SIGNATURE VERIFICATION

Bank has to deal with various documents such as checks, drafts, letters,
approvals, traveler’s checks etc. On the basis of checks, bank pays out
money or effects transfers. On the basis of Nepal Rastra Bank approval,
bank provides foreign currency facility to Nepali people. On the basis of LC
application, bank issues letter of credit. Hence the necessity of verifying the
signature appended in various documents arises. Genuineness of these
documents must also be ensured from bank’s side.

Normally all the documents have signature(s) of the originating party. Bank
takes risk on the basis of these signatures. Bank has to verify the signature of
the applicant/drawer of the checks on the basis of specimen signature
retained in the bank’s custody. In the modern banking ICDM (Image
capturing and display module) is a important tool, which captures specimen
signature of the applicant and displays as and when required.

Signature verification is closely associated with the style of handwriting. At

one time, good hand writing used to be one of the criteria for a beautiful job
like banker. During a tenure, a banker places his initials and signatures at
hundreds of places every day to authenticate or authorise transactions.

Signature of a banker or a customer can be broadly divided into two

categories:

1. Initials: This is the short form of signature wherein the signatory puts
on his signature in a very short form. These initials are not accepted
for wide range of transactions by bankers. These are used for intra
official transactions and on copies of instruments. Normally,
institutions do not retain these signatures as a specimen.

2. Full Signature: These are the signatures widely used in banking

transactions and are retained as a specimen signature by the banker.
Bank officials verify the signatures appearing in the instruments
against these specimen signatures. In the cases of corporate or
institutional customers, company seal or stamp is also retained as a
part of signature.
The ability of a banker to compare signatures with those on specimen card is
the first and most important defense of a bank against fraud and forgeries.
There are no guidelines, manuals, books and rare training to the banker on
signature verification which compels them to verify the signatures from their
knowledge through experience and at times from their costly mistakes.
“Learning by doing and committing mistakes” has become a common
phenomenon among the bankers.

If the signatures are forged and transactions carried on the strength of forged
signatures, the financial responsibility will be of the bank and most
commonly to the person verifying the signature. Exploration and capture of
real culprit may not be happened due to various reasons.

Therefore, in order to strengthen the defense of the bank against forgeries,

here are some tips to the bankers on signature verification in a real way.

1. See the additional instructions in specimen card:

Customers may provide some additional conditions and instructions in

specimen card. Some of them may be:
- Signature number 1 is compulsory.
- Stamp is must.
- Up to Rs. 50000 single signature and above, two signatures are
required.
- Signatory must present himself for encashment.
- Any others.

2. Always compare the signature upside down:

Direct comparison of the signature with specimen normally is not

done letter to letter. Therefore, if we go according to upside down or
tilted position, all the letters are read and any deviations are easily
noticed. Hence, upside down, right side up and left side up
comparisons will disclose major differences.

3. Sign with relief nibs as far as possible:

There was a time years ago when bankers used to sign with a relief
nib so that the signature appeared with a thick line on which variations
 on the up stroke and the down stroke could be clearly distinguished.
Even now many bankers use relief nibs for signature.

4. Characteristics of Signatures

(a) Slant or slope: Whether the characters lean leftward rightward

or stand erect and vertical.

(b) Vigor or boldness: The vigor, boldness or self confidence of the

signatory is evident from the pressure used by him in signing.

(c) Continuity-Break: Continuity or breaks in the signature can

easily be viewed and distinguished.

(d) Length, Breadth and Height: The size, height and width of the
signatures will also be visible at a glance.

(e) Dots and lines: These are the unchangeable and invariable parts
of the signature. The banker must ensure, such dots and lines
ate not absent in the signature.

Some specific techniques for signature verification

a) Angle Baseline Slant:

Angle of inclination of signature baseline to the horizontal is called the

Slant.
b) Aspect Ratio:

.The ratio of height to the width of the signature is called aspect ratio.

c) Area of the signature

The multiplication of the height and width of the signature.

d) Gravity center of the signature:
Following examples show how signatures are forged:

Example signature Example signature Forgeries

 Bank Frauds:

Definition:

Fraud is any dishonest act and behavior by which one person gains or
intends to gain an advantage over another person. The gain may directly
accrue to the person involved or may be redirected towards third person. In
both the cases it causes loss to the victim.

Indian contract act defines fraud as “ Fraud means and includes any of the
following acts committed by a party to a contract, or with his connivance
(pursuance), or by his agent, with intent to deceive another party thereto or
his agent, or to induce him to enter into the contract:

i. The suggestion as a fact, of that which is not true.

ii. The active concealment of a fact by one having knowledge or
belief of the fact.
iii. A promise made with the intention of non-performance
iv. Any other act fitted to deceive.

Nature:

Fraud has intention to deceive other person through:

i. Fraudulent acts
ii. False statements
iii. Active concealment of facts
iv. False promises
v. Material silence
vi. Misleading suggestions
vii. Anything declared ‘fraud’ by a court

Various types of Frauds

Cheque Frauds:

Cheques frauds include frauds relating to the customers cheques, Bankers

Cheque and Travellers Cheques. Basically, they are in the following forms:
 i. Counterfeiting cheques, Drafts etc.
ii. Forging signature of the victim.
iii. Materially altering the cheques:

a) Value is raised
b) Validity is changed
c) Beneficiary is changed
d) Character of the cheque is changed e.g. cross cheque is made
bearer

iv. Issuing the cheques against non-existing accounts

v. Stamping with the forged seals/stamps
vi. Using cheque writer to alter the amount.

Prevention:

Above natured forgery can be managed/minimized by employing one or all

the following measures:

Control over cheque/draft stock.

a. Dual recording the stock in the banking system and in the register and
periodic verification.
b. Dual signature for all ins and outs.
c. Safe keeping.

Proper verification.
a. ƒState
b. ƒSignature
c. ƒDate
d. ƒPayee
e. ƒAmount
f. ƒBalance
g. ƒAlteration
Deposit Account Frauds:

i. Account is opened with false documents and introduction. Stolen

or forged bills may be deposited and the culprit may vanish from
the scene.
ii. A dormant account is fraudulently operated by a forger on forged
signature.
iii. Joint accounts are operated by one of the signatories.

Prevention:

1. Proper introduction. Send a letter of thanks to introducer.

2. Regular transfer of bankers from paying department.
3. Dormants accounts and accounts opened by illiterate should be
handled by senior staff.
4. Maker and checker concept.
5. Large deposits and payments should be handled by at least two
persons.
6. Specimen signature cards should be properly maintained.

Bills Purchase Frauds:

i. Stolen or forged bills presented.

ii. Bogus bills drawn on sister concerns are presented.
iii. Bogus bills for worthless goods are got discounted on the
strength of dispatch papers.

Prevention:

1. Encourage the practice of collecting money rather discounting

or negotiating directly.
2. Purchase or discount the bills of reputed firms only with proper
authorization to purchase.
3. Proper checking of documents
4. If payments are delayed find the cause.

Loans frauds:

1. Loans are taken by different person on the same item. In an

interesting case, three different agriculturists obtained loan
 against the same buffalo, each of them showing the same
buffalo during each inspection.
2. Bogus firms appeared and obtained loans.
3. Loans taken for one purpose are used in others.
4. Under and over invoicing to take import/export loans.
5. Goods hypothecated are sold without giving notice to the Bank.
6. Same stock pledge to different banks.
7. Stock statements inflated.
8. Godown are put on fire after removing stocks.
9. Duplicate keys are used to remove goods under hypothecation.

Prevention:

Regular stock verification jointly.

Regular review/calculation of drawing power.
Take godown insured.
Verify/inspect security land/buildings etc.

Bankers Bunk:

This is a dishonest banker who can play havoc with the Bank’s money. The
are of operation of the Bank is wide. The followings have been noticed time
and again:

1. Manipulation of cash by cashiers.

2. Misappropriation of deposit accounts.
3. Misappropriation of money in remittance.
4. Creaming of the sundry accounts.
5. Playing with the central accounts and branch accounts.
6. Accepting counterfeit currencies.
7. Providing information to the outsiders.
8. Become fraudulently joint account holder.
9. Allowing/Granting loans beyond norms.

Identification:

He is efficient.
He is obliging.
He is know all.
He is indispensable.
Prevention:

Right recruitment.
Proper Training
Auto checking procedures.
Internal vigilance.

Various cases:

Case one:
Wernesto Smith, a black guy at USA was working in a foreign Bank. He
was expert on identifying forged currency even blindfolded, just from the
feel of the notes. The Bank was totally dependent on him. He worked quite
honestly for years. But after few years he got frustrated as being a black he
could not get promotions even after the promotion of white juniors.

He contacted a person involved in counterfeit currency transaction and

started accepting such notes. Bank could not identify in the initial stage and
incurred a heavy loss.

Case two:
Two Bankers conspired and sent a message for the supply of traveler
cheques took hold of the consignment and sold to fictitious name.

Case three:

A cashier or a teller continuously kept a convenient amount for his private

use every day.
He did not enter receipt of the money corresponding to the amount deposited
by one of the customers. He used to make the entry next day relating to this
deposit and keep another entry of that day not posted.

Case four:

Lingham A.K. in Banglore issued a forged guarantee and pledged in other

bank and cheated the bank by taking loans.
Case five:

A customer went to a Bank and asked its Manager to purchase a cheque of

small value. Upon repeated requests the Manager agreed and purchased the
cheque. The instrument was realized and nothing went wrong. Next time the
customer again requested to purchase the bill of higher amount and went on
without any difficulty. After gaining the confidence of the Manager, the
customer this time requested a large value bill to be purchased. Considering
the past track, the Manager agreed to purchase the bill. Finally this
instrument was returned unpaid and the customer vanished like horn of the
jackal.

Case six:

A Bank operating since long was trying to update customer details and the
preliminary job was given to a clerk, who used to sit in a lonely place for his
job as customer area was noisy and was not proper to carry the job of such
nature. During his job, he found some accounts as dormant and not in use for
last six years. These accounts had a good balance in them.

The clerk thought a long and opened one account with forged documents
and signature as this job was easy to him with genuine help of account
opening department as he also belonged to the same department. The
amount was transferred to this forged account and was withdrawn.

Case seven: (Checks)

Amount alteration, word alteration, date alteration etc.

Cash Management:

Liquidity:

This is the ability of the Bank to pay against the demand of its depositors.
Liquidity is represented by liquid assets of the Bank mainly cash and
balance at NRB.
Cash Reserve Ratio:

Banks has to maintain certain percentage of its total deposit as cash or as

balance at Nepal Rastra Bank. This ratio is known as CRR. NRB monitors
cash flow in the country by reducing or increasing CRR.

Insurance:

Insurance should adequately cover the cash at vault, counter, premises and
cash in transit.

Cash Handling

All tellers are allowed to hold certain amount as tellers cash in

their cash box. The tellers are also given pre- bundled currency
and coins to start the days work. This pre - bundled currency must
be counted and verified before acceptance by the tellers. Cash
should not be handled in areas other than the vault and cash
department.

Accumulated cash in the form of deposit must be packaged by the

teller in bundles denomination wise which must be strapped. Each
bundle or packet must contain 100 pieces and the strap should be
initialed by the teller packaging it along with mentioning date of
packaging. The responsibility for any short or over of pieces in the
bundle will be of the teller hence due care must be given in cash
packaging. Cash collected on a given day should not be handed out
the same day as far as it is practicable.

Verifying cash position atleast once during the transaction hour is

advisable. This will enable the teller to confirm he/she has not made
any over or short payments till the point of checking. In case at the
end of the day while balancing cash position if balance does not tally
teller can check only those transactions handled after cash position
verified during the day.

Tellers at the end of day must hand over all excess cash beyond their
limit allowed in the cash box. The head teller receives all such cash
with due verification of bundles and loose cash. The head teller must
pick up a few bundles daily and check them for correctness.

The cash in possession of the head teller is at the end of day taken
to vault and booked in reserve cash. A separate cash denomination
book is maintained to balance total cash holding in reserve. The cash
reserve book must be signed by the preparer and checked by the head
teller and cash officer for correctness while transferring the cash to
vault. Keys to the vault are under joint custody one of which must be
the head teller.

Handling cash properly is a fundamental part of the tellers assignment.

Tellers should give emphasis on accuracy rather than on speed which
will come naturally with practice. Packaging of cash is normally done
during lull period or when the numbers of customers waiting to be
serviced are few in numbers. Soiled and mutilated currency must be
maintained separately.

Each teller must obtain a computer printout of their transactions

and along with the instruments received during the day after
balancing cash send it to the record room. Any cash received or
handed over during the day or when transferring cash to head
teller must be entered in the system. Every transaction must be
supported by an instrument.

In case there is a cash difference at the end of day you must recheck
all your transactions through your day transaction printout. It could
possibly due to a wrong entry, not entering cash received or handed
out to other tellers during the day, short payment or overpayments. At
times it has even been observed some currency was left behind in the
drawer or mistakenly thrown in the waste paper basket due to which
differences have taken place.

Differences should be immediately informed to the head teller who

will also assist in identifying in which transaction the teller could
have made an error. Cash is a sensitive area therefore you must try to
remain calm and cool while doing transactions so as to ensure you
work with a peaceful mind.
 CASH HANDLING AND BALANCING:

- Cash must always be handled in safe area i.e either in the vault or
in the area earmarked for cash transactions.

- Always keep cash in the locked drawer.

- Always give emphasis on accuracy rather than speed.

- Always accept cash after satisfying your shelf the cash received is
in order.

- Receive cash from Head Teller after verifying the bundles and
loose cash if any.

- Give your balance to Head Teller at the close of transaction after

counting and along with denomination slip.

- Put denomination record in all receipts and payments throughout

the day.

- All bundles made by you must be striped, stapled and signed by

your shelf along with the date of bundling.

- Do not pay out loose bundles and the cash received in same day as
far as practicable.

- Remember “you must not believe every one for every thing and
don’t be misled by known face”.

- Extra attention should be given while counting notes. Any

mutilated, out of circular and fake notes will be put on for your
liability.

- Please ensure all inter teller transfers are recorded and initialed by
the receiver of the cash.

- Do not allow anybody else to put on hands on your belonging cash

and cash items.
 PROCEDURES IN CASES OF CASH IMBALANCES:

- Recount the cash.

- Check all cash in and out against cash flow of the day. Recall if
any unrecorded transactions have been carried.(please note, you
should not carry such transactions)

- Check the arithmetic you have made in the reverse side of checks
and deposit slips.

- Check transaction list to ensure correct posting in the accounts in

Nabsys.

- Check teller’s proof sheet (if any) to ensure any amount is left for
posting.

- Ask teller/head teller if he/she has counted the cash you have given
to them.

- Check your cash bin, drawer and floor for currencies and any
checks/deposit slips misplaced/scratched.

- Divide the imbalance figure by 2. If it is divisible without leaving

remainder, there will be possibility that the result figure might
have been debited instead of credit and vise versa.

- Divide the figure by 9. If it is divisible, there will be possibility

that you have not entered the figure of check/deposit slip properly.
For example, if you have posted RS. 45692 instead of RS. 45962,
the difference 270 is divisible by 9.

- If still the cause for imbalances are not detected, ask head teller to
deploy another teller to check the transactions independently.

If the imbalance is still undetected, immediately inform head teller. He/she

will inform upward managers.