Describing frauds in the financial sector as “lethal parasites” to the economy of the nation, Union Minister of State for Finance Jayant Sinha Friday urged banks and financial institutions to follow the RBI prescribed framework relating to prevention, early detection and timely initiation of staff accountability, while ensuring that the normal conduct of business of banks and their risk taking ability is not adversely imparted.
The MoS was speaking at the CBI headquarters in New Delhi after he inaugurated the sixth conference of Chief Vigilance Officers of Public Sector Banks and Financial Institutions. “The concept of a Red Flagged Account (RFA) is being introduced in the current framework as an important step in fraud risk control.
A RFA is one where a suspicion of fraudulent activity is thrown up by the presence of one or more Early Warning Signals (EWS). These signals in a loan account should immediately put the bank on alert regarding a weakness or wrong doing which may ultimately turn out to be fraudulent. A bank cannot afford to ignore such EWS but must instead use them as a trigger to launch a detailed investigation into a RFA,” Sinha said.
The Central Fraud Registry being prepared by RBI, the MoS said, will be a centralised searchable database which can be accessed by banks.
Speaking at the conference, CBI Director Anil Sinha said, “On one hand, the number of bank fraud cases, including big-ticket frauds getting registered with the CBI is expected to see a substantial increase, while on the other, there is going to be an increased responsibility on the CVOs of banks to ensure that the complaints filed with CBI are comprehensive and contain a full disclosure of all facts.”