Combating Fraud Risk in Payment

Systems
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Defining Fraud
..a deliberate act of omission or commission
by any person, carried out in the course of a
banking transaction or in the books of
account maintained manually or under
computer system in banks, resulting into
wrongful gain to any person for a temporary
period or otherwise, with or without any
monetary loss to the bank.
(Report of the Study Group On Large Value Bank Frauds issued by RBI)


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Payment Systems
Key participants
Reserve Bank of India
CCIL, Stock Exchanges
Clearing Houses
Banks
Other entities
Mission:
To ensure that all the payment and settlement
systems operating in the country are safe, secure,
sound, efficient, accessible and authorised
Apex body:
The Board for Regulation and Supervision of
Payment and Settlement Systems (BPSS)

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Frauds in Payment Systems
Paper based
Cheques
Dividend/Interest warrants
Demand Drafts/Pay orders
Electronic
CTS (Cheque Truncation System)
RTGS/NEFT
ECS Debit and Credit
ATMs
Credit cards including prepaid
Internet Banking
Mobile Banking



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Instrument frauds
Forgery
Colour photo copy
Colour photo copy with MICR coding
Scanned image printed on security paper
Large value cheques issued without balance in
account


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Electronic frauds
Fraudulent RTGS/NEFT requests
Physical requests
Through internet banking
Speedy dissemination of fraud funds to various
banks
Withdrawal across the country through ATMs or
cheques
ECS frauds
Changing account numbers for credit/debit



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Channel frauds
ATMs
Social engineering
Skimming
Unauthorised reversals

Internet
Phishing
Vishing

Mobile Banking
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The challenge to a Bank
Financial Loss

Brand Image & Reputation

Customer confidence

Regulator confidence

Shareholder confidence



Combating the Challenge
The TAP concept :
Technology Solutions
Awareness/Training
Policy Changes
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Technology & fraud mitigation
Upgrading reader sorter machines
UV integration
Reading of security features
Sorting suspicious instruments into a different
pocket
Transaction monitoring
New accounts
Accounts with unsatisfactory conduct
Clearing accounts
Transaction monitoring in automated channels
Internet banking
ATMs
Mobile

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Awareness
Customer awareness
Newspapers & other media
SMS alerts
Emails

Staff awareness
Training programmes
Practical
Online
Culture building
Rewarding fraud preventers
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Policies for Risk Mitigation
IT Security Policy

Outsourcing Policy

Employee Code of Conduct

Whistle Blower Policy

Fraud Policy



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Fraud governance
Fraud governance structure
Detailed fraud policy
Reporting to Board, Special Committee
Responsibility of senior management
Staff accountability for frauds
Fraud is not the responsibility of one department,
it has to be owned across the organisation
Fraud loss limits
Triggers for review of product features
Regular review of fraud prone areas by Special
Committee

Anti Fraud Policies
& Procedures
Fraud Vulnerability
Reviews
Fraud Awareness
Training
Fraud Risk
Assessment
Whistle Blower /
Report a Fraud
Proactive Fraud Prevention & Detection
Post Event Analysis
Reviews &
Investigations
Data Mining &
Analysis
Building Blocks in Fraud Management
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Thank you