According to the Reserve Bank of India's (RBI) annual report for 2023-2024, India reported 36,075 bank frauds, which is a 166% increase from the 13,564 frauds reported in 2022-
2023. However, the amount involved in the frauds decreased by 46.7% to ₹13,930 crore in 2023-2024, down from ₹26,127 crore in the previous year. The RBI also reported that online banking frauds decreased by more than 45% in 2023-2024.
In today’s financial world, banks play an important role in protecting our money and ensuring smooth transactions. However, as technology evolves and the banking system becomes more complex, so do the risks associated with it. One of the major threats to the integrity of the financial system is bank fraud. These fraudulent activities not only affect individuals and businesses but also damage the trust that is fundamental to the banking system.
Let’s look at what exactly a bank fraud is.
What is a bank fraud?
Bank fraud is the illegal activity to obtain money or financial assets from a financial institution
or its customers. Common examples include identity theft, phishing scams, check fraud, and credit card fraud. It can take time and resources to uncover and resolve frauds, making it a significant issue for banks and their customers alike.
After understanding about bank fraud let us try to have a look at what roles the bank play to
prevent frauds.
Fraud Prevention Strategies in Banks
Transaction monitoring:
Transaction monitoring is the activity of monitoring or tracking the customer transactions for suspicious or unusual activity. It helps detect potential fraud, money laundering, or other illegal acts by analyzing patterns in real-time or after the transaction has occurred. If irregularities are found, alerts are generated for further investigation.
Conducting audits regularly:
Conducting regular audits in banks involves systematically reviewing financial records, operations, and processes to identify any discrepancies or vulnerabilities that could lead to fraud. These audits help ensure compliance with regulations, detect suspicious activities, and verify that internal controls are effective in preventing fraud. Regular audits serve as a proactive measure to catch potential issues before they become serious problems.
Strict KYC norms:
Banks implement strict Know Your Customer (KYC) norms to verify the identity of customers, reducing the risk of identity theft and fraudulent accounts.
Biometrics:
Biometrics helps solve problems with verifying identities and preventing credential theft. It adds an extra layer of protection for account security because biometric data is difficult to copy or hack. Techniques like fingerprint and facial recognition are already commonly used. Voice recognition is another method that banks use, as everyone's voice has a unique pattern. These tools help banks keep accounts safe and prevent fraud.
Customer Education:
Banks provide resources and awareness campaigns to educate customers about common fraud schemes, phishing attacks, and safe banking practices.
Checking Internal Threats:
Banks deal with internal threats by educating their employees and providing a confidential hotline for reporting any suspicious activities. They closely monitor employee behavior and review inactive accounts to spot any issues. They also conduct regular training sessions to ensure employees understand security protocols and the importance of vigilance. These steps help keep the bank secure.
Conclusion
In conclusion, banks play an important role in preventing fraud through strong security measures, employee training, and the use of advanced technology. By following strict verification processes, monitoring transactions, and promoting awareness among staff, banks protect their assets and keep their customers safe. As fraud methods keep changing, it’s essential for banks to adapt and improve their strategies to maintain trust and security in the financial system. In the end, taking steps to prevent fraud helps everyone and makes banking safer for all.
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