Ways To Prevent And Control Banking Fraud

The banks have become an indispensable tool for day to day life today. The ease they provide, from security for money and assets to timely payment of utilities have become an important need for our lives. However, in recent times another aspect which has definitely been there is the looming cloud of fraud.

 A RTI application brought to light an astonishing fact that in the past 5 years the cumulative losses faced by the Public and private sector banks lost around Rs.27, 000 crores. The banks have reported on paper to the RBI upwards from 11500 cases of forgery and cheating. One of the major issues is banks performing “silo” monitoring at application levels. This basically means systems in place are not capable of a holistic impact. They are more attuned to specific delivery, product or risk channels. Thus, the following may be applied to control banking frauds:

  • Financial institutions must tackle fraud at an organisational level and this should be in addition to the AML or anti money laundering mechanisms. Banks today have realised the need for systems implementation which afford much needed extra flexibility to incorporate new threats pertaining detection models and new data sources. This will not only provide better protection but also reduce IT costs.


  • AML and KYC along with potential fraud risk factors as well as regulatory compliance should be extensively tackled at the board level. The banks must perform a process and business service wide SWOT analysis so as to face risk of fraud in real time. Regulatory requisites such as AML, Fraud and Basel must be met through standardisation of solutions, systems and various impact business processes.


  • There must be intent to take accountability and for this banks must have dedicated fraud risk management and AML teams with specially trained staff. There at times exists certain incompleteness in the risk portfolio of a customer teams dealing in a not so integrated manner with which fraud prevention and detection occurs in business line operations. If an individual has been exposed to risks and the same is credit card related, then the same information is not available to the debit card or internet banking and thus flags would not be raised therein due to lack of system congruity.

Banks must employ multiple authorisations across factors along with old school confirmations over telephone to ensure multi faceted protection.

Banks today are looking to employ tri layered approval process and are also enhancing the awareness for fraud by closely monitoring transactions on ad hoc basis without set sample sizes.

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