Blockchain Could Have Blocked Nirav Modi

by February 27, 2018 0 comments

Whom to Trust

 “Technology can protect you from invasion or hacking, but technology cannot protect you from human tendency to perpetrate fraud. It is important to minimize human interference and maximize technology-based transactions.” Says Prasad Ajgaonkar, CEO, iRealities Pvt. Ltd (The company specializes in offering technological innovation, digital services.)

Gokulnath Shetty, retired deputy branch manager with another junior employee misused the Society For Worldwide Interbank Financial Telecommunication or SWIFT codes; as he had passwords to them. He has worked in the bank for a long time and he managed to cover up the whole mess for years.

A big question arises here is whom to trust as modern day banking necessitates working in hand with partners, agents and vendors, etc. besides outsourcing, peripheral and several operational activities involve deploying and trusting outside agency’s employees.

In the mist of the PNB Fraud case, there is need to have vigilant backgrounds checks for the employees working in financial

Rahul Belwalkar, CEO, SecUR Credentials

institutions.  CEO of SecUR Credentials, a background screening company Rahul Belwalkar says, “Currently, the numbers of PSU’s that opt for Background screening are low because of HR Practices that have been ingrained through the years and their resistance to change these practices. We also suspect that there are push backs from unions as well because of which HR policies haven’t changed in a while. There has been a rise in number of private sector banks and NBFCs that are not only conducting background screening but are also doing regular credit checks on their employees who at the end of the day handle large amounts of clients’ money. In this case too, right from general manager level and other 18 employees have been accused of the fraud; having proper and systematic employee background verification is the need of the hour.”

What more can be Done

In the light of this case; leaders in the industry have suggested some of the measures that should not be avoid. Prasad Ajgaonkar CEO of iRealities suggests that it is extremely important to educate all stakeholders in the banking ecosystem on information security, as banking frauds are not technology frauds but process frauds.

“Making information security training compulsory for all bank employees is an important step in significantly reducing bank frauds. For one of the largest private sector banks, we have created and deployed a comprehensive information security training module, which they are successfully running for the last 3 years.” He says.

There should be a system or mechanism to immediately make the changes in the patches in the system, and it can be made secure. For this, the systems should be open systems. Banks should also have a crises management system in place, for immediate external and internal communication.

Meanwhile, RBI also said it has formed a panel to look into reasons for factors leading to increasing incidents of frauds in banks. The panel will also look into reasons for high divergence in Non-Performing Asset (NPA) classification and provisioning by banks.

“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 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-a-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,” Apex bank states.

The members of the committee include Bharat Doshi, member, Central Board of Directors, RBI; S Raman, former chairman and MD, Canara Bank and former whole-time member, SEBI; and Nandkumar Saravade, chief executive officer, Reserve Bank Information Technology Pvt Ltd (ReBIT). A K Misra, executive director, RBI will be the member-secretary of the committee.

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