circular) H T ransactions broadly having one or more of the following features may be categorized as fraud :  Fudging of Financial Statements. Issuance of letter of credit, bank guarantees and DPGs, etc. without recording liability in the books of accounts. Discounting of forged trade documents or documents without underlying trade transactions or kite flying in clearing effect. Transgression of the delegated authority and its concealment from the competent authority resulting in financial loss to the bank .

Bank Frauds : 

Bank Frauds What is a fraud? .( In terms of RBI‘s Master Circular) H T ransactions broadly having one or more of the following features may be categorized as fraud : Misuse of computer code and breach of security of computer systems. Diversion of funds outside the borrowing units, lack of interest or criminal neglect on the part of the borrowers, their partners, etc, and also due to managerial failure leading to the unit becoming sick.

Bank Frauds : 

Bank Frauds Bank frauds can be classified into three major groups. 1. Frauds committed by the outsiders on the Bank 2 Frauds committed by Bank employees 3.   Frauds committed by outsiders with the connivance of Bank employee

Bank Frauds : 

Bank Frauds Frauds by Outsiders Cheque book, DD etc, account in the name of a fictitious person fraud in hypothecation/ pledge/ mortgage Kite Flying

Bank Frauds : 

Bank Frauds Frauds by Employees Act as highly cooperative employee and gain confidence of superiors and then plan for fraud account in the name of a fictitious person false credit entries, cheating illiterate customers, cheating bank’s own cashier, siphoning security items like cheque books, DD leaves fraud in dormant accounts, false bank guarantees,

Bank Frauds : 

Bank Frauds Frauds committed by outsiders with the connivance of bank employees Loans/hypothecation/pledge/mortgage Fictitious Bank Guarantees etc

VIGILANCE : 

VIGILANCE CORRUPTION And VIGILANCE

Slide 24: 

WHAT IS CORRUPTION ?

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WHAT IS CORRUPTION A willful act intentionally committed by an individual (s) – by deception, suppression, cheating, fraudulent means, thereby causing wrongful gain (s) to self or any other individual (s) and wrongful loss to others.

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“Use of Public Office for private gains” DEFINED BY ASIAN DEVELOPMENT BANK AS:

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CORRUPTION - EXISTENCE Since time immemorial. Kautilya’s Arthshastra describes 40 different types of embezzlements.

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CORRUPTION – A MENACE ACCORDING TO KAUTILYA “Just as it cannot be found out whether a fish moving under the water is drinking water, similarly, it cannot be found out whether the public servants are taking money unless they are caught.”

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CORRUPTION – MAGNITUDE According to a recent study, “ Common citizens in India are forced to pay a sum of Rs. 20168 crores annually to avail themselves of one or more of 11 selected public services in a year.”

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CORRUPTION – MAGNITUDE – TRANSPARENCY INTERNATIONAL’S CORRUPTION PERCEPTIONS INDEX COUNTRY RATING (Out of 158 countries (Score out of 10) INDIA 70 TH(2.9) BANGLADESH & CHAD 1 st(1.7) ICELEND 158 th(9.7)

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CORRUPTION – MAGNITUDE – TRANSPARENCY INTERNATIONAL’S CORRUPTION PERCEPTIONS INDEX - MOST CLEAN NATIONS COUNTRY RATING (Out of 158 countries) (SCORE OUT OF 10) AUSTRALIA 149 (8.8) UNITED KINGDOM 147 (8.6) CANADA 144 (8.4) USA 145 (7.6) FRANCE 140 (7.5) JAPAN 137 (7.3)

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WORLD CORRUPTION SCENARIO CORRUPTION PERCEPTIONS INDEX

Slide 33: 

CORRUPTION – IMPACT Eats away scarce resources. Affects public procurement system as nearly 30% of Food grains and sugar disappears in black market. Lowers economic growth. Hits poor hard. Sabotages policies and programmes aiming at reduction in poverty. Increases cost of production / services. Adversely affects good governance

Slide 34: 

CORRUPTION – IMPACT According to a UNDP Report, if corruption level in India goes down to that of Scandinavian countries, the GDP will grow by 1.5% And FDI will go up by 12%

Slide 35: 

CAN WE ELIMINATE CORRUPTION ALTOGETHER FROM ITS ROOTS ? FIGHTING CORRUPTION

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Corruption cannot be eliminated altogether but can only be reduced. WAYS TO FIGHT CORRUPTION

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Reduction cannot be by one person or a group. WAYS TO FIGHT CORRUPTION

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Can only be a MULTILATERAL / UNITED EFFORT WAYS TO FIGHT CORRUPTION

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LET US FIGHT CORRUPTION UNITEDLY – BE A WHISTLE BLOWER

Slide 40: 

What is Vigilance? WHAT IS VIGILANCE

Slide 41: 

Vigilance means “ being on continuous alert ” “ Watchfulness ” WHAT IS VIGILANCE

Slide 42: 

VIGILANCE MANAGEMENT IN PUBLIC SECTOR BANKS

Slide 43: 

WHY VIGILANCE MACHINERY IN PUBLIC SECTOR ?

Slide 44: 

TO CURB CORRUPTION THE SIMPLE ANSWER IS