India’s second largest IT services firm Infosys on Friday clarified that the Rs 130-billion Punjab National Bank scam was not aided by any failure of its Finacle core banking software, but due to a breakdown of manual processes on the bank’s end.
“On the PNB front, I just want to clarify that it has nothing to do with Finacle; it was a process failure,” said U B Pravin Rao, COO, Infosys during the company’s Q4 earnings call. “You can have any strong technology, you can have any strong platform, but if there is collaboration between the maker and the taker, it’s very difficult for any system to prevent. It’s more of a process failure than anything else,” he added.
The company said, going forward, it will try and use artificial intelligence and machine learning to aid in the detection of frauds, built right into Finacle.
The version of Finacle used by the bank did not have an automatic integration system that requires the bank to do things manually. The breakdown of this manual process along with the collusion of employees and the fraudsters is what is said to have led to the scam going undetected for so long.
The fraud basically occurred because Letters of Understanding and international financial communication system SWIFT used by PNB did not get captured in its core banking software. State-owned PNB was apparently working to upgrade to the automated integrated version of Finacle for a year and a half, before the scam emerged.
Going forward, Infosys said it would work on using artificial intelligence and machine learning technologies to detect frauds, something which can help bring down the ability of humans to manipulate a banking system for gain. It is looking at ways to integrate its AI platform Nia within Finacle to do the same.
“We will try to experiment and pilot the use of Nia within Finacle and see if from a larger fraud context whether you can use machine learning to try to detect it in a much better way. But at the same time there has to be tightness in any process you deploy as well,” added Rao.
PNB in February had said that its CBS had been bypassed over the years to raise payment notes to foreign branches of Allahabad Bank, Axis Bank, and Union Bank of India, using SWIFT, by two employees at one of its Mumbai branches.