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How to deal with the latest financial scams: The bank’s lawyer

How to handle the latest banking scams?

Bank lawyers are calling for banks to adopt more sophisticated defences, with the aim of reducing the number of financial crimes that can be carried out through fraud and manipulation.

The banking sector has seen a sharp rise in the number and sophistication of scams in recent years, as banks have become more dependent on mobile banking technology.

“There are many new types of scams that are happening,” said Rajan Saha, president of the National Bankers Association of India.

“A big problem is how to deal (with them).”

A bank has a wide range of options to address frauds that can have devastating consequences on its business, from taking action against fraudulent accounts to imposing a civil or criminal penalty on a perpetrator.

“The key thing is to have a clear strategy for detecting and combating the fraud and it is a big responsibility,” said Saha.

In March this year, the National Investigation Agency (NIA) said there were around 9,000 cases of financial crime being committed on behalf of banks, compared to around 6,000 in 2015.

“We are now seeing more and more cases of fraudulent transactions and money laundering being reported by banks and the government,” said Anand Swarup, director of the Centre for Financial Investigation (CFI).

“It is time for banks and regulators to do more to stop these scams.”

Banks are required to report suspicious activity to the RBI within a specified timeframe, as per an earlier directive by the Reserve Bank of India (RBI), which is also responsible for ensuring that they follow the rules of the Indian banking system.

“But this directive was not followed, so banks were not able to provide information to the government and the RBI,” said Swarups.

The RBI has made it clear that it is looking into various ways to strengthen the anti-money laundering regime.

“RBI is working on a number of new measures and plans to ensure that all transactions are subject to the anti fraud and anti money laundering (AFL) norms,” said R.K. Srivastava, vice-president, banking sector, RBI.

“Our view is that banks need to ensure their compliance with the anti money-laundering norms as they can play an important role in preventing money laundering and facilitating financial transactions.”

According to the NIA, the government is also working on ways to provide greater protection to small and medium enterprises (SMEs) and small companies, as well as those with more than Rs 1 crore in assets.

“As a rule, all SMEs are subject, if they have assets of less than Rs 10 lakh, to the strict KYC norms,” Swarupp said.

“This includes SMEs that have not been in business for a certain number of years.”