Ways to combat fraud at financial institutions

Banks and financial institutions are required to take the initiative for timely and complete disclosure of fraud to the Reserve Bank of India (RBI). Banks are also required to adopt a regular chain of reporting system for frauds.

Banks may, with the approval of their board of directors, frame internal policy for the fraud risk management and fraud investigation function, based on the governance standards relating to the ownership of the function and accountability for malfunctioning of the fraud risk management process in their banks.

RBI has observed that banks sometimes detect frauds long after their perpetration. Some fraud reports are submitted to RBI with considerable delay and without complete information. On occasion, RBI has learned about large frauds through reports in the press and financial journals.

Shardul Thacker is a partner at Mulla & Mulla & Craigie Blunt & Caroe in Mumbai.