How to avoid bank fraud

According to Moneylife, if banks were to provide full details of fraud scams, it could help to prevent other banks falling into future traps.

Moneylife gives a recent example as the Reserve Bank of India (RBI) which put a penalty on the Bank of Maharashtra, Dena Bank and Oriental Bank of Commerce for violating know-your-customer (KYC) norms by opening fake accounts for private organisations.

The fundamental reason why the fraudsters were able to infiltrate the system was because RBI permitted banks to offer secret interest rates on large deposits, which were different to what was quoted for bulk deposits that took place on a day to day basis. The problem occurred when these interest rates were taken advantage of.

There are several middlemen who meticulously study the banks’ rules and regulations, take advantage of the ignorance of depositors by offering higher interest rates and all types of baits to the potential depositors to lure them into their trap. They, therefore, contact cash rich corporates, trusts and high net worth individuals (HNIs) and entice them with tempting offers to place their surplus funds with the banks with which they have developed a rapport,” Moneylife reported.

A financial analyst who writes for Moneylife under the pseudonym Gurpur, has summarised how to avoid bank fraud by:

  1. Checking all information that is given to you in order to avoid being conned.
  2. Taking care of your banking transactions yourself as it is not necessary to use a middleman or broker.
  3. Arranging to meet the bank branch manager especially when depositing money.
  4. Do not accept any offer of cash incentives for placing the deposit with the bank, even if this offer comes from a professional.
  5. KYC documents should be handed over to the bank personally to ensure that information is not shared by a third party.

Even though these precautions may not fully protect you from bank fraud, attempting to combat risk means that the bank can be held responsible for any losses you may experience.


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