SWIFT Fraud: Banks May Have Been Slow in Heeding to Warnings | CORPORATE ETHOS

SWIFT Fraud: Banks May Have Been Slow in Heeding to Warnings

By: | February 21, 2018
swift fraud

It appears that India’s public sector banks may have been slow in heeding to the warnings issued by Reserve Bank of India (RBI) regarding potential malicious use of the SWIFT infrastructure for transferring funds abroad.

RBI has stated that SWIFT system has always been a component of their operational risk profile. The central bank had atleast on three occasions since August 2016 advised banks to implement safeguards for pre-empting misuses of the system. However, the bans have been at varying levels in implementation of such measures, according to RBI.

In the wake of the Rs 11,300 cr PNB fraud, RBI has directed the banks to implement safety measures within stipulated deadlines for strengthening the SWIFT operating environment.  However, RBI doesn’t seem to put the entire blame of the fraud on PNB management.

“The fraud in PNB is a case of operational risk arising on account of delinquent behaviour by one or more employees of the bank and failure of internal controls. RBI has already undertaken a supervisory assessment of control systems in PNB and will take appropriate supervisory action.”

RBI Appoints Expert Committee
in view of large divergences observed in asset classification and provisioning in the credit portfolio of banks as well as the rising incidence of frauds in the Indian banking system, it has been decided to constitute an Expert Committee under the chairmanship of Shri Y H Malegam, a former member of the Central Board of Directors of RBI, to look into the reasons for high divergence observed in asset classification and provisioning by banks vis-à-vis the RBI’s supervisory assessment, and the steps needed to prevent it; factors leading to an increasing incidence of frauds in banks and the measures (including IT interventions) needed to curb and prevent it; and the role and effectiveness of various types of audits conducted in banks in mitigating the incidence of such divergence and frauds.

The members of the committee will be: Shri Bharat Doshi, Member, Central Board of Directors, RBI; Shri S Raman, former Chairman and Managing Director, Canara Bank and former Whole-Time Member, SEBI; and Shri Nandkumar Saravade, Chief Executive Officer, Reserve Bank Information Technology Pvt Ltd (ReBIT). Shri A K Misra, Executive Director, RBI will be the Member-Secretary of the committee.