Frauds - Classification and Reporting- UCBs - आरबीआय - Reserve Bank of India
Frauds - Classification and Reporting- UCBs
RBI/2010-11/103 July 01, 2010 The Chief Executive Officers of Dear Sir, Frauds – Classification and Reporting Please refer to our letter DBS.CO. FrMC BC No. 2 /23.04.001/2009-10 dated July 01, 2009 forwarding therewith Master Circular on 'Frauds – Classification & Reporting'. It may be noted that the Master Circular consolidates and updates all the instructions issued during the year since the date of the last Master Circular dated July 01, 2009. The Master Circular also incorporates instructions contained in certain clarifications issued by RBI to banks during the course of the year. The Master Circular has been updated as on June 30, 2010 and has been placed on the web-site of the Reserve Bank of India (/en/web/rbi). Yours faithfully, (P. K. Panda) 1.1 Incidence of frauds, dacoities, robberies, etc., in banks is a matter of concern. While the primary responsibility for preventing frauds lies with banks themselves, the Reserve Bank of India (RBI) has been advising banks from time to time about the major fraud prone areas and the safeguards necessary for prevention of frauds. RBI has also been circulating to banks, the details of frauds of an ingenious nature not reported earlier so that banks could introduce necessary safeguards by way of appropriate procedures and internal checks. To facilitate this ongoing process, it is essential that banks report to the Reserve Bank full information about frauds and the follow-up action taken thereon. Banks may, therefore, adopt the reporting system for frauds as prescribed in the following paragraphs. 1.3 Delay in reporting of frauds and the consequent delay in alerting other banks about the modus operandi and issue of caution advices against unscrupulous borrowers could result in similar frauds being perpetrated elsewhere. Banks may, therefore, strictly adhere to the timeframe fixed in this circular for reporting fraud cases to RBI failing which banks would be liable for penal action as prescribed under Section 47(A) of the Banking Regulation Act, 1949 (As applicable to Co-operative Societies). 1.4 Banks should specifically nominate a senior official who will be responsible for submitting all the returns referred to in this circular.
2.2 Cases of 'negligence and cash shortages' and 'irregularities in foreign exchange transactions' referred to in item (d) & (f) above are to be reported as fraud if the intention to cheat/defraud is suspected/ proved. However, the following cases where fraudulent intention is not suspected/proved at the time of detection will be treated as fraud and reported accordingly: (a) cases of cash shortages more than Rs.10,000.00 and (b) cases of cash shortages more than Rs.5,000.00 if detected by management/auditor/inspecting officer and not reported on the day of occurrence by the persons handling cash. However, in the case of collection of an instrument which is genuine but the amount is collected fraudulently by a person who is not the true owner, the collecting bank, which is defrauded, will have to file fraud report with the RBI. In case of collection of instrument where the amount has been credited and withdrawn before realisation and subsequently the instrument is found to be fake/forged and returned by the paying bank, it is the collecting bank who has to file FMR-1 with the RBI as they are at loss by parting the amount before realisation of the instrument. 2.4 Encashment of altered / fake cheques involving two or more branches of same bank 2.4.1 In case of collection of altered/fake cheque involving two or more branches of the same bank, the branch where the altered/fake cheque has been encashed, should report the fraud to Head Office of the bank. Thereafter, Head Office of the bank will file the fraud report with RBI. 2.4.2 In the event of an altered/fake cheque having been paid/encashed involving two or more branches of a bank under Core Banking Solution (CBS), there could be a possibility of dispute/difference of opinion as to whether the branch where the drawer of the cheque maintains the account or the branch where the encashment has taken place should report the matter to the Head Office of the bank. In such cases also the branch which has released the payment against an altered / fake cheque should report the fraud to the Head Office . Thereafter, Head Office of the bank will file the fraud report with RBI. 2.5 Cases of theft, burglary, dacoity and robbery should not be reported as fraud. Such cases may be reported separately as detailed in paragraph 8. 3. REPORTING OF FRAUDS TO RESERVE BANK OF INDIA 3.1 Frauds involving amounts of less than Rs. 1.00 lakh The cases of individual frauds involving amounts of less than Rs.1.00 lakh are not to be reported individually to the RBI. Statistical data in respect of such frauds should, however, be submitted to RBI in a quarterly statement as detailed in Para 4.1. 3.2 Frauds involving amounts of Rs. 1.00 lakh and above but less than Rs. 25.00 lakh The cases of individual frauds involving amounts of Rs.1.00 lakh and above but less than Rs.25.00 lakh should be reported to the Regional Office of Urban Banks Department of Reserve Bank of India, under whose jurisdiction the Head Office of the bank falls, in the format given in FMR-1, within three weeks from the date of detection. 3.3 Frauds involving amounts of Rs. 25.00 lakh and above 3.3.1 The cases of individual frauds involving amounts of Rs.25.00 lakh and above should be reported to Frauds Monitoring Cell, Department of Banking Supervision, Reserve Bank of India, Central Office, World Trade Centre, Centre-1, Cuffe Parade, Mumbai 400005 in the format given in FMR-1, within three weeks from the date of detection. A copy of FMR-1 should also be submitted to the Regional Office of Urban Banks Department of Reserve Bank of India under whose jurisdiction the Head Office of the bank falls. 3.3.2 In addition to the requirement given at paragraph 3.3.1 above, banks may report the fraud by means of D.O. letter addressed to the Chief General Manager-in-Charge of the Department of Banking Supervision, Reserve Bank of India, Central Office, within a week of such fraud coming to the notice of the bank's Head Office. The letter may contain brief particulars of the fraud such as amount involved, nature of fraud, modus operandi in brief, name of the branch/office, names of parties involved (if they are proprietorship/partnership concerns or private limited companies, the names of proprietors, partners and directors), names of officials involved and whether the complaint has been lodged with the Police. A copy of the D.O. letter should also be endorsed to the Regional Office of Urban Banks Department of Reserve Bank of India under whose jurisdiction the bank's branch, where the fraud has been perpetrated, is functioning. 3.4 Frauds committed by unscrupulous borrowers 3.4.1 It is observed that a large number of frauds are committed by unscrupulous borrowers including companies, partnership firms/proprietary concerns and/or their directors/partners by various methods including the following:
In respect of frauds in borrowal accounts additional information as prescribed under Part B of FMR – 1 should also be furnished. Cases of attempted fraud, where the likely loss would have been Rs. 25.00 lakhs or more had the fraud taken place, should be reported by the bank to the Fraud Monitoring Cell, Department of Banking Supervision, Reserve Bank of India, Central Office, Mumbai within two weeks of the bank coming to know that the attempt to defraud the bank failed or was foiled. The report should cover the following:
Reports on such attempted frauds should be placed before the Audit Committee of the Board. Such cases should not be included in the other returns to be submitted to RBI. 4.1 Report on Frauds Outstanding (FMR-2) 4.1.1 Banks should submit a copy each of the Quarterly Report on Frauds Outstanding in the format given in FMR – 2 to the Regional Office of Urban Banks Department of the Reserve Bank of India under whose jurisdiction the Head Office of the bank falls within 15 days of the end of the quarter to which it relates. Banks which may not be having any fraud outstanding as at the end of a quarter should submit a nil report. 4.1.2 Part – A of the report covers details of frauds outstanding as at the end of the quarter. Parts B and C of the report give category-wise and perpetrator-wise details of frauds reported during the quarter respectively. The total number and amount of fraud cases reported during the quarter as shown in Parts B and C should tally with the totals of columns 4 and 5 in Part – A of the report. 4.1.3 Banks should furnish a certificate, as part of the above report, to the effect that all individual fraud cases of Rs. 1.00 lakh and above reported to the RBI in FMR – 1 during the quarter have also been put up to the bank’s Board of Directors and have been incorporated in Part – A (columns 4 and 5) and Parts B and C of FMR – 2. 4.2 Progress Report on Frauds (FMR-3) 4.2.2 In case of frauds where there are no developments during a quarter, a list of such cases with brief description including name of branch and date of reporting may be furnished in Part – B of FMR – 3. 4.2.3 If there are no fraud cases involving Rs.1.00 lakh and above outstanding, banks may submit a nil report. 5.1.1 Banks should ensure that all frauds of Rs. 1.00 lakh and above are reported to their Boards promptly on their detection. 5.1.2 Such reports should, among other things, take note of the failure on the part of the concerned branch officials and controlling authorities, and consider initiation of appropriate action against the officials responsible for the fraud. 5.2 Quarterly Review of Frauds 5.2.1 Information relating to frauds for the quarters ending March, June and September may be placed before the Audit Committee of the Board of Directors during the month following the quarter to which it pertains, irrespective of whether or not these are required to be placed before the Board/Management Committee in terms of the Calendar of Reviews prescribed by the Reserve Bank of India. 5.2.2 These should be accompanied by supplementary material analysing statistical information and details of each fraud so that the Audit Committee of the Board would have adequate material to contribute effectively in regard to the punitive or preventive aspects of frauds. 5.2.3 A separate review for the quarter ending December is not required in view of the Annual Review for the year-ending December prescribed below.
5.3.3 The annual reviews should also, among other things, include the following details:
6. GUIDELINES FOR REPORTING OF FRAUDS TO POLICE 6.1 Banks should follow the following guidelines for reporting of frauds such as unauthorised credit facilities extended by the bank for illegal gratification, negligence and cash shortages, cheating, forgery, etc. to the State Police authorities:
6.2 Filing of Police complaint in case of fraudulent encashment of DDs/TTs/Pay Orders/Cheques/Dividend Warrants, etc. 6.2.1 In case of frauds involving forged instruments, the paying banker has to file the police complaint (FIR) and not the collecting banker. 6.2.2 However, in case of collection of instrument which is genuine but the amount collected fraudulently by a person who is not the owner, the collecting bank which is defrauded has to file a police complaint (FIR). 6.2.3 In case of collection of instruments where the amount has been credited before realisation and subsequently the instrument is found to be fake/forged and returned by the paying bank, it is the collecting bank who has to file a police complaint as they are at loss by paying the amount before realisation of the instrument. 6.2.4 In cases of collection of altered/fake cheque involving two or more branches of the same bank, the branch where the altered/fake instrument has been encashed, should file a Police complaint (FIR). 6.2.5 In the event of an altered / fake cheque having been paid /encashed involving two or more branches of a bank under CBS, the branch which has released the payment against a fraudulent withdrawal, should file a Police complaint . Banks will report to the concerned Regional Office of Urban Banks Department of Reserve Bank of India under whose jurisdiction the Head Office of the bank falls, the details of the fraud cases closed along with reasons for the closure where no further action was called for. Fraud cases closed during the quarter are required to be reported in quarterly return FMR-2. Banks should report only such cases of frauds as closed where the actions as stipulated below are complete:
Banks should also pursue vigorously with the Police/Court for final disposal of the pending cases especially where the banks have completed staff side action. 8. REPORTING CASES OF THEFT, BURGLARY, DACOITY AND BANK ROBBERIES 8.1 Banks should arrange to report by fax / e-mail instances of thefts, burglaries dacoities and robberies to the following authorities immediately on their occurrence.
The report should include details of modus operandi and other information as at columns 1 to 11 of FMR – 4. 8.2 Banks should also submit to concerned Regional Office of the Reserve Bank of India, Urban Banks Department under whose jurisdiction the bank's Head Office is situated a quarterly consolidated statement in the format given in FMR – 4 covering all cases pertaining to the quarter. This may be submitted within 15 days of the end of the quarter to which it relates. 8.3 Banks which do not have any instances of theft, burglary, dacoity and/ or robbery to report during the quarter, may submit a nil report. |