Banking Fraud

Fraud is any dishonest act and behaviour by which one person gains or intends to gain advantage over another person. Fraud causes loss to the victim directly or indirectly. Fraud has not been described or discussed clearly in The Indian Penal Code but sections dealing with cheating. concealment, forgery counterfeiting and breach of trust has been discusses which leads to the act of fraud.

Banking Frauds constitute a considerable percentage of white-collar offences being probed by the police. Unlike ordinary thefts and robberies, the amount misappropriated in these crimes runs into lakhs and crores of rupees. Bank fraud is a federal crime in many countries, defined as planning to obtain property or money from any federally insured financial institution. It is sometimes considered a white collar crime.

The number of bank frauds in India is substantial. It in increasing with the passage of time. All the major operational areas in banking represent a good opportunity for fraudsters with growing incidence being reported under deposit, loan and inter-branch accounting transactions, including remittances.
Bank fraud is a big business in today’s world. With more educational qualifications, banking becoming impersonal and increase in banking sector have gave rise to this white collar crime. In a survey made till 1997 bank frauds in nationalised banks was of Rs.497.60 crore.
This banking fraud can be classified as:
# Fraud by insiders
# Fraud by others

Rogue traders

A rogue trader is a highly placed insider nominally authorized to invest sizeable funds on behalf of the bank; this trader secretly makes progressively more aggressive and risky investments using the bank’s money.

Fraudulent loans

One way to remove money from a bank is to take out a loan, a practice bankers would be more than willing to encourage if they know that the money will be repaid in full with interest.

Wire fraud

Wire transfer networks such as the international, interbank fund transfer system are tempting as targets as a transfer, once made, is difficult or impossible to reverse. As these networks are used by banks to settle accounts with each other, rapid or overnight wire transfer of large amounts of money are commonplace.

Theft of identity

Dishonest bank personnel have been known to disclose depositors’ personal information for use in theft of identity frauds. The perpetrators then use the information to obtain identity cards and credit cards using the victim’s name and personal information.

Demand draft fraud

DD fraud is usually done by one or more dishonest bank employees that is the Bunko Banker. They remove few DD leaves or DD books from stock and write them like a regular DD. Since they are insiders, they know the coding, punching of a demand draft.

Accounting fraud

In order to hide serious financial problems, some businesses have been known to use fraudulent bookkeeping to overstate sales and income.

Bill discounting fraud

Essentially a confidence trick, a fraudster uses a company at their disposal to gain confidence with a bank, by appearing as a genuine, profitable customer.

Cheque kiting

Cheque Kiting exploits a system in which, when a cheque is deposited to a bank account, the money is made available immediately even though it is not removed from the account on which the cheque is drawn until the cheque actually clears.

Credit card fraud

Credit card fraud is widespread as a means of stealing from banks, merchants and clients. A credit card is made of three plastic sheet of polyvinyl chloride. The central sheet of the card is known as the core stock.

Stolen payment cards

Often, the first indication that a victim’s wallet has been stolen is a ‘phone call from a credit card issuer asking if the person has gone on a spending spree.