Automation has failed to curb bank frauds

Working group to re-examine checks and controls in a centrally automated environment set-up.

Most banks implemented core banking solutions (CBS) for centralised operations, but the networked automation failed to take into consideration the controls necessary for checking frauds.

Banks have now realised that the checks and controls established in the days of manual operations have either been rendered irrelevant or found wanting in preventing fraudulent transactions.

Sensing the need for an urgent review of the controls, banks, under the auspices of Indian Banks' Association (IBA), have set up a working group to re-examine the checks and controls in a centrally automated environment.

The group, headed by Sanjay Sharma, advisor - IT, IDBI Bank, and CEO of IDBI Intech, has representatives from Bank of India, Bank of Baroda, Dena Bank, Indian Bank, State Bank of India, ICICI Bank and Punjab National Bank as members.

The working group will recommend new controls that need to be put in place and the checks to be built in for remote access provided to faceless customers, and also identify areas where frauds are committed through advanced technology.

The group will also work on how to ensure checks and controls for new channels such as ATMs, internet banking and mobile banking.

With the introduction of CBS, banks' operations have been shifted from branches to central units at back offices.

Also, with the introduction of single window concept, electronic channels and faceless banking, the processes in banks had to be re-engineered. Also, it is being increasingly felt that the earlier controls are either irrelevant or insufficient.

IBA said, "Fraudsters are using advanced technology, in the form of colour photo copy, skimming, hacking, phishing and pharming, to defraud banks. So, there is an urgent need to review the checks and controls already in place in banks, in view of the new processes and channels."

Sharma said the whole exercise was expected to be completed and a report submitted to IBA by the first week of October. Earlier, the customer was of a branch, but now he belonged to the bank with anywhere banking made possible by CBS, he added.