BFIs urged to maintain profile of customers‚ staff
KATHMANDU:
Financial institutions can stave off incidences of financial fraud by keeping tabs on its customers and employees, according to experts.
“While the banking system is stringent on ‘Know-Your-Customer’ norms, knowing your employees has also become equally important at present,” pointed out Nepal Rastra Bank (NRB)’s governor Dr Yubaraj Khatiwada, during the inauguration of ‘Workshop on Financial Fraud Investigation’ organised by the National Banking Training Institute (NBTI) today.
“With the expansion of financial system, challenges have also mounted, and hence factors such as behaviour of executives and morale of employees are just as important to avoid financial fraud,” he added.
“There is an urgent need to protect the financial world from such criminals through institutional policy measures,” he said.
In the past couple of years, the Nepali financial sector has witnessed quite a few frauds, which led to the liquidation of two financial institutions, while eight more have been declared crisis ridden. Likewise, at a smaller scale, many fraudsters have targeted internet banking and card payments. Moreover, Nepal Police’s Central Investigation Bureau (CIB) has made more than 40 arrests in cases related to financial fraud, involving more than Rs 17.6 billion so far.
Experts provided insights on the issues regarding different types of frauds and forgeries prevalent in the banking industry.
“Negligence and lack of awareness on the part of both customers and staff have resulted in a large number of frauds, so a strong monitoring mechanism has to be in place for the banks to detect any sort of fraud at an early stage,” said senior advisor on risk management at Indian Bankers’ Association Sangeet Shukla during the workshop.
“Moreover, despite the obvious benefits, technology has also augmented the vulnerabilities facing the banking system,” he said.
Echoing Khatiwada, he also suggested the banks to profile their customers and employees. “If there is a surge of activities in an account that had remained dormant for a long time, or if an employee seems to be living a lifestyle beyond his income, it calls for vigilance of the bank,” he added.
He also cautioned that branch managers have to be careful in tracking their employees and the trans-action in their branches as remote branches, located far from the centre, are susceptible to loan and deposit account frauds.
“Although frauds can only be detected after they actually occur, early detect-ion and plugging the system loopholes will be effective to deter potential culprits,” he added.
According to Shukla, by March 2013, the Indian financial system had witnessed 169,190 cases of fraud worth IRs 299.1 billion. Among the total frauds, loan-related frauds accounted for 1.65 per cent in number but amounted to 55 per cent of the total cases in terms of monetary value.
Source: THT
