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Transactions to be reported as fraud to RBI
Context: Reserve Bank of India (RBI) issued updated Master Directions on Fraud Risk Management (MDoFRM) stipulating that ten specific types of transactions be reported as fraudulent.
RBI Issues Revised Fraud Risk Management Guidelines for Regulated Entities
- RBI issued 3 revised MDoFRM for Regulated Entities (REs) namely:
- Commercial Banks (including Regional Rural Banks) and All India Financial Institutions
- Cooperative Banks (Urban Cooperative Banks / State Cooperative Banks / Central Cooperative Banks)
- Non-Banking Finance Companies (including Housing Finance Companies).
- It aims to strengthen the governance and oversight of fraud risk management by the Boards of the REs.
- RBI mandates reporting these 10 fraudulent transactions via Fraud Monitoring Returns (FMRs) on its web portal.
- This ensures uniform and consistent fraud reporting across the banking and financial sector.
Ten categories of transactions that will be reported as fraud to the RBI are:
- Misappropriation of Funds and Criminal Breach of Trust: Involves unauthorised use or theft of funds by an individual or entity entrusted with them.
- Fraudulent Encashment through Forged Instruments: Cashing out funds using forged checks, drafts, or other financial instruments.
- Manipulation of Books of Accounts or Fictitious Accounts and Conversion of Property: Altering financial records or creating fake accounts to illegally convert or divert property or funds.
- Cheating by Concealment of Facts and Impersonation: Deceiving individuals by hiding critical information or pretending to be someone else to commit fraud.
- Forgery with the Intention to Commit Fraud: Creating false documents or electronic records to deceive or commit fraud.
- Wilful Falsification, Destruction, Alteration, or Mutilation of Records: Intentionally tampering with or destroying financial documents, electronic records, or other valuable securities to defraud.
- Fraudulent Credit Facilities for Illegal Gratification: Extending credit facilities based on fraudulent activities, often for bribery or corruption purposes.
- Cash Shortages Due to Frauds: Discrepancies in cash balances resulting from fraudulent activities.
- Fraudulent Transactions Involving Foreign Exchange: Engaging in deceitful activities related to foreign exchange transactions.
- Fraudulent Electronic Banking and Digital Payment Transactions: Conducting fraudulent transactions using electronic banking systems or digital payment platforms.