Bank fraud- Prove it!

A two-pronged strategy — filing a police complaint and approaching a consumer court— works best.

Bank frauds are becoming common–a fact that has prompted the RBI to ask banks on Wednesday to set up special surveillance and investigation cell. While the more common ones include online frauds or identity theft, there are more blatant ones when someone from the bank or outside forges your signature.

For instance, a couple in Mumbai discovered recently that their accountant had withdrawn Rs 34 lakh in two tranches by forging their signatures. On approaching the bank, the branch manager said that since the bank was going through a system upgrade, they were unable to verify the signatures.

After the couple approached the police and filed a criminal case, the bank refused to compensate them under the pretext that they should wait for the outcome of the case.

In such cases, the customer has three choices. One, approach the bank directly and tell them that there has been a fraud because of their laxity. If the bank does not resolve the issue within a month, approach the Reserve Bank of India’s banking ombudsman.

Two, approach a consumer court, and three, file a criminal case with the police immediately.

Jehangir Gai, consumer activist, said that a two-pronged strategy works better — file a criminal case as well approach the consumer court. While filing a police compliant, he suggested that that one should always add this important line “unknown bank officials have colluded in perpetrating this crime.” This will ensure that the bank is also involved in the process.

Banks, on their part, were quick to say that the onus was on the individual to prove the case of fraud having taken place.

“As per the Banking Codes and Standards Board of India (BCSBI), if frauds occur due to customers’ negligence, they cannot claim any compensation from the bank,” said MG Sanghvi, executive director, Bank of Maharashtra.

Banks categorise frauds in three categories. The most prevalent is the fraud on account of customers’ negligence. For instance, customers tend to note down their net banking password and pins at places that can be accessed by others.

“One should take the bank’s help while filing the complaint,” said KVS Manian, group head, retail liabilities, Kotak Mahindra Bank.

Nowadays banks monitor places where transactions occur. There are closed circuit television cameras (CCTV) inside automated teller machine (ATM) facilities and branches. Even in case of net banking frauds, banks will help in tracing the location of miscreants and the computer used for the fraud.

The second category of fraud occurs on account of the bank’s laxity. These include cases involving an employee in the swindle, a bank passing cheques without verifying signatures, acceptance of duplicate cheques by a bank, and debit/ credit cards and cheque books stolen even before they reach customers. In such cases, a bank takes the full responsibility of the customers’ money and compensates them.

“Banks, usually, have a risk cover called fidelity insurance for such cases,” said Sanghvi.

At times, a third party can dupe the customer as well as the bank. Here, neither the customer nor the bank could have averted the fraud. These include identity theft, card skimming, phishing or stealing of cheque or cards. In such cases too, a person has to rely on police nabbing the criminals.

“Such cases are not as rampant in India compared to other developed nations,” said Manian. But chances of getting back the money are least. This is because such frauds have cross-border linkages.

At times there could be grey areas when a fraud occurs in determining who has shown negligence, the customer or the bank. For instance, an original cheque leaf with forged signature is passed by the bank. In such case, there is little the bank could have done, if the forged signature matches with the customer’s original one. “After all, for a signature to be original, the signature should vary as per handwriting experts,” said Sanghvi.

If there is a dispute, customer has little choice. “They have to go by the bank’s decision unless police investigations points carelessness on the bank’s part,” said a banker.

As far as the role of the Reserve Bank of India goes, while the banking ombudsman has a role to play when the customer approaches the bank with the grievance of a fraud, it may not be able to do much, in case of a police case.