Don't depend on private persons for mobilising bulk deposits, CVC tells banks

To prevent fixed deposit (FD) frauds, the Central Vigilance Commission (CVC) has asked banks to eschew dependence on private persons for accepting bulk deposits.

Referring to a specific instance of FD fraud, the CVC, in its ‘Analysis of 100 top bank frauds’, said a fraudster pretending to government organisations/corporates as a representative of a bank and to the bank as a financial advisor of these organisations/corporates, brought bulk deposits to the branches of different banks.

Elaborating on the modus operandi of the fraud, the Commission said: “He (the fraudster) kept the original term deposit receipts (TDRs) issued by the branches with himself and submitted fake copies to the depositors. Subsequently, the original deposit receipt was utilised by the fraudsters for availing loan against the deposit without the knowledge of the organisation.”

In this manner, the fraudster had siphoned off the money through RTGS (real time gross settlement) in his various associate accounts with different banks.

The Commission specifically highlighted a fraud whereby deposits were canvassed by the branch manager through a private person. Bulk deposits of about Rs 604.33 crore were mobilised through the private person from seven government organisations/corporates.

Calling for systemic improvements to prevent frauds, the CVC said proper due diligence and precautions should be taken by the branches while dealing with the bulk deposit accounts opened in the names of organisations, corporates and public sector undertakings, etc. The bank’s systems and procedures should not be diluted.

The commission wants branches, on receipt of bulk term deposits of Rs 1 crore and above, to report the complete details of such deposits to the Treasury Management Department. In the said report, branch should also confirm that KYC (know your customer) guidelines have been complied with.

For limited companies, trusts, associations, co-operative, the Commission said bank branches should ascertain whether the company /director/trustees/office bearers have borrowing powers and the extent of these powers. Copy of the necessary resolution passed by the borrowing organisation for borrowing against the fixed deposit receipts should be obtained.

“Bank should not depend on a private person for accepting bulk deposits. Officers should verify the details of organization/corporate and verify the signature of all the joint holders as per bank record,” the Commission said.

Bank officer should obtain the requisite documents executed in person from the applicant and enter the proposal in loan sanction register along with original TDR.

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