Page 45 - Banking Finance October 2024

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manipulation of books of account or through fictitious Periodical changes in incumbencies
accounts and conversion of property.
Red-flagged accounts
Unauthorized credit facilities extended for reward or
for illegal gratification. Identifying & Declaring Fraud
Negligence and cash shortages. All cases, regardless of the amount involved, must
be presented to the Competent Authority for thorough
Cheating and forgery.
examination to determine whether they constitute
Irregularities in foreign exchange transactions. fraud. This includes cases where a fraudulent angle
Any other type of fraud not coming under the specific is suspected or established, investigations are
heads as above initiated by central/state agencies, complaints are
lodged by other banks/consortium/customers, or when
Detecting Frauds sources directed by the Reserve Bank of India. Suspected
Fraudulent activities can be detected through various instances noted during audits are documented in the
triggers, including: Audit Report as Suspected Frauds.
Customer complaints
Reporting of Frauds
Alerts from investigating agencies
Banks must promptly report all frauds amounting to
Media reports
Rs. 1.00 lakh and above to their Boards upon
Whistleblower complaints detection.
Anonymous/pseudonymous complaints with verifiable Information regarding frauds is typically presented
facts quarterly to the Audit Committee of the Board of
Directors.
Audits and inspections (internal and external)
Banks should conduct an annual review of fraud cases
Periodical verification of customer information
and provide a summary to the Board of Directors for
Reconciliation of office accounts
informational purposes
Observations during controllers' visits
Pillars of Fraud Risk Management:
Banks employ a multi-layered approach to fraud risk
management, with each pillar playing a critical role in
safeguarding customer finances. Here's a deeper dive
into these essential components:

Risk Assessment and Profiling
Conducting comprehensive risk assessments is
fundamental to identifying and understanding
potential vulnerabilities within a bank's operations.
By analyzing historical data, emerging trends, and
regulatory requirements, banks can develop risk
profiles that prioritize areas susceptible to fraudulent
activities. This enables proactive measures to be
implemented to mitigate identified risks effectively.

People and Culture
Employee Training: Regular training programs

40 | 2024 | OCTOBER | BANKING FINANCE