After analysing top 100 bank frauds in the country, the Central Vigilance Commission (CVC) has directed the probe agencies, especially the Central Bureau of Investigation (CBI) to go after the promoters who are siphoning money from company to create personal wealth, and attach theirproperties.
In its 47-page report released on Tuesday, the CVC analysed the banking frauds committed by promoters in 13 sectors, including media, gems and jewellery, manufacturing, aviation, services and projects, and discounting of cheques.
The report authored by Vigilance Commissioner TM Bhasin, who was former CMD of Indian Bank and chairman of Indian Banking Association, said basic fraud is committed by creating fake invoices and manipulation of accounts to cheat banks by the promoters of the companies. The CVC has shared their report to the Reserve Bank of India, Ministry of Finance and major investigating agencies and Vigilance Units of the banks.
The report urged that the agencies like, the CBI to take parallel steps to attach the properties of the promoters along with filing of chargesheet and trial court proceedings to recover the loss. It reiterated that agencies should concentrate on money trail from company accounts to promoters’ personal wealth creation.
The top most vigilance body also noted that gem and jewellery sector is the most non-transparent sector with many fake accounting practices. The report observed that this sector cheats the banks with fake bills with some time with inflated bills or undervalued bills.
Giving details of the frauds in the gem and jewellery sector, the report cited different modus operandi by private companies, including inflating the valuation of diamonds with the malafide intention to avail higher credit facilities from the lenders.
It cited absence of effective mechanism in banks and certain other loopholes that led to frauds in this sector and suggested systemic changes. “The gem and jewellery sector credit facilities to these companies increased manifold within a short span of time in an effort by the banks to increase their credit dispensation. There should have been some segment related limits on such type of credit exposures,” the report suggested.
The major recommendation was the use of real time information technology and strengthening the core banking system and its’ linking with all major units of the banks. The CVC also noted that automated money transfer system like SWIFT is at present not available to many officers of the banks. The report suggested that this should be available to all senior banking officers to detect frauds in automated transferring money.
The report also noted many internal frauds committed by banking staffers by obtaining commission from canvassing deposits from Government organisations and PSUs. “These studies have been done by the commission as a preventive vigilance tool by utilising its vast experience of handling various cases of frauds and staff accountability related matters,” said Bhasin.
He said as a conscious decision and with a view to maintaining discreteness, the names of borrower accounts or entities, and the names of the banks have not been disclosed in the report. “However, steps are being taken for all encompassing actions such as investigation by the premier investigative agencies, fixing staff accountability and recovery measures, etc. For effective action,” he said.
Bhasin said the findings have also been shared the Enforcement Directorate (ED) and the Central Bureau of Investigation (CBI). The measures suggested include strengthening of standard operating procedures (SOPs) and the monitoring system, and also highlighting the role of controlling offices, so as to examine the aspect of quality of business, Bhasin said.