Fraud in Public Sector Banks: A Call for Stringent Background Verification
India woke up to a fraud of eleven thousand and five hundred crore rupees. What a big number, with seven zeros at the end. That too, from a bank that was government-owned, a public sector bank.
If we understand this whole fiasco in simple terms: There was an employee in a bank, Mr. X. He was in a managerial position, which had a lot of authoritative magnitude attached to it. Plus, he was very close to the heads of the organization, who trusted this employee with their secret passwords, which generated the Letter of Undertakings (LoUs).
Now, these LoUs are very powerful documents. They are given only after strict invigilation and audits. The trust was breached. Unauthorized LoUs were rolled out, and this small action led to a fraud of thousands of crores of rupees and an irreversible loss of goodwill.
Questioning Public Sector Organizations
Are we doing stringent background verification during recruitment and appraisals? Do you know your own employees? I guess not!
In September 2005, the central bank had cited cases of technological mishaps, which resulted in losses of money and damaged the lenders' reputation. The knock of possible fraud was there, and the importance of following the 'Know Your Employees (KYE)' norms was realized, but it was quite short-lived.
A 'Know Your Employees' process involves a background check during recruitment and after it as well. If only we follow the same in a very strict manner, we can avail the advantages of it and curb the financial and goodwill loss.
Financial Background Verification for Key Positions
Here is one question in my mind: Why can’t we do financial background verification for all the top position holders or those who sit in key authoritative positions? We can find the following answers:
- Tax paid
- Negative accounts paid
- Active accounts including open loans
- Accounts paid according to terms
- Inquiries made by third parties
The employees should always be made aware that such verifications do take place once in a while. The organization will be aware of the financial state of the employee, and if there is anything suspicious, it must be looked into immediately.
If such background verification was done for our Mr. X, within time, we would have caught the culprit, and the financial and goodwill loss would have been a little less damaging.
Public sector banks employ a huge number. Of course, having financial background verification for all is not feasible, but for the top level, it can be done, and it may save a lot of financial and brand image loss for the organizations. What do you say?
Read more at: https://www.jantakhoj.com/blog/backg...ication-banks/
From India, New Delhi
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23India woke up to a fraud of eleven thousand and five hundred crore rupees. What a big number, with seven zeros at the end. That too, from a bank that was government-owned, a public sector bank.
If we understand this whole fiasco in simple terms: There was an employee in a bank, Mr. X. He was in a managerial position, which had a lot of authoritative magnitude attached to it. Plus, he was very close to the heads of the organization, who trusted this employee with their secret passwords, which generated the Letter of Undertakings (LoUs).
Now, these LoUs are very powerful documents. They are given only after strict invigilation and audits. The trust was breached. Unauthorized LoUs were rolled out, and this small action led to a fraud of thousands of crores of rupees and an irreversible loss of goodwill.
Questioning Public Sector Organizations
Are we doing stringent background verification during recruitment and appraisals? Do you know your own employees? I guess not!
In September 2005, the central bank had cited cases of technological mishaps, which resulted in losses of money and damaged the lenders' reputation. The knock of possible fraud was there, and the importance of following the 'Know Your Employees (KYE)' norms was realized, but it was quite short-lived.
A 'Know Your Employees' process involves a background check during recruitment and after it as well. If only we follow the same in a very strict manner, we can avail the advantages of it and curb the financial and goodwill loss.
Financial Background Verification for Key Positions
Here is one question in my mind: Why can’t we do financial background verification for all the top position holders or those who sit in key authoritative positions? We can find the following answers:
- Tax paid
- Negative accounts paid
- Active accounts including open loans
- Accounts paid according to terms
- Inquiries made by third parties
The employees should always be made aware that such verifications do take place once in a while. The organization will be aware of the financial state of the employee, and if there is anything suspicious, it must be looked into immediately.
If such background verification was done for our Mr. X, within time, we would have caught the culprit, and the financial and goodwill loss would have been a little less damaging.
Public sector banks employ a huge number. Of course, having financial background verification for all is not feasible, but for the top level, it can be done, and it may save a lot of financial and brand image loss for the organizations. What do you say?
Read more at: https://www.jantakhoj.com/blog/backg...ication-banks/
From India, New Delhi
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Dear Akansh, I opine that this is an open fraud and most of the top people are involved because if you go to the bank and want to withdraw your own amount by issuing a cheque, you need to undergo so many verifications like tallying the signature, checking if you have that much money, ensuring the proper date, and making any corrections on the cheque, etc.
Verification Process for Loans
As far as the sanction of a loan for an individual, they will approach the organization where they are working, meet the concerned HR to obtain confirmation, visit the house where the employee is residing, obtain confirmation from the house owner, pay slip, Aadhar card, PAN card, bank statement, etc. There is even much more stringent verification for house loans, car loans, etc. They may even depute enforcers in case of delays in repayment.
Consequences of Loan Defaults
In the case of a house loan, they will post notices, organize auctions, and in the case of vehicles, the enforcers will directly seize the vehicle without any mercy. Despite handling loans worth thousands or even lakhs of crores of rupees, why do they fail? Why are similar things not happening in other countries? I hope you got the answer.
Thank you.
From India, Hyderabad
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Verification Process for Loans
As far as the sanction of a loan for an individual, they will approach the organization where they are working, meet the concerned HR to obtain confirmation, visit the house where the employee is residing, obtain confirmation from the house owner, pay slip, Aadhar card, PAN card, bank statement, etc. There is even much more stringent verification for house loans, car loans, etc. They may even depute enforcers in case of delays in repayment.
Consequences of Loan Defaults
In the case of a house loan, they will post notices, organize auctions, and in the case of vehicles, the enforcers will directly seize the vehicle without any mercy. Despite handling loans worth thousands or even lakhs of crores of rupees, why do they fail? Why are similar things not happening in other countries? I hope you got the answer.
Thank you.
From India, Hyderabad
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Background Verification Form.doc