Fraud risk management is a fundamental aspect of overall Risk Management within the banking sector. In India, banks adhere strictly to guidelines set forth by the Reserve Bank of India (RBI) to prevent, detect, and promptly report fraudulent activities. Emphasizing prevention, early detection, and swift reporting, these guidelines aim to safeguard the integrity of financial institutions and protect stakeholders' interests.
The policy framework established by the RBI focuses on several key principles. Firstly, it underscores the importance of identifying early warning signs of potential fraud. This proactive approach allows banks to implement corrective measures swiftly, thus mitigating the risk of fraudulent breaches. Moreover, maintaining a robust review mechanism is essential to preempting fraudulent activities and ensuring compliance with regulatory standards.
Fraud Risk Management - Defined
Fraud risk management in banking refers to the systematic approach employed by financial institutions to identify, assess, mitigate, and monitor the risks associated with fraudulent activities. It encompasses a range of strategies, policies, procedures, and technologies aimed at preventing, detecting, and responding to fraudulent schemes that could result in financial losses, reputational damage, or legal liabilities. The goal of fraud risk management is to safeguard the institution's assets, protect customers' interests, maintain regulatory compliance, and uphold the integrity of the financial system.
Classification of Frauds
Any fraud can be broadly classified as
Internal frauds - involvement of employees
External frauds - by customers or third party
Furthermore as per Indian Penal Code provisions Frauds can be classified as under
Misappropriation and criminal breach of trust.
This story is from the October 2024 edition of BANKING FINANCE.
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This story is from the October 2024 edition of BANKING FINANCE.
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Fraud Risk Management In Banking
Fraud risk management is a fundamental aspect of overall Risk Management within the banking sector. In India, banks adhere strictly to guidelines set forth by the Reserve Bank of India (RBI) to prevent, detect, and promptly report fraudulent activities.
