FSR report highlights: Frauds in banking sector see an uptick

The Financial Stability Report has raised concerns over the increase in frauds due to technological innovations. “In the recent past, frauds in the technology environment have accentuated through malware attacks and skimming frauds in ATMs, misuse of SWIFT messages by employees and attacks on the SWIFT messaging system of a bank,” the report said.

The Reserve Bank of India said with the increase in ATM penetration, it was important that transactions at ATMs were carried out in a more secure manner. RBI had also set up a cyber security cell last year and has also been periodically asking banks to strengthen cyber security.
 

Another area of concern for the central bank has been instances of large-scale forex remittances in the guise of import advances/payments.

“While banks may not have any credit exposures to such parties remitting forex, misuse of banking channels for such remittances is a serious concern, and, therefore, banks need to enhance rigour in their data analytics and reporting structures to aid board level governance,” the report said.
 

RBI said it had increased regulatory and supervisory instructions to check the misuse of remittance channels and has been levying fines on banks for violation of instructions issued under Prevention of Money Laundering Act and Foreign Exchange Management Act.
 

The FSR report also pointed out that another area where some banks have been flouting rules, which needed to be addressed, was around opening current accounts and providing non-fund-based credit facilities (bill/LCs discounting/guarantees) by banks to constituents who are not their regular borrowers.