FRAUDS

Bank Fraud

Bank fraud is the use of potentially illegal means to obtain money, assets, or other property owned or held by a financial institution, or to obtain money from depositors by fraudulently posing as a bank or other financial institution. In many instances, bank fraud is a criminal offence.

 Types of bank fraud

Deposit Account Frauds: Following types of frauds are normally committed-

(a) Value of cheque deposited is inflated by inserting numbers.

(b) Nature of cheque is altered by deleting words. For example, crossed cheques are made bearer cheques.

(c) Name of the payee in the cheque/draft is altered and money is withdrawn by the fraudster.

(d) A dormant account is fraudulently operated by forging signature.

(e) Collections of the Mini Deposit Account are not deposited with the bank and misappropriated by the agent

Frauds relating to loans and advances:

Following types of frauds are generally committed-

(a) A large number of loans advanced under the priority sector lending schemes turn NPAs because either the loans are taken by ineligible persons or used for some social or consumption purpose rather than utilizing it for agricultural operations.

(b) Proper appraisal of the project for which loan is advanced is not done by the staff for a consideration.

(c) Collaterals lodged with the bank are inadequate or valueless.

(d) Value of Hypothecated /pledged stocks is inflated.

(e) Goods pledged with the bank are removed with the connivance of the bank staff

Frauds relating to purchase Bills Such frauds are committed normally in the following manner-

(a) Fraudster discounts the bogus or stolen railway receipts.

(b) False bills are drawn on sister concerns for the purpose of discounting.

(c) Bills are inflated in collusion with the supplier.

(d) Payment is obtained before the bill is presented by the bank for encashment.

(e) Worthless goods are dispatched and bills discounted on the strength of dispatch papers.

 

IPC and Banking Frauds

Perpetrators of frauds in banking transactions are liable to be prosecuted under the criminal law of the country for which adequate provisions of punishment have been prescribed under the Indian Penal Code, 1860. Some of the important provisions of the IPC in this regard are discussed hereunder-

(a) Section 403 of IPC-Dishonest misappropriation of property: According to this provision, whoever dishonestly misappropriates or convert to his own use, any movable property, shall be punished with imprisonment for a term which may extend to two years or with fine or with both. (b) Section 405 of IPC-Criminal breach of trust: According to this provision, anybody entrusted with the property dishonestly misappropriates or converts to his own use or dishonestly uses or disposes of that property in violation of anydirection of law prescribing the mode in which such trust is to be discharged, or of any legal contract, which he has made touching the discharging of such trust, commits criminal breach of trust.

(c) Section 415 of IPC –Cheating : According to this provision, whoever, by deceiving any person, fraudulently or dishonestly induces the person so deceived to deliver any property, to any person, or to consent that any person shall retain any property or intentionally induces the person so deceived to do or omit to do anything which he would not do or omit, if he were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, reputation or property, commits cheating.

(d) Section 463-Forgery: It is defined as- “Whoever makes any false document or false electronic record or, part of a document, or electronic record, with intent to cause damage or injury, to the public or to any person, or to support any claim or title, or to cause any person to part with property, or to enter into express or implied contract, or with intent to commit fraud or that fraud may be committed, commits forgery”.

(e) Section 489-A – Counterfeiting of currency notes: This section provides that whoever counterfeits, or knowingly performs any part of the process of counterfeiting, any currency notes or bank note, shall be punished for imprisonment for life, or with imprisonment of either description for a term which may extend to ten years, and shall also be liable to fine.

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