Banking fraud is a serious white collar crime that involves deception to obtain money from financial institutions. Common types of banking fraud in India include advance fee fraud, account opening fraud using fake documents, phishing scams, loan fraud, and money laundering. Punishments for banking fraud are severe, with imprisonment of up to 30 years and fines up to three times the amount involved. India loses approximately Rs. 100 crore daily to banking fraud according to RBI reports. Recent high-profile fraud cases in India include those involving Nirav Modi, Mehul Choksi, and Ratul Puri.

2. Table of Contents :
1. Introduction about Banking Fraud
2. Types of frauds
3. Some Recent Bank Fraud cases
4. A sneak peek into faceless crimes
5. Methods of Prevention
6. References

3. What is Banking Fraud ?
 Any illegal act that involves the use of deception to obtain
money or other property from a financial institution, or from a
bank’s depositors.
 There are dozens of ways in which an individual can
commit bank fraud. Some of these schemes are more complex,
and affect more people or institutions, garnering harsher
penalties than others do.

4. Is Banking Fraud a crime ?
 A white collar crime.
 Chargeable at the Federal level.
 Highly penalized by nations all over the world.

5. Punishment for Banking Frauds
IN INDIA :
Under section 447 ,
 Imprisonment for six months - 10 years.
 Fine up to three times the amount involved in fraud.
IN USA :
Under section 1344 of chapter 18 ,
 Fine up to one million dollars.
 Prison sentence of up to thirty years.

6. STATISTICS
4372 4669 4534
4093 4235 4306 4639 4693 5076
5916
6800
8700
7400
NUMBER
OF
CASES
NUMBER OF BANK FRAUD CASES : INDIA
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
FINANCIAL YEAR

8. TYPES OF BANK
FRAUD
• Advance Fees Fraud
• Phishing Fraud
• Card Skimming
• Accounting data fraud
• Account opening fraud
• Cheque kiting
• Cheque fraud
• Counterfeit securities
• Bank hacking fraud
• Loan fraud
• Money laundering fraud
• Money transfer fraud
• Letters of Credit
• OTP fraud

9. • Advance fees
fraud
• An advance-fee fraud occurs when the
victim pays money to someone in
expectation of receiving something. such
as receiving a loan, contract, investment,
or gift and then receiving little or nothing
in return.
• Account opening fraud means opening a
bank account to deposit and cashing
fraudulent cheques . This fraud is one of
the most common frauds in the world.
Moreover, mostly these accounts are
opened with fake proofs so no one can
get busted.
• Account
opening fraud

10. Phishing fraud
• Phishing is an online scam that uses to steal private user
data which includes login details, OTP, Passwords, and
credit card numbers. Moreover, Phishing can be done
by giving bank details to fake emails, texts, phone calls.
• The OTP messages that are passed through telex in form of
codes could be altered to divert the funds to another
account so that code could help fraudsters to make fund
transfer.
OTP fraud

11. • Loan fraud • Loan fraud means when funds are
lent to a borrowing customer that
has exceeded his credit limit or a
non-borrowing customer.
• Scammers use a lot of schemes to
get your money by using money
transfers through companies like
Western Union and Money-Gram.
Scammers create pressure on
people to use money transfers as
quickly, so fraudsters can get the
money before that victims realize
they’ve been cheated.
• Money transfer
fraud

13. IBAN CH93 0076 2011 6238 5295 7
ISO Country Code CH (Switzerland)
IBAN Check Digits 93
BBAN 0076 2011 6238 5295 7
Bank Identifier 00762
Account Number 011623852957
SEPA Member Yes
This is an example Swiss IBAN. The country code for Switzerland is CH. The IBAN check digits 93
validate the routing destination and account number combination in this IBAN. The BBAN is 0076
2011 6238 5295 7, which contains the country-specific details of the account number. The bank
identifier is 00762 and the account number is 011623852957.
Switzerland is a member of the Single Euro Payments Area (SEPA).
India loses Rs 100 crore to banking fraud
every day for the past seven years,
according to an RBI report. Although there
is a decrease from the last year's data on
banking frauds.
States like Delhi, Tamil Nadu, Telangana,
and Gujarat together accounted for more
than Rs 2 lakh crore or 83% of the
quantum of money lost to financial fraud.
The major of the biggest frauds in India
are connected to the Swiss bank,
Switzerland.
The reason behind these frauds executed
in Swiss banks is because of the
confidentiality of the customer's details.

14. Money Laundering Case of
Ratul Puri
• The Enforcement Directorate has arrested businessman
Ratul Puri, nephew of Madhya Pradesh Chief Minister
Kamal Nath, in an alleged Rs 354-crore bank fraud case.
• Ratul Puri was arrested under the Prevention of Money
Laundering Act, 2010.
• AgustaWestland VVIP chopper scam is a corruption case
in the field of helicopters.
• Ratul Puri was already facing heat for his alleged
involvement in the AgustaWestland VVIP chopper scam.
• The PMLA case emerges from a CBI FIR of Aug. 17,
where Ratul Puri, his father and Moser Baer India Ltd.
promoter Deepak Puri, mother Nita Puri (Kamal Nath's
sister) and others were booked in connection with a Rs 354
crore bank fraud case filed by the Central Bank of India.
• Ratul Puri was booked in this case because he was an
executive director at Moser Baer India.

15. • Moser Baer had been taking loans from various banks since 2009.
• Moser Baer India “has committed fraud and cheated the complainant bank thereby
making a wrongful gain to themselves and a wrongful loss to the lender bank which is
a custodian of public money", the Central Bank of India said in submissions to CBI.
• Ratul Puri, meanwhile, is facing criminal investigations by three main central probe
agencies—the Enforcement Directorate, Central Bureau of Investigation, and the
Income Tax Department.
• After resolving the case, Ratul Puri has to pay a penalty of Rs 3600 crore and after
that, he got bail.

16. Nirav Modi's Swiss Bank
accounts with 6 million
US dollars seized
• Nirav Modi is a key accused in Rs 13,400 crore Punjab
National bank (PNB) fraud case and is facing
extradition trial in the United Kingdom at the moment.
• Nirav Modi's four Swiss bank accounts have been
frozen by the authorities in Switzerland at the request
of India, confirmed Enforcement Department.
• The Letters of Undertakings (LOUs) were opened in
favor of branches of Indian banks for the import of
pearls for one year, for which Reserve Bank of India
guidelines layout a total period of 90 days from the
date of shipment.
• The Enforcement Directorate (ED) recovered bank
token devices of the foreign dummy companies used
by the fugitive diamond trader to transfer the
fraudulent funds, by Nirav Modi.

17. • The probe agency found that Nehal Modi, brother of Nirav Modi had destroyed
the devices and had even secured a server located at United Arab Emirates (UAE)
soon after the scam broke out.
• The enforcement agency has so far seized movable and immovable properties to the
tune of Rs 2362 crore in the PNB fraud case.
• PNB employees misused the SWIFT network to transmit messages to Allahabad Bank
and Axis Bank on fund requirement.
• On 29 January 2018, PNB lodged a FIR with CBI stating that fraudulent LOUs worth Rs
2.8 billion (Rs 280.7 crore) were first issued on 16 January.

18. • In the complaint, PNB had named three diamond firms, Diamonds R Us, Solar
Exports and Stellar Diamonds.
• As of 18 May 2018, the scam has ballooned to over Rs 14,000 crore.
• In early 2018, both Mehul Choksi and Nirav Modi fled the country before the multi-
crore fraud came to light.

19. A sneak peek into faceless crimes
A computer crime may be committed in one country and the result can be in
another country. There is no personal exposure, no written documents, no
signatures, no fingerprints or voice recognition. The criminal is truly and in
strict sense faceless.
The normal investigator does not have the proper background and knowledge
,special investigators have to be created to carry out the investigations. the
different treaties and conventions have created obstructions in relation to
tracking of cyber criminals hiding or operation in other nations
FBI of USA have a cell, even in latest scenario there has been cells operating in
the Maharashtra police department to counter cyber crimes. C.B.I also have
been asked to create special team for fighting cyber crimes.

20. Comparison between FY 2020 between India and Britain
India
• Last financial year, 2020-21, during which
more than 83,000 banking frauds took
place that syphoned off Rs 1.38 lakh
crore. This was a slight improvement over
the figures from the previous financial
year (2019-20) when the country
witnessed 231 banking frauds every day.
• The year saw 4,047 cases of online
banking fraud According to the figures for
2019-21, public sector banks are
responsible for Rs 2.94 lakh crore in
frauds , while private sector banks are
responsible for Rs 86,355 crore.
Britain
• Unauthorised financial fraud losses across
payment cards, remote banking and
cheques totalled £783.8 million in 2020, a
decrease of five per cent compared to 2019.
A British record of 754 million pounds ($1
billion)was stolen in the first six months of
this year, up 30% from the same period in
2020.
• Online banking fraud is categorized under
the larger group of remote banking fraud,
which accounted for more than 150 billion
GBP in losses during 2019.

21. • Over 1,100 cases pertain to
card/internet transactions, though the
value stood at Rs 32 crore. the
number of fraudulent card or internet
transactions is on the rise and
accounted for 35% of the total number
of cases in FY21.
• The recoveries during the same
period amount to a little over Rs 1,000
crore, less than one per cent of the
outflow.
• Impersonation scams saw the biggest
increase of any scam type, almost
doubling in 2020 compared to 2019.
Scams in which scammers pretend to be
trusted government agencies and
delivery companies to get victims to give
them their money, nearly doubled in
2020 to 39,364.
• Banks and card companies prevented
£1.6 billion in unauthorized fraud in
2020. This represents incidents that
were detected and prevented by firms
and is equivalent to £6.73 in every £10 of
attempted fraud being stopped.

22. Some
Loopholes in
system
Illegal agreements
between the banking staff
members and the third
parties
Lack of technologies to
detect frauds and scams
in the early stage
Formalizing policies to
ensure to ensure
regulatory compliance
and good governance .
Faulty incentive mechanism in
place for employees
ADVERSE IMPACT OF BANKING SCAMS

23. Detection of Bank Frauds
• What is fraud detection?
• Fraud detection is a set of activities undertaken to prevent money from being obtained
through false pretences.
• Major techniques used to detect fraud :
FRAUD DETECTION
STATISTICAL
DATA ANALYSIS
AI TECHNIQUES

24. STATISTICAL DATA ANALYSIS
Data matching is used to compare two sets of collected data. The process can be
performed based on algorithms or programmed loops. Trying to match sets of data
against each other or comparing complex data types. Data matching is used to remove
duplicate records and identify links between two data sets for marketing, security or
other uses.
Regression analysis allows you to examine the relationship between two or more
variables of interest. Regression analysis estimates relationships between independent
variables and a dependent variable. This method can be used to help understand and
identify relationships among variables and predict actual results.
Gap analysis is used to determine whether business requirements are being met, if
not, what are the steps that should be taken to meet successfully.

26. Ai techniques
Data mining Machine learning
 Classifies, groups and
segments data to search
 Through millions of
transactions to find patterns
and detect fraud.
Neural networks Pattern recognition
Automatically identifies
characteristics found in
fraud.
Learn suspicious-looking
patterns and use those
patterns to detect them
further.
Detects classes, clusters
and patterns of suspicious
behaviour.

28. GOVERNMENT’S ROLE
What is the main role of the government in the financial system?
Minting of Money: The government is the only agency which is authorized to create money
supply in a country. Therefore, it is the responsibility of the government to ensure that
excess money is not printed and flooded in the market.
One of the major things which the government is
doing is educating people and making them aware
of different information regarding banks by running
advertisements .

29. INDIVIDUAL STEPS
1. Keep Financial Data Separate For business users in particular, use a dedicated work
station to perform all company banking activity. Use other computers to access the
Internet and conduct non-banking business.
2. Know Who’s Asking Never share any personal information, especially social security or
tax ID, numbers, account numbers, or login and password information via email or
text.
3. Keep Your Passwords Secret Do not share passwords and do not leave any
documents that contain access to financial data in an unsecured area. Change your
passwords regularly for better protection, using a combination of letters, numbers and
special characters when possible.

30. 5. Protect Your Computer
With cyber attacks on the rise, it’s more important than ever to install antivirus software on
your computer or network. Equally important is ensuring you are regularly running and
updating this software to prevent viruses from infecting your computer. In addition,
installing and enabling the following software programs will help you combat malicious
cyber activity:
 Anti-spam software
 Firewall
 Anti-spyware software
Keep your computer operating system and Internet browser current; this provides
additional protection against fraud.
4. No Phishing Allowed
Beware of phishing emails. These emails are designed to prompt you to click links
provided within the email to verify or change your account in some way. Often, the
links included in the email are ways for fraudsters to install malicious software onto the
computer or device you use to access your email.