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Bank frauds: The big bank robbery – The Big Story News

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Janardan Singh Sigriwal, the BJP’s Lok Sabha MP from Maharajganj in Bihar, was in for a shock in February 2021 when he realised that the Bank of Baroda’s (BOB) branch in Chhapra, in Saran district, had suspended operations of his MPLADS (Members of Parliament Local Area Development Scheme) account. Sigriwal’s aide rushed to the bank branch to enquire and returned with grim news. “The account had been put on hold. Fraudsters had withdrawn Rs 89 lakh from it using cloned cheques. These had been cleared by BOB’s Ahmednagar branch (in Maharashtra) on November 3, 2020,” says Sigriwal.

Sigriwal approached Union home minister Amit Shah, whose ministry flagged the matter at various levels for a thorough investigation, including by the Bihar government. BOB, on its part, had already informed Bidhan Chandra Rai, the district planning officer for Saran and custodian of the MPLADS account, and an FIR had been lodged in November 2020. The economic offences wing (EOW) of the Bihar police took over the case this February, making two arrests. The Maharashtra police also arrested two people. But the swindled funds are yet to be recovered.

Icons by Raj Verma

Banibrata Biswas, BOB assistant general manager for Muzaffarpur zone, told INDIA TODAY that the scam appeared to be the handiwork of seasoned criminals. “The fraudsters chose November 3 to present the [cloned] cheque at a BOB branch in Maharashtra well aware that the Chhapra branch would be closed because of voting for assembly elections in Bihar,” he said. Biswas informed that the bank has restored the duped funds in the account in accordance with the July 2017 guideline of the Reserve Bank of India (RBI) that banks have to credit any amount lost in unauthorised/ negligent transactions to the account holder.

NOT A ONE-OFF CASE

Sigriwal’s case is just one of the thousands of bank frauds committed every year in India. An RBI report on banking frauds, released in December last year, recorded 7,363 cases involving over Rs 1.38 lakh crore in 2020-21—an average of 20 cases a day. It was a 15 per cent drop from the 8,703 cases of fraud (involving over Rs 1.85 lakh crore) in 2019-20. Frauds using cheques/ demand drafts declined from Rs 63 crore in 2019-20 to Rs 39 crore in 2020-21. Card and internet frauds dropped significantly, from Rs 2,445 crore (2019-20) to Rs 535 crore (2020-21). Another Rs 119 crore were siphoned off bank balance-sheets. Frauds related to foreign exchange transactions totalled to Rs 434 crore and those involving deposits Rs 129 crore. These figures, however, are only for frauds worth Rs 1 lakh and above, which means the actual sum could be much bigger.

Loan advances, which usually involve big players, made up around 99 per cent of bank frauds in 2020-21, to the tune of over Rs 1.37 lakh crore, according to the RBI report. The remaining 1 per cent totalled to Rs 1,399 crore worth of frauds, committed by smaller cyber crooks who largely work below the police radar through multiple layers of operators. Assuming 252 working days for banks in a year, these crooks had made an average of Rs 5.5 crore on every bank working day in India in 2020-21.

To prevent cheque frauds, the RBI introduced the Positive Pay System, which requires banks to reconfirm key details of bigvalue cheques with account holders

The RBI’s annual report for 2020-21 says the total number and value of frauds suffered by public sector banks (PSBs) fell in 2020-21 from the previous year while it shot up for private banks. PSBs accounted for 59.2 per cent of the total funds defrauded in 2020-21 and private banks 33.5 per cent. The rest involved foreign banks, financial institutions, small finance banks, etc. What is more worrisome is that the average time lag between the detection of frauds in 2020-21 and their occurrence was 23 months. For frauds of Rs 100 crore and above, the average lag was 57 months.

Union minister of state for finance Bhagwat Kishanrao Karad informed Lok Sabha in December last year that Maharashtra had reported the highest number of card/ internet frauds in 2020-21—26,522 cases involving Rs 66.9 crore. Next was Delhi (7,774 cases, Rs 18.9 crore ), followed by Tamil Nadu (5,659 cases, Rs 16.08 crore), Haryana (5,605 cases, Rs 22.5 crore) and Gujarat (4,671 cases, Rs 13.3 crore).

In October 2021, the Delhi police arrested three HDFC Bank employees and nine others for allegedly attempting to steal Rs 5 crore from the account of a US-based NRI (non-resident Indian), which had Rs 200 crore. K.P.S. Malhotra, deputy commissioner of police (cyber crime), Delhi police, says one of the bank employees had obtained a cloned cheque book while the other two had tried to change the registered mobile number and remove the debit freeze on the dormant account.

According to police, 66 unsuccessful attempts were made to access the account through internet banking. “We have suspended (the suspected) bank staff pending the outcome of the investigation. The bank is extending full support to the law enforcement agencies in the investigation,” said an HDFC Bank official over email.

In December 2019, the All India Institute of Medical Sciences filed a complaint with the Delhi police EOW about Rs 12 crore missing from its two State Bank of India (SBI) accounts due to the bank honouring fake cheques. A month later, police in Uttar Pradesh’s Azamgarh arrested a five-member gang, including an SBI official, for alleged involvement. Triveni Singh, superintendent of police (cyber crime), UP police, said the gang was expert in making counterfeit cheques and had, with the help of the SBI employee, accessed the bank’s data. An email from INDIA TODAY to SBI seeking its version on the case did not elicit a response.

THE MPLADS ACCOUNT SCAM

Apart from filing the FIR in the MPLADS case, BOB had initiated action against two employees at its Savedi branch in Ahmednagar for clearing the fake cheques. The Maharashtra police also arrested two persons, Sandeep Kothari and Ganesh Gawde, to whose accounts the funds were initially moved. They were sent to judicial custody but did not reveal where the stolen funds were transferred further.

The breakthrough came after the Bihar police EOW began investigations. “We got to the bottom of the case. It had multiple layers and involved a team of scamsters,” says Nayyar Hasnain Khan, Bihar additional director general of police, EOW. Police say Kothari and Gawde confessed to working for two Jamshedpur-based fraudsters, Vinay Singh and Jagjot Singh. The arrest of Vinay and Jagjot threw up incriminating evidence, including documents allegedly linking them to the forgery. Police say the investigation revealed that the duo had also siphoned off Rs 1.17 crore from the bank account of the Bihar science and technology department in 2019.

The police have identified Ved Prakash, a resident of Jharkhand, as the mastermind of the MPLADS account scam and are hunting for him. Police suspect it all started as an insider job with an employee of BOB’s Chhapra branch identifying Sigriwal’s account as ‘vulnerable’, since it had lot of funds and, like many government department accounts, was possibly not being monitored closely. He allegedly provided the fraudsters details of the check book, including serial numbers on the cheques, and the mobile number registered with the account. Police say the employee’s computer records are being scrutinised for evidence.

Once the account details had been accessed, Jagjot Singh stepped in. First, he allegedly created a cloned cheque book and then procured a new SIM card for the registered mobile number using a fake Aadhaar card of Bidhan Chandra Rai, the custodian of the MPLADS account. Rai says the SIM card of the mobile number had got deactivated around the time of the fraudulent transaction.

“Usually in such frauds, after obtaining a new SIM card, fraudsters place a number porting request so that the holder of the mobile number registered with the bank account is unable to access the number. The porting takes a few days, which is when the fraud takes place,” says a Bihar police officer involved in the MPLADS case probe. The fake cheques are invariably presented for clearance at the bank’s branches in other states. SMSes regarding withdrawals never reach the account holder because the fraudsters have switched the mobile service provider.

GOVERNMENT ACCOUNTS ARE PRIME TARGETS

Investigators say most cheque frauds are related to bank accounts of government institutions, such as schools, colleges, departments and societies, since their account statements are unlikely to be checked regularly. Also, such accounts are flush with funds and can net big sums if the fraudsters succeed in their modus operandi.

Take for instance the Rs 32 crore fraud in the Bihar revenue department’s account with Kotak Mahindra Bank in Patna. The fraud was unearthed by the bank’s officials when a person, Subham Kumar Gupta, reached the branch on Exhibition Road on January 2, 2021 to withdraw/ transfer Rs 11.73 crore, using a forged letterhead of the National Highways Authority of India (NHAI) and a counterfeit Aadhaar card of Patna district land acquisition officer (DLAO) Pankaj Patel. Suspicious bank officials called the police and Gupta was arrested. The bank checked its records and found that Rs 32 crore had already been swindled from the account in 2020. These funds belonged to the NHAI and were parked in Patel’s account for acquiring land for government projects. The fraud had gone undetected for weeks until Gupta’s arrest.

In a letter dated August 3, Kotak Mahindra Bank senior vice-president (legal) Rajarshi Chatterjee wrote to the Bihar police EOW, mentioning how the bank had conducted an internal investigation after Gupta’s arrest and discovered the defrauding of Rs 31.92 crore between November 4 and December 15 in 2020. Investigations by the bank and EOW pointed to branch manager Sumit Kumar as the alleged mastermind. While he was arrested in January 2021, his wife Nita Singh, one of the alleged beneficiaries of the fraudulent transactions, is absconding.

The bank’s investigation revealed that Nita Singh’s account had been credited with Rs 9 crore since July 2019—when it was opened by Sumit Kumar in his capacity as branch manager—and that the transactions appeared to be of the nature of money-laundering. While Kotak Mahindra Bank’s head office had sent an anti-money laundering alert in September-October 2019 regarding Nita Singh’s account, EOW officials say the bank failed to spot that Sumit’s personal email ID was also the email ID registered in her account. The same email ID had been used to send Rai’s forged Aadhaar card of DLAO Patel, the authorised signatory of the account.

CHECKS AND BALANCES

To safeguard against cheque frauds, the RBI had in 2020 introduced the Positive Pay System, which required banks to reconfirm key details of big-value cheques (Rs 50,000 and above) with account holders. While the positive pay mechanism is optional for account holders, banks may consider making it mandatory for cheques of value Rs 5 lakh and more, says the RBI. Under the Positive Pay mechanism, customers provide the key details of the cheque, such as their account number, cheque number and date, cheque amount and beneficiary name, to the drawee bank. The details can be submitted electronically. The cheque truncation system verifies the details before allowing clearance of the cheque. Any discrepancy between the details of the cheque provided and the cheque presented for clearance gets flagged to both the drawee and presenting banks.

Notwithstanding such measures, bank frauds continue with impunity. In most cases, the swindled funds are not recovered. Since the frauds involve multiple executioners, the end beneficiaries invariably never come under the radar. Mostly, it’s the banks that end up compensating for the lost funds and the government departments too do not push for a deeper investigation. The police’s record of taking such cases to finality and securing convictions is poor too. Fraudsters will be emboldened by the 2020 National Crime Records Bureau (NCRB) report, which found 440,000 cases to forgery, cheating and fraud pending before the courts.


A HIGH REWARDS, LOW RISK SCAM

By the end of each bank working day in 2020-21, Indian banks had been defrauded of Rs 80 lakh by way of forged cheques and card/ internet frauds. The loss amounted to over Rs 1 crore if other kinds of bank scams were taken into account. Since banks—as per RBI policy—are mandated to compensate account holders for the funds, the victims of such scams invariably lose interest in the progress of the investigation. With time, the overworked police also drop these cases off their priority list. This is why the swindled money is not recovered in a majority of the cases.

According to the National Crime Records Bureau (NCRB), the police registered 4,047 cases of online banking frauds in 2020 even as investigation was pending in 2,267 such cases from previous years. Trials, on an average, had been completed in just 90 cases a year. In 2020, police submitted final reports in 3,871 cases, mentioning “cases true but insufficient evidence or accused untraced”. The bulk of these cases (2,460) were of cyber fraud. The NCRB’s 2020 report also found more than 440,000 cases of forgery, cheating and fraud pending court trials.



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