banking fraud and pose a threat to the Indian economy. And can understand her vital influence is the fact that in 04 the number of cyber crimes and 347 in India, which rose to 481 in 05, an increase of 38.5% while the IPC category of crime in the 302 in 05, including 186 Internet fraud cases and 68 cases cyber fraud. Thus it becomes very important that the occurrence of such frauds should be minimized. More annoying is the fact that such frauds walk in the banking sector as well.
new dimensions in the present day, has been the global banking system has gained scenario. Banking has not spread in India. Today, the banking system entered into competitive markets in areas including resource mobilization, human resource development, and customer services and credit management as well.
Indian banking system has several outstanding achievements to its credit, the most striking of which is spread. In fact, Indian banks are now spreading out into the remote areas of our country. Indian banks, which had been operating in the extremely comfortable and protected environment until the early 190s, have been pushed into the crashing waters of intense competition.
and a sound banking system should possess three basic characteristics to protect the depositors' interest and confidence of the public. Theses are (i) a fraud free culture, (b) test the best code of practice, and (c) in-house therapeutic regimen appeal immediately. All of these conditions are missing or very weak in India. Article 5 (b) of the Banking Regulation of 1949 defines banking law ... "Banking is to accept for the purpose of lending or investment, deposits of money for the purpose of lending or investment, deposits of money from the public, payable on demand or otherwise, pull able for by check, draft, order or otherwise. "but if has been fraudulently put his money from the bank the latter is under strict obligation to pay depositors. But the bank has to ensure at all times that the depositors' money is not directed through fraud. The time has come when the security aspects of the banks to be handled on a priority basis.
banking system in our country may take care of all segments of our socio-economic set up. The article includes a discussion on the rise in bank fraud and various methods that can be used to avoid such frauds operations. And bank fraud is a deliberate act of omission or commission by any person carried out in the context of banking transactions or in the books of accounts, resulting in the ill-gotten gains to anyone for a temporary period or otherwise, with or without any financial loss for the bank. Provisions have been cited relevant sections of the Indian Penal Code, Code of Criminal Procedure, the Indian contract law, and the law of convertible instruments banking frauds in this article.
evolution of the banking system in India
banking system occupies an important place in the country's economy. Banking institution is indispensable in modern society. It plays a pivotal role in the economic development of the country and forms the core of the Capital Market in an advanced state.
banking industry in India has passed a long way to assume its current position. Has experienced significant structural transformation after the nationalization of 14 major commercial banks in 1969 and six more in the April 15 1980. Indian banking system is unique and perhaps has no parallels in the banking history of any country in the world.
target the Indian economic and social Reserve Bank of
Reserve Bank of India has an important role in maintaining the exchange value of the rupee in view of the close interrelationship between international trade and national economic growth and well-being. This aspect is the broader responsibility of the central bank to maintain economic and financial stability. This bank is entrusted with the custody and management of international reserves of the country. It also acts as an agent of the government with regard to India's membership in the International Monetary Fund. With the Bank's economic development is also a variety of developmental and promotional functions which in the past has been the object recorded outside the normal scope of central banks. As important regulator works.
Bank Fraud: concept and dimensions
banks are the engines that drive the operations in the financial sector, which is vital for the economy. With the nationalization of banks in 1969, it has also emerged as engines of social change. After independence, the banks have passed through three stages. They moved from character-based lending to ideology based lending to lending on the basis of competitiveness in the context of today's economic liberalization policies in India and the process of linking with the global economy.
while the bank's operations have become increasingly significant banking frauds in banks are also increasing and fraudsters are becoming more and more sophisticated and ingenious. In an effort to keep up with the changing times, the banking sector is a diversified business manifold. It was the replacement of the old philosophy of the banking class by universal banking. The challenge has increased in the management of social responsibility with economic viability.
definition of fraud
knowsfraud as "any behavior in which one person is intended to gain a dishonest advantage on the other." In other words, fraud is an act or omission intended to cause increased illegal for one person and wrongful loss to another, either by hiding the facts or otherwise. Know
fraud u / s 421 of Indian Penal Code and u / s 17 of the Indian Contract Law. Thus the essential elements of fraud are:
1. There must be a representation and assertion.
2. It must relate to reality.
3. You must be knowing that it is incorrect or without belief in its truth. And
4. You must stimulate another to work on the assertion in question or to do or not do a certain act.
bank fraud
losses incurred by the banks as a result of frauds exceed the losses resulting from theft, dacoity, robbery and theft all together. The expansion of the credit facilities of unauthorized gratification illegally, such as credit status by a pledge to allow goods, subject goods against bills or against the debt book. Joint working the way it is, and pledged goods false, Inletting the value of goods, hypothecating goods to more than one bank, and fraudulent removal of goods with the knowledge and complicity of the negligence of the bank's employees, and vowed to goods belonging to a third party. Found on goods hypothecated to a bank to contain the old stocks packed in between goods stocks and the state of weight loss is not uncommon.
analysis is made of the cases come out on a large scale under mentioned four major elements responsible for committing fraud in banks.
1. The active participation of the staff of both the supervisor and the religious either independent of external elements or in collusion with outsiders.
2. Failure on the part of the bank's staff to follow up thoroughly and put on the instructions and guidelines.
3. External elements perpetuating frauds on banks' operations through fraud or manipulation of checks, money orders and other instruments.
4. There has been a growing collusion between business and banks senior executives and civil servants and politicians in power to defraud the banks, by getting bent rules, regulations and norms flouted banking thrown to the wind.
fraud-prevention and detection
close study of any fraud in bank reveals many common basic features. There may be negligence or dishonesty at some stage, on the part of one or more of the bank's employees. One of them may have colluded with the borrower. Bank official has been put up with the acute to the borrower for personal gain practices. Proper care that was expected of employees, should not be taken as bosses of the banks' best interest. Bank rules and procedures set forth in the instruction manual and may not have been noticed circulars or has been deliberately ignored.
fraud Bank is a bank failure. This does not mean that the external frauds do not defraud banks. But if the bank upright and knows his job, the task of the thief will become extremely difficult, if not possible.
fraud detection
Despite all the care and vigilance there may be still some fraud, although their number, frequency and intensity may be greatly reduced. The following procedure can be very useful if it is taken into account:
1. stock data of all relevant documents and others should be collected promptly. Must be original or other securities that form the basis of the investigation under lock and key remaining vouchers.
2. Each person in the bank who can know anything about time, place and modus operandi of the fraud should examine their data must be recorded.
3. It should then be possible to rebuild the order of events by the officer, in his mind.
4. It is advisable to keep the central office reported fraud and other developments with regard to them.
classification fraud and required action by the banks
had set up a high level committee in 1992 and who heads the Reserve Bank of India by Mr. A ... Ghosh, then de. The governor of the Reserve Bank of India to investigate the various aspects relating to frauds malpractice in banks. The committee had noticed / observed three main reasons for committing fraud granted as follows:
1. complacency in respect for the rules and procedures set forth by the operations and supervision of staff.
2. Over confidence reposed in customers who indulged in dishonesty.
3. Unscrupulous clients by exploiting lax celebration applicable, guarantees the test is also a time frauds committed.
in order to obtain uniformity in reporting cases of fraud, it is RBI matter of classification of bank frauds on the basis of the provisions of the Iraqi Penal Code.
The following provisions and remedial measures can be taken.
1. fraud (Section 415, IPC)
compensation procedures.
preventive measures in respect of fraud can be focused on cross-checking on the identity, authenticity, check the details, and so with respect to different instruments, as well as persons involved in the clouds or dealing with the bank's property.
2. Criminal misappropriation of property (Section 403 IPC).
therapeutic measure
criminal misappropriation of property, assume the custody or control of money or property, and are exposed to it, with the person committing such frauds. It should take preventive measures, this category of fraud at the level of the custody or control of the funds or property of the bank generally vests. Such a procedure should be enough, and extends it to those people who are actually dealing with or having custody or control of the capital or immovable property for the actual bank.
3. crime of breach of trust (Section 405, IPC)
therapeutic measure
and should be taken care of the first step when a person comes to the bank. Care needs to be taken when employment in the bank as well.
4. fraud (Section 463, IPC)
therapeutic measure
both prevention and detection of fraud by falsifying the task of the bank. Falsification of signatures is the most common in the banking fraud. The bank should care especially when it has been either a tool holder or system; in the case of bank pays forged instrument he will be responsible for the loss of a real fashion designer.
5. falsification of accounts (Section 477A)
requiredtherapeutic measure
proper diligence while filling out forms and accounts. Must re-examination of accounts on a daily basis.
6. theft (Section 378, IPC)
remedial measures
clouds of stolen choice "can be prevented if the bank clearly age and sex sets and two visible identification is a step on the the body of the traveler's checks in person on the back of a paper check. this bank will help pay to easily identify the check holder. theft from lockers and safes secretariats and not easy to commit because the master key remains with the banker and the individual key to the closet delivery for more than a fashion designer with proper acknowledgment.
7. criminal conspiracy (Section 0-a, IPC)
in the case of the state of Andhra Pradesh against IBS Prasad Rao and others, the defendants, who were clerks in the Central Cooperative Bank, both convicted of fraud crimes under Article 420 read together with section 0 A. All four defendants had conspired together to defraud the bank by making drafts of false demand and vouchers receipt.
8. offenses relating to banknotes and bank notes (section 489 a-489E, IPC ) provide
these sections to protect the currency notes and cash and securities fraud. Crimes under oath is:
(A) counterfeit banknotes or banks.
(b) the sale and purchase or use as a real, forged or counterfeit currency notes or banknotes. Knowing the same to be false or fraudulent.
(C) the possession of counterfeit currency or counterfeit banknotes or papers, knowing or counterfeit and intending to use the same real.
(d) or tools or materials to passers-by falsifying or counterfeiting banknotes or banks.
(E) making or using documents resembling currency notes or banknotes.
Most of the above provisions on the crimes included in Article 2 (c) of the Code of Criminal Procedure, 1973.
fraud-prone areas in the different accounts
The following is a potential fraud areas prone in the banking sector. In addition to those areas that I have mentioned also the types of fraud that are common in these areas.
savings bank accounts
is being played some examples in respect of the accounts following savings bank:
can provide(a) checks bearing forged signatures of depositors and paid.
can change the signatures (b) a sample of depositors, especially after the death of depositors,
and can be run from the (C) dormant accounts by people who are dishonest with or without the collusion of bank employees, and 19,459,002 ]
(D) pull unauthorized customer accounts by the bank employee to maintain the savings book and destruction at a later date from the latter by coupons.
current account fraud
is likely to be committed in the case of current accountsfollowing types.
(a) Opening fraud in the names of companies or limited companies by unauthorized persons;
(b) the presentation and payment of checks bearing forged signatures.
(C) dishonesty by employees in companies or companies that have the papers signed by the choice signatures certified.
(D) fraudulent change of the amount of the checks and get paid either at the counter or through another bank.
fraud in the state of progress
may be committed for the following types of introductions:
(a) may be mortgaged gold ornaments false.
(b) may be mortgaged goods sub-standard with the bank or its value may appear in the inflated figures. Can be hypothecated
(C) the same goods for the benefit of various banks.
legal system in controlling fraud Bank
constitute fraud white collar crime, committed by unscrupulous persons deftly advantage of loopholes in the systems / procedures. The ideal situation is one there is no fraud, but with the facts on the ground environment in the country and the weakness of human nature, the institution should always like to keep the overtaking of fraud at the level of the minimum occurs.
The following relevant information concerning fraud Bank parts
Indian Penal Code (45 of 1860)
(a) Article 23 "illegal gains" .-
"gain unlawful" gain unlawful means of property that a person does not have the right to earn a law.
(b) "false loss"
"Losing illegal" is the loss by unlawful means of property that the right of a person losing it legally.
(C) win unfairly.
loss unjustly thousand people are said to gain wrongfully when such person retains wrongfully, as well as when such person acquires wrongfully. It is said that the person to lose wrongfully when such person retains illegally from any property, as well as when that person wrongfully deprived of property.
(D) Section 24. "dishonest"
and who does anything with intent to cause graft for one person or a loss illegally to someone else, and is said to do this thing "dishonest ".
(E) Section 28. "counterfeit"
is said to be the person to "fake" that causes one thing resembling something else, intend through it resemblance to practice deception, or knowing that it is likely to deception and thus to exercise.
dishonesty
1. Section 408. The crime of breach of trust by an employee or employees.
2. Section 409. The crime of breach of trust by a public servant, or by banker, merchant or agent.
3. Section 416. cheating by impersonation
4. Section 419. Punishment for cheating by election claim.
crimes related DOCMENTS
1) Section 463 of forgery
2) Section 464 -Making a false document
3) Section 465. The punishment for forgery.
4) Section 467. The value of securities fraud, will, etc.
5) Section 468. forgery for the purpose of fraud
6) Section 469. forgery for the purpose of harming the reputation of
7) and section 470. The forged document.
8) Section 471. used as a genuine a forged document
9) Section 477. fraudulent cancellation, destruction, etc., will, the power to adopt, or the value of the security.
10) Section 477A- falsification of accounts.
THE RBI ACT, 1934
issuance of demand bills and notes section 31.
provides that the Bank may only exception provided by the central government to draw acceptance or action or issue any exchange Act, Hyundai, promissory note or engagement for the payment of money payable to the bearer on demand, or borrow, owe or take any amount or amounts of money on bills, hundis or notes payable for at the request of any person of such holder
tHE ACT negotiable instruments 0.1881
lost the right holder to repeat section 45A of law.
1. Code Finder lost or memorandum acquire any title to him. The title remains with the true owner. It is entitled to recover from the true owner.
2. If the finder gets to pay a bill or a note lost in time, the beneficiary may be able to get a valid discharge for it. But the true owner can recover the money owed on the instrument compensation from the Finder.
Section 58
is obtained when the instrument by illegal means or for consideration illegally is not the owner or Sadiq who claims through the person who found or even get the right instrument to receive the due amount of this maker, acceptor or holder, or by any party by the holder, unless the owner was not honest or is, or a person through whom he claims, holder of it in time.
Article 85:
check payable to the order.
1. Through this section, bankers are placed in a privileged position. It provides that if a system selection indorsed by or on behalf of the beneficiary, and the bank on the one directing it pays in a timely manner, discharged banking.
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