Page 46 - BF Cover February 2019

ARTICLE

Mitigating the risk of fraud is all about focusing on the weak a deal combined with a willingness to overlook or waive
areas and taking reasonable prudent steps to minimize the "discrepancies"
risk of being the victim of a scam. Trade finance officers ♦ Avoidance to questions requiring clear answers
should have clear guidelines as to what is considered to be
"suspicious" and ensure simple and quick reporting Documentary Issues
procedures. Banks should provide an anonymous reporting ♦ The proposed trade and the proposed shipping and
mechanism in place so that employees, suppliers and finance documents are inconsistent
customers can - if they wish - make a report in confidence.
♦ Incomplete cargo documents or information thereon is
There should be clear guidelines on how to dispose of old inconsistent with the usual terms of the trade
and / or cancelled documentation, sensitive documents ♦ Documents with alterations outside of normal trade
should never just be "thrown away", but may need to be practice
shredded or subject to further destructive methods. A
strong IT policy is needed to cover the internal ♦ Post dated Cargo Documents
communication, external communication, custody of digital ♦ Documents contain errors or otherwise have suspect
records and databases and on-line security policies. validity

Desk officers must ensure that Suppliers and Vendors are Transaction Issues
thoroughly checked and confirmed, these checks should be ♦ The proposed transaction is highly undervalued or
repeated periodically by obtaining credit reports on overseas provides for an unusual profit margin
buyers/sellers from external agencies over and above the
limit fixed for transactional amount. There should be robust ♦ The trade is unusual in terms of its nature or geography
third party screening for both internal audits as well as ♦ Payment is to be made / received in cash
counterparty checks.
♦ Numerous Intermediaries are involved, more than usual
in any event
No doubt fraudsters will always try to upgrade their skills
by using technology to improve their ability. They will also ♦ Requests for unexplained payments
try to build their nexus strong by spreading their network ♦
to disguise illegal transactions. Banks also have to move one Overly complex transaction(s)
step ahead of these fraudsters with the help of continuously ♦ Routing of funds via 3rd parties or countries
upgrading the existing ones and adopting new technologies. ♦ Unexplained changes to transaction details
The following precautions can be of much help to the desk
officers while dealing with the various issues at the bank
branches so that they can timely smell the frauds and finally Punjab National Bank Reports Surprise
prevent these frauds from happening so that their profits Profit on lower provisions
may not be shredded away.
Punjab National Bank (PNB), India's second largest
Precautions government-owned lender by assets, reported a
surprise profit in October-December quarter, aided by
Counterparty Issues lower provisioning for bad loans.
♦ Identities of unknown or new clients, sister concerns
could not be verified independently Punjab National Bank's net profit rose 7.12 per cent
♦ Supposedly separate entities share postal addresses and annually to Rs. 246.51 crore, according to a regulatory
/ or there are other contact detail inconsistencies filing by the lender. The net profit surprised analysts
♦ Counterparty or Intermediary's activities are being amid expectations of a net loss. Analysts had on an
undertaken away from the place / jurisdiction where average estimated the bank's loss at Rs.1,063 crore,
their registered address places them news agency Reuters reported citing Refinitiv Eikon
♦ Excessive pressure or aggressive behavior in pushing for data

46 | 2019 | FEBRUARY | BANKING FINANCE