Banks are stepping up their efforts to fight fraud by creating a comprehensive list of around 3,000 entities involved in fraudulent activities. This list includes professionals like lawyers, builders, and gold loan appraisers who have been found colluding to secure loans through dishonest means. The goal is to share and update this list in real-time, ensuring that all banks are aware of these entities and can prevent further fraud.
Key Decisions from the Advisory Board for Banking and Financial Frauds (ABBFF)
At a recent meeting with the Advisory Board for Banking and Financial Frauds (ABBFF), it was decided that banks would be required to check this list before conducting business with any entity. This step ensures that those involved in fraud do not slip back into the financial system. A senior bank executive explained, “Banks will need to update this list continuously to stay in line with the latest guidelines issued by the Reserve Bank of India (RBI) on July 15.”
Real-Time Updates and Enhanced Compliance
One of the critical issues discussed at the meeting was that many operational staff members were not consistently checking the existing “caution list.” This lack of oversight allowed some fraudulent entities to remain active in the system. To address this, all banks will soon issue internal directives to ensure strict compliance, making sure the caution list is reviewed before engaging in any business transactions.
Collaboration Across the Financial Sector
While banks have been taking action against fraudulent entities individually, the consolidated list will help all financial institutions work together. By having access to a shared resource, lenders can verify if an entity has been flagged for fraudulent activity by any other regulated entity (RE). This shared information will provide a stronger defense against potential fraudsters.
Role of the Central Vigilance Commission (CVC)
The Central Vigilance Commission (CVC) has played a vital role in directing public sector banks (PSBs), insurance companies, and other financial institutions to refer cases involving fraud of ₹3 crore and above to the ABBFF. This board also has the authority to conduct fraud analysis across the financial system and provide recommendations for policy changes to the RBI and CVC.
Continuous Expansion of the Fraud List
As banks complete their internal exercises to comply with the new guidelines, the list of fraudulent entities is expected to grow. “The updated list could include business correspondents, chartered accountants, and property valuers,” said one bank executive. This will further strengthen the safeguards against fraudulent activities in the financial sector.
Conclusion
The move to create a real-time, shared fraud list among banks and other financial institutions marks a significant step toward preventing banking fraud. With stricter compliance measures and collaboration across the sector, banks aim to close the loopholes that allow fraudsters to exploit the system. As the list continues to expand, the financial system will be better equipped to identify and block those attempting to commit fraud.
