Banks Identify 3000 Entities for Fraud

Banks have identified around 3,000 entities involved in fraud. The list includes lawyers, builders and gold loan appraisers among others. The long list comes after a meeting where banks decide to share the information on a real-time basis, said people familiar with the developments.

The issue was discussed at a meeting with the Advisory Board for Banking and Financial Frauds (ABBFF), and it and was decided that it will be made mandatory for the lenders to check this list before dealing with such entities and further update it on a real-time basis.

The urgency follows a sharp rise in banking frauds. Another bank executive said that it was pointed out during the meeting with ABBFF that the operational staff is not accessing the “caution list” mandatorily, which can lead to fraudulent entities finding a way back into the financial system.

“All banks will be sending internal directives to ensure full compliance,” he added. Banks individually take action against entities involved in fraud but it was observed that many times such h entities were engaged by other regulated entities.

The consolidated list allows all lenders to run a check and ensure they do not engage with entities facing action for banking fraud.

The Central Vigilance Commission (CVC) has directed that all PSBs, public sector insurance companies, and public sector financial institutions should refer all matters of fraud involving Rs 3 crore and above to ABBFF for advice.

Additionally, the board has also been empowered to periodically carry out fraud analysis in the financial system and give inputs, if any, for policy formulation to the RBI and CVC.

“The list may be further updated as banks would be completing their internal exercise soon,” said one of the bank executives quoted above, adding that the new list may have more entities like business correspondents, chartered accountants, and valuers.

The RBI’s July 15 directions on fraud classifications require all regulated entities to issue a detailed show cause notice to the persons, entities, and its promoters/whole-time and executive directors against whom allegations of fraud are being investigated.