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TABLE OF CONTENTS
S. No
Content
Page
Introduction
Evolution of Frauds
14
17
23
27
30
10
Bibliography
33
ACKNOWLEDGEMENT
First and foremost wed like to thank our Management of Financial Institutions teacher, Dr.
Kumar Bijoy for giving us this topic and also for his kind support and guidance throughout the
completion of this project. Without his guidance this project would not have been such a
success.
Wed also like to thank the University for providing us the opportunity of working on projects as
a part of our curriculum.
We are also grateful to our friends and family for their invaluable support. We would also like
to thank the people who have spent their time extensively researching on this topic. Their
research helped us build this project.
INTRODUCTION
Computer and Information Technology has gained pace over the last few years and now has
become one of the most important means of communication and transfer. It has made its way
into all the facets of any industry. Because of its increased use and dependency on it, there has
been a growing trend of online transactions, digital data transfer, electronic database, information
transmission and various other information technology tools. In the time of high degree of
competition, all banks and financial service providers have started making prime use of
technology to make transfers, payments, provide regular information to customers and other
remittance services. But with increased dependence on information technology, people from all
industries witness a high risk of theft, hacking, transmission of virus, and various other kinds of
frauds due to publically available data.
The growth in the banking sector has been more than the growth in Indias economy over the last
financial year but with this growth has emerged increasing risk and worry due to frauds. Frauds
have been observed in mobile banking transactions, RTGS, NEFT, etc. According to the Reserve
Bank of India, the primary responsibility of combating these frauds lies in the hands of the banks
themselves. The major aspects on which the banks need to concentrate include cybercrime,
identity theft, money laundering, use of black money, loan loss. the banks face a dilemma of
choosing between provision of ease in banking or protection of their customers from the high
risk that exists due to electronic banking. Currently, 74% of the Indian population has mobile
phones. Mobile payment volumes have hence registered a steady rise. A recent study on ecommerce in India by Accel Partners estimated that shopping through mobile phones grew by
800% in 2013. It is expected to show a compound annual growth rate of 150% by the end of
2016.According to a report published in ICFE Fraud Magazine,9 in 2013, 46% of the complaints
or identity theft frauds reported globally involved breaches of government documents. Over 20%
of all identity theft frauds or complaints were related to breaches of data of financial institutions
(e.g. credit card, loan or other bank information). RBI circular November 2014:10 It has been
reported that in some cases even though the original cheques were in the custody of the
customer, cheques with the same series had been presented and en-cashed by fraudsters.
Thus this trade-off between ease in banking and risk-free banking needs to be overcome such
that the banking sector is able to provide their services and in addition are also able to ensure
safety and security.
We are therefore going to analyse the kinds of frauds faced, the issues that the banks have to
counter due to the frauds, the challenges that need to be overcome, the regulations which are
already prevalent and a few suggestions that can help them to cover and protect themselves from
these frauds.
EVOLUTION OF FRAUDS
1999-2000
The kinds of frauds in the banking and financial sector that prevailed in the decade of 1990s is
as follows:
Hawala Transactions
Ponzi Schemes
Fake Currency
Cheque Forgery
Advancing loans without adequate due diligence
Siphoning of investors money through Fictitious companies
Use of Fictitious Government securities
2001-2015
The kinds of frauds have changed over time. With the introduction of internet banking, the
industry of banking and financial services have witnessed a change in the kinds of frauds, The
frauds in this time period are more focussed on obtaining information by means of hacking,
identity theft, etc.
Tax Evasion and Money Laundering
Black Money stashed abroad
Cybercrime
Debit/Credit Card fraud
Identity Theft
Fake Accounts
Benami Accounts
Collusive frauds emanating kickbacks to employees of financial institutions
Use of forged instruments such as stamp papers and shares
Violation of Know Your Customer (KYC) norms
Fraudulent documentation
Siphoning of funds takes place when funds borrowed from financial institutions are utilised for
purposes unrelated to the operations of the borrower, to the detriment of the financial health of
the entity or of the lender. Diversion of funds, on the other hand, can include any one of the
following occurrences:
Use of short-term working capital funds for long-term commitments not in conformity with the
terms of sanction
Using borrowed funds for creation of assets other than those for which the loan was sanctioned
Transferring funds to group companies
Investment in other companies by acquiring shares without the approval of lenders
7
Shortage in the usage of funds as compared to the amounts disbursed/drawn, with the
difference not being accounted for
Identity Theft
Fraudsters are devising new ways to exploit loopholes in technology systems and processes. In
case of frauds involving lower amounts, they employ hostile software programs or malware
attacks, phishing, SMSishing and whaling (phishing targeting high net worth individuals) apart
from stealing confidential data.
In February 2013, the RBI advised banks to introduce certain minimum checks and balances
such as the introduction of two factor authentication in case of card not present transactions.
Some examples:
Unauthorised emails asking for account information for updating bank records are sent by
fraudsters. The customer information is then misused for misappropriating funds.
Access rights for making entries are given to unauthorised people.
Bank employees keep original Fixed Deposit (FD) receipts with themselves and hand over
phony FD receipts to customers. They then revoke FDs by forging signatures.
Lost/stolen card: It refers to the use of a card lost by a legitimate account holder for
unauthorised/illegal purposes.
Account takeover fraud: An individual illegally obtains personal information of valid
customers and takes control of the card account.
Theft of valuables: Fraudsters open bank lockers to take key impressions of other lockers and
then use duplicate keys to steal assets.
Around 65% of the total fraud cases reported by banks were technology-related frauds (covering
frauds committed through/at an internet banking channel, ATMs and other payment channels
like credit/debit/prepaid cards), whereas advance-related fraud accounted for a major proportion
(64%) of the total amount involved in fraud.
Some examples:
Triangulation/site cloning: Customers enter their card details on fraudulent shopping sites.
These details are then misused.
Hacking: Hackers/fraudsters obtain unauthorised access to the card management platform of
banking system. Counterfeit cards are then issued for the purpose of money laundering.
Online fraud: Card information is stolen at the time of an online transaction. Fraudsters then
use the card information to make online purchases or assume an individuals identity.
Lost/stolen card: It refers to the use of a card lost by a legitimate account holder for
unauthorised/illegal purposes.
Debit card skimming: A machine or camera is installed at an ATM in order to pick up card
information and PIN numbers when customers use their cards.
ATM fraud: A fraudster acquires a customers card and/or PIN and withdraws money from the
machine.
Social engineering: A thief can convince an employee that he is supposed to be let into the
office building, or he can convince someone over the phone or via e-mail that hes supposed to
receive certain information.
Dumpster diving: Employees who arent careful when throwing away papers containing
sensitive information may make secret data available to those who check the companys trash.
False pretences: Someone with the intent to steal corporate information can get a job with a
cleaning company or other vendor specifically to gain legitimate access to the office building.
Computer viruses: With every click on the internet, a companys systems are open to the risk of
being infected with nefarious software that is set up to harvest information from the company
servers.
According to PwCs Global Economic Crime Survey 2014, 20 external fraudsters are still the
main perpetrators of economic crime for the majority of financial service organisations (57% in
2014 and 60% in 2011).
Financial institutions are prime targets for external frauds, given the amount of money fraudsters
can potentially obtain as well as the sensitivity of data held by these organisations (credit card
and personal identity details, for example).
The financial services sector also tends to be more strictly regulated and as a result, many
business processes and functions have corporate controls in place. This makes it more difficult
for frauds to be internally perpetrated without discovery. The absence of
a proactive and robust monitoring framework, however, does not allow the entity to identify
conflict of interest issues such as employees or agents having a close relationship with other
entities. Some examples:
Falsified Valuations: External consultants advising loan borrowers to fabricate their valuation
report and inflate the amount of funds that can be borrowed
Corporate espionage: Sharing trade secrets or confidential customer information with the
competitor for commercial benefits
Merchant collusion: Merchant owners and/or their employee conspiring to commit frauds using
their customers accounts and/or personal information
Ponzi scheme: A type of pyramid scheme, where money from new investors is used to provide
returns to previous investors
9
Counterfeit Cheques
Counterfeit or fake cheques that look too good to be true are being used in a growing number of
fraudulent schemes, including foreign lottery scams, cheque overpayment scams, internet auction
scams and secret shopper scams. Unsuspecting sellers get stuck when scammers pass off bogus
corporate or personal cheques.
Even though the above-mentioned terms are interchangeably used, in the banking world, asset
stripping primarily implies taking company funds or assets of value, and leaving behind debts.
This can happen when a companys directors transfer only the assets of one company to another
and not the liabilities. The result is a dormant company which has to be liquidated as it has
large liabilities that cannot be met. Some examples:
Asset stripping: Fraudsters deliberately target a company or companies to take ownership,
move the assets and then put the stripped entity into liquidation.
Phoenixing: Directors of a company move the assets from one limited company to another to
secure the benefits of their business and avoid the liabilities. Most or all directors will usually
be the same in both companies. This usually is a way of rescuing the assets of a failing business
rather than targeting a company.
Teeming and lading: In order to maintain the liquidity situation artificially, amounts received
from the subsequent debtor are credited to the earlier debtors account so that one debtors
account does not show an outstanding balance for a long time. Such a process is continued till
the time the original amount misappropriated is finally replaced or till the time the cashier is
caught.
10
Absence of stringent guidelines on the due diligence of professionals assisting borrowers at the
time of disbursement of loans may result in valuation agencies or advocates facilitating the
perpetration of frauds by colluding with the borrowers to inflate security valuation reports. Some
examples:
Concealing liabilities: Borrowers concealing obligations such as mortgage loans on other
properties or newly acquired credit card debts in order to reduce the amount of monthly debt
declared on the loan application
Misstatement: Deliberately overstating or understating the propertys appraised value; when
overstated, more money can be obtained by the borrower in the form of a cash-out
refinance, by the seller in a purchase transaction, or by the organisers of a for-profit mortgage
fraud scheme
Cash back schemes: The true price of a property illegally being inflated to provide cash-back to
transaction participants, most often the borrowers, who receive a rebate that is not disclosed to
the lender
Shot gunning: Multiple loans for the same home being obtained simultaneously for a total
amount greatly in excess of the actual value of the property
11
mobile device. The customers account is compromised by the associate and he or she
does not get any notification about the same.
Creating fake and non-existent users on the mobile financial services platform: Most
of the banks appoint a third party vendor to develop mobile application to be integrated
with their core banking system. The vendor may create two unauthorised users with
rights to initiate and verify transactions, and transfer funds from the organisation to his
associates wallets, effectively stealing money from the bank
Malware: The increase in the number of mobile banking users is accompanied by a rise
in attacks through malware.
Data theft: Mass attacks are possible through the theft of credentials which can be used
for personal benefits.
SIM swap: SIM swap means replacing the old SIM with a new one, when the old gets
lost or damaged, or when one needs a differently sized SIM card. If a fraudster manages
such a swap, he can carry out numerous fraudulent transactions using the mobile number
of the victim. For instance, the valid mobile station international subscriber directory
number (MSISDN) is moved to another handset. The user has no access to their account
and receives no notification. The user with the other handset, on knowing the PIN, can
transact in the account.
Fake or similar interface apps: Fake applications, with exactly the same user interface
as the original application, are being created to steal confidential information shared by
the user.
Risks associated with Mobile Wallet:
Increased risk of money laundering: Transfer of money into and out of a mobile wallet
from or to a bank account is now possible. Cash-in from the bank account of an
individual and cash-out to a different bank account of another individual can be used as a
platform for laundering unaccounted money.
Unauthorised deductions from the wallet of a customer (especially a dormant or
infrequent customer account): Employees of the mobile wallet service provider may
misuse the balance stored in the wallet of a customer by making unauthorised deductions.
Moreover, in case of a mis-happening to a customer with no nomination facility, the
balance in the customers account is not passed on to his family members and remains
with the service provider, which ultimately becomes a low-hanging fruit for the
fraudsters.
Failure to conduct proper due diligence of merchants: If the merchant on-boarded by
the service provider is a fraudster, and the payment is made by the customer for fictitious
goods or services from the merchant, cash can be rotated with minimum transaction fees.
No auto log off facility: An individual usually opens the application on his mobile device
for availing of the services and closes the application, instead of logging out. If the
12
mobile device is stolen or lost and a fraudster opens the application, he can misuse the
remaining balance in the service providers wallet
13
As is evident from the above table, the cumulative number of frauds reported by the banking
sector and the total amount involved in these fraud cases have a major share in the frauds
reported by all entities under RBIs supervisory jurisdiction. A year-wise break up of fraud cases
reported by the banking sector together with the amount involved is given in Table 2 below:
14
It may be observed that while the number of fraud cases has shown a decreasing trend from
24791 cases in 200910 to 13293 cases in 201213 i.e. a decline of 46.37%, the amount involved
has increased substantially from Rs 2037.81 crore to Rs. 8646.00 crore i.e. an increase of
324.27%. A granular analysis reveals that nearly 80% of all fraud cases involved amounts less
than Rs. one lakh while on an aggregated basis, the amount involved in such cases was only
around 2% of the total amount involved. Similarly, the large value fraud cases involving amount
of Rs.50 crore and above, has also increased more than tenfold from 3 cases in FY 200910
(involving an amount of Rs 404.13 crore) to 45 cases in FY 2013 (involving an amount of Rs
5334.75 crore) (Annex 1). Further, a bank group wise analysis of frauds reveals that while the
private sector and the foreign bank groups accounted for a majority of frauds by number
(82.5%), the public sector banks (including SBI Group) accounted for nearly 83% of total
amount involved in all reported frauds (Table 3 below).
15
While the sheer number of frauds and the amount involved, when seen in isolation, may appear
overwhelming, it is important to view the incidence of frauds in the banking sector in the context
of the massive increase in the number of deposit and credit accounts in banks and the staggering
volume and value of transactions that are processed by the banks every day. To put things in
perspective, let me quote some statistics again. The number of deposit accounts in the banks over
the last ten years (between end 2002 and end 2012) has gone up from 43.99 crore to 90.32 crore
while the number of loan accounts in the same period has also more than doubled from 5.64
crore to 13.08 crore. A quick estimate puts the average number of all transactions that happen
every day in the banking system at approximately 10 crore, which is enormous. The number of
frauds per million banking transactions was about 0.4, which is not a very high figure. Likewise,
besides increase in the number of brick and mortar branches, additional service delivery points
like ATMs and Point of Sale (POS) terminals have also gone up significantly. While the number
of ATM machines has grown from 34789 in March 2008 to 114014 in March 2013, the number
of POS terminals has also more than doubled (from 423667 to 845653) during the same period.
The observation is that on a standalone basis the quantum of frauds, both in terms of number and
amount involved, may appear to be very high, but when one weighs it against the sheer
magnitude of accounts and transactions handled by the banking system, they are not alarming.
16
17
Cooperative Bank (MMCB) and a collapse of the Unit Trust of Indias US-64 mutual fund, the
largest mutual fund of the biggest institutional investor in the Indian stock market.
1) Collapse of MMCB:
The fraud was exposed in 1999 when a Rs 140 crore pay-order given to Ketan Parekh by
Madhavpura Mercantile Co-operative Bank (MMCB) bounced. The discounting bank, Bank of
India (BOI), had already given Parekh Rs 137 crore but when the pay-order was sent to the
clearing house it was dishonoured. Meanwhile, Parekhs over-valued shares shares had collapsed
in the market and the MMCB could not raise sufficient funds to defend its position.The
involvement of Madhavpura Mercantile Co-operative Bank (MMCB) with Ketan Parekh was the
only reason for its immediate collapse when the fraud broke. The MMCB issued credit regularly
to Parekh in violation of RBI regulations along with UTI and Global Trust Bank and the total
exposure of MMCB to Parekh stood at Rs 840 crores before its collapse. The MMCBs Mandvi
Branch alone issued 13 pay-orders to Parekh in only two days against all RBI guidelines. The
RBI has observed generally as regards co-operative banks in one of its reports as,
The management and boards of several co-operative institutions continue to reflect political
interests rather than genuine co-operative spirit. A similar observation was also given by the
Vikhe Patil Committee Report , Excessive politicisation and absence of committed leadership
dedicated to the vision of the co-operative movement have affected the basic fabric of the
democratic co-operative structure. The recovery climate in the co-operative sector has been
vitiated due to across-the-board loan waivers. Poor recoveries and diversion of a part of the
recoveries to fund losses have severely debilitated the health of these institutions. In two
months, about 250 pay-orders totalling Rs 2400 crores were issues by MMCB, UTI and GTB to
Parekh. In fact, GTB and Standard Chartered Bank provided Parekh with an overdraft facility
through which he could route funds into the stock market in violation of RBI guidelines. The
total amount involved in the pay-order fraud was estimated by the Central Bureau of
Investigation (CBI) to total Rs 1030.34 crores. That meant that the banks advanced this amount
of money to Parekh against a permissible overall limit of Rs 475 crores and thereby committing
various deliberate irregularities and wilful breach of all RBI guidelines and directives. The CBI
Report also has stated that Parekh opened 11 accounts in MMCB, Mandvi Branch, in Mumbai
alone and his relatives held 16 accounts in the names of various bogus companies with the Bank
of India, Mumbai Stock Exchange Branch. It also traced an account in Credit Suisse Bank,
Zurich, the contracting partner being a corporation named Elista Ltd, registered in Nassau,
Bahamas, with the beneficial owner being Ketan Parekh.
2) Collapse of UTIs US-64:
The Unit Trust of India's (UTI) US-64 mutual fund, the largest mutual fund in India, comprising
of two thirds of the total assets of the Indian mutual funds industry and Rs.57,500 crores in
assets, collapsed in the wake of the Ketan Parekh fraud. The US-64 was originally conceived as a
savings instrument for pensioners and middle-class salaried persons and its credibility lay in the
18
fact that it offered a regular and safe income and the highest ever yield was 18% in 1993-94. The
JPC Report, while stating the primary reason as non-observance of basic investment
fundamentals by the fund managers, indicts UTI as follows: "India's largest mutual fund appears
to have taken recourse in brokers for certain transactions, which seem to be in the nature of interscheme transfers, and thus has violated its own guidelines." The UTI invested Rs 3,400 crores in
just 6 out of a total portfolio of 44 stocks which was eroded by 60 per cent of its value in one
year. It also invested Rs 1300 crores in another five stocks, which was devalued by 77 per cent
and stood at Rs 300 crores within a year. The imprudent investment by fund managers in the K10 stocks was cited by the JPC as a consequence of collusion and connivance with Ketan
Parekh. The Report particularly pointed out the investment in Himachal Futuristic
Communication Limited (HPFCL) and Global Telesystems, two of Parekhs favourite stocks. It
pointed out that as on June 2001, UTI had invested Rs 1050.70 crores in HFCLs equity, the
market value of which had depreciated by 92 per cent. The JPC Report clearly stated that UTI
went on building up its portfolio in the Global Telesystems (Private Limited) scrip to facilitate
the upward trend in its prices and that decisions not to offload the stock to book profits when
the prices were favourable or cut their losses in adverse circumstances raises doubts. The
Rs.30,000 crore portfolio of the fund lost its value by half within 2001. By March/April, 2001,
US-64 Net Asset Value (NAV) stood at Rs.5.81 below par (Rs.10). The government had to
announce a bail out package at a cost of Rs.5120 crores. The Tarapore Committee Report
concluded, "The sanction and disbursement process does indicate that the sanctity of the
sanctioning powers and the laid-down processes have on many occasions not been observed."
The N.L. Mitra Committee constituted after the Ketan Parekh fraud, when examining the
causative factors for the incidence of bank frauds, cited the following reasons in its Report:
A. Large Value Credit Frauds:i) Absence of proper physical verification of collateral security offered.
ii) Lack of proper post-disbursement monitoring to ensure appropriate end use of funds.
iii) Lack of pre-sanction survey including improper identification of borrower and verification of
antecedents of prospective borrowers.
B. Lapses in Internal Control Mechanism:i) Lack of periodical review of systems and procedures at certain intervals.
ii) Lack of annual review of frauds and serious irregularities pointed out in audit reports which
could also become a basis for review of the basic accounting systems as well as the procedural
guidelines.
iii) Delayed reconciliation of high value intra-branch accounts or inter-branch transactions.
iv) Lack of periodical review of credit outflow from banks
v) Lack of concurrent audit, internal inspection of books, snap audits and verification of audits.
vi) Connivance of supervising staff as well as involvement of lower level bank staff.
19
21
identify multiple accounts held by single borrower in same branch of Bank of India, a public
sector bank, as well as MMCB, from which money used to be regularly diverted to the markets.
(5) Problem of Dual Regulation of Co-operative Banks
The failure of MMCB and several co-operative banks in different parts of the country almost
simultaneously raises extremely difficult questions as to the quality and extent of banking
regulation. It represents the problem of having a system of overlapping regulatory arrangement
in the regulation of co-operative banks without the actual division of regulatory workload or
practical separation of supervisory responsibilities.
22
23
prominent form of cyber crime is identity theft, in which criminals use the Internet to steal
personal information from other users. Two of the most common ways this is done is through
phishing and pharming which are related with the finding of confidential online information.
According to the Zee Research Group (ZRG) analysis, during the last decade, the Indian banking
sector grew at an average rate of 18 percent in comparison to 7 percent GDP growth rate.
However, during the same period, cyber fraud in the banking sector has emerged as a big
problem and a cause of worry for this sector.
Explaining the rationale behind the increase in amount related to cyber frauds, Pavan Duggal,
Cyber law expert averred, Relevant security mechanism has not been followed by the private
sector banks while public sector banks continued to follow the traditional approach. He
lamented that the Gopalakrishna Working Group (GGWG) report recommendations on safe
electronic banking had met with poor compliance. These recommendations mandated that each
bank create a separate information security function to focus exclusively on information security
management, a Board approved information security policy needs to be in place and reviewed at
least annually as also digital evidence needed to be considered as similar to any other form of
legal proof. This manuscript puts forward the issues related to the title.
Reserve Bank of India (RBI) is the regulatory body over banking in India. It keeps close eye on
the banking operations.
Comparative Analysis: The data have been analysed to reveal comparative status of fraud cases
in terms of numbers and amount involved. The study focuses two kinds of comparisons. i. intra
sector (banks within same sector) comparison and; ii. inter banking (between sectors)
comparison.
Inter Banking Sector Comparative Analysis: Banks belonging to the same sector, i.e. public,
private, and foreign sector have been presented in different tables along with their data in terms
of number of cyber crime cases and their monetary values.
Titled study showed a bigger share of private and foreign banks in frauds related to online
banking, ATM, cards and other digital banking transactions. Even with the reducing number of
cases, the value of such cases did not come down proportionately. Banking cyber frauds in the
country are the result of introductory phase of banking technology like ATM, online banking,
mobile banking, EFT etc. which need time for people, market and technology to get matured.
Regulatory framework also gets stronger by experience. Recently RBI has issued guidelines
suggesting measures and reporting methods of cyber fraud cases to be followed by the banks.
24
No. of
Cases
S.
No
201
0
Amount
No. of
201
1
Amount
No. of
201
2
Amount
No. of
Amount
involved
Cases
involved
Bank Name
involved
Cases
involved
Cases
Allahabad Bank
3.3
Andhra Bank
31.85
0.52
Bank of Baroda
6.88
12.4
31.82
62.45
Bank of India
5.21
14.61
54.49
15.82
Bank of
Maharashtra
3.55
4.69
2.9
105.26
Bank of Rajasthan
Ltd.
0.31
Canara Bank
1.39
0.6
10.24
Central Bank of
India
0.84
2.15
Corporation Bank
0.72
6.21
6.44
47
21.69
10
Dena Bank
2.07
0.53
11
FIRSTRAND BANK
14
4.82
12
24
16.29
13
15.29
50
44.64
87
203.04
13
Indian Bank
1.41
0.41
20.9
14
Indian Overseas
Bank
0.39
1.44
10
176.03
15
Oriental Bank of
Comm.
4.75
16
Punjab National
Bank
33
50.15
10
8
248.64
28
170.19
14
99.43
17
SBBJ
6.66
0.15
3.49
49.32
18
State Bank of
Hyderabad
63.33
50.52
25
19
State Bank of
India
14.62
20
State Bank of
Indore
0.8
21
State Bank of
Mysore
1.01
22
State Bank of
Patiala
80.45
31.42
23
State Bank of
Travancore
10.3
3.2
24
Syndicate Bank
0.53
2.32
0.56
7.87
25
UCO Bank
0.58
1.6
31.22
26
Union Bank of
India
10.45
19.22
7.86
70.17
27
United Bank of
India
1.37
32.86
28
Vijaya Bank
8.4
Grand Total
97
105.81
15
6
370.12
128
672.48
21
4
828.63
(Amount in lakh)
26
Default in payment to the banks/ sundry debtors and other statutory bodies, etc., bouncing
of the high value cheques
Raid by Income tax /sales tax/ central excise duty officials
Frequent change in the scope of the project to be undertaken by the borrower
27
29
information to apply for an online account and subsequently (within a day or two) call in
to request a change of address. Mailing verification to the address originally supplied
helps to confirm that the customer is the true person that applied for the online account. A
number of different scenarios can result, two of which are the receipt of return mail,
which would require back-office monitoring and subsequent account restrictions, or a call
from an individual who says he or she has not applied for the product. Based on this, the
bank can further look into the matter and this can lessen the chances of fake accounts.
To ensure that the true user logs into the account and not some hacker, the bank can
implement the process of confirming a persons identity by asking questions not related
to individuals credit report so that only the true owner of the account can answer such
questions. But using these questions may require a vendor who can supply the necessary
data. To ensure protection in terms of internet banking, the banks can also allow the
account holder to have a separate self-selected user name that is not printed in any report.
This will ensure that no third party is aware of this login name. However it is not cent
percent protected because the banking employees would be aware of it, but the chances
of it being exploited by some hacker can be avoided.
To prevent online frauds based on mobile banking, the mobile banking applications can
make use of the cameras on the handset for facial or palm print recognition or the
microphone for voice recognition. Such innovations are costly, however, the benefits
should justify the costs.
32
BIBLIOGRAPHY
The following references have been used for researching about this project:
www.rbi.org.in
www.banktech.com
www.bpcbt.com
http://trak.in/banking/2013-bank-cyber-fraud-india-statistics/
https://www.kpmg.com/IN/en/services/Advisory/RiskCompliance/Forensic/Documents/Framework-Loan-fraud.pdf
http://www.isca.in/IJMS/Archive/v2/i7/4.ISCA-RJMS-2013-062.pdf
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