Bank Fraud and it’s Types.

by Yogiraj Sadaphal

Fraud is defined as any dishonest act or behavior that allows or intended for one individual to obtain an unfair advantage over another. Fraud leads the victim to lose money, either directly or indirectly. The Indian Penal Code does not precisely define or discuss fraud, however it does have sections dealing with cheating. The topics of concealment, forgery, counterfeiting, and violation of trust have been discussed, all of which lead to fraud.

Banking fraud accounts for a sizable portion of the white-collar crimes investigated by the authorities. Unlike typical thefts and robberies, the money stolen in these crimes is in the millions and crores of rupees. In many countries, bank fraud is defined as attempting to obtain property or money from a federally insured financial institution.

Types of Bank Fraud:-

1. Accounting fraud:-

Some firms have been known to use false bookkeeping to overestimate sales and income, inflate the value of the company’s assets, or report a profit when the company is operating at a loss in order to disguise major financial problems. In a final attempt to obstruct justice, these manipulated records are used to seek investment in the company’s bond or security issues, or to submit fake loan applications.

2. Demand Draft Fraud:-

Employees take a few DD leaves or DD books from the stock and write them in the same way as a regular DD. They understand the coding and punching of a demand draught since they are insiders. These forged demand draft are frequently made payable to a distant city and thus do not debit a bank account. At the payable branch, the drafts is cashed. By the time the money is gone, the fraud is only found when the bank’s main office undertakes the branch-by-branch reconciliation, which generally takes six months.

3. Check Fraud:-

Remotely created checks are checks that the payee creates and the client authorizes via the phone or the internet by supplying the relevant information, including the MICR code from a valid check. Unlike regular cheques, they do not bear the signatures of the clients. Instead, they have the legend “Authorized by Drawer” on them.

4. Loan Fraud:-

Accounting fraud can lead to loan fraud, however this type of fraud isn’t restricted to companies providing false information on loan applications. Loan fraud occurs when people provide fraudulent information in order to get a loan. Another sort of loan fraud is when a thief steals someone’s identity and applies for a loan in their name.

5. Card Skimming:-

Card skimming is a sort of bank fraud in which criminals utilize a small electronic device known as a skimmer to obtain card information. The skimmer is often inserted in a ATM machine. When you swipe your credit or debit card through a skimmer, the gadget gathers and retains vital information from the magnetic strip. Fraudsters copy this information to the magnetic strip of a blank card and use it to steal money from your bank account.

6. Phishing:-

You may have received an email stating that you are eligible for an interest-free loan, that you may get a loan without a credit check, and so forth. However, none of these emails are real. These emails are called phishing mails. The purpose of sending these emails is to steal bank account information. Many consumers assume these emails are authentic and supply their banking information, but they eventually lose their money.

7. Vishing:-

Vishing is also called voice phishing. In this scam, scammers act as representatives of a reputable organization and seek for personal banking information. They steal money from your bank account after gathering your personal financial details.

Government’s step to curb Bank Fraud.

1. The Fugitive Economic Offenders Act of 2018 was enacted to prevent economic offenders from avoiding Indian law by residing outside of Indian courts’ jurisdiction. The statute allows for the attachment of a fugitive economic offender’s property, confiscation of such property, and the denial of the offender’s right to defend any civil action.

2. PSBs have been advised to obtain certified copies of the passports of the directors and other authorized signatories of companies seeking loan facilities of more than Rs. 50 crore, to decide on publishing photographs of willful defaulters in accordance with RBI instructions and as per their Board-approved policy, and to strictly ensure rotational transfer of officials/employees.

3. The National Financial Reporting Authority was established by the government as an independent authority to enforce auditing requirements and ensure the quality of audits.