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    Banking frauds to surge over next two years: Deloitte Survey

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    Banking frauds to surge over next two years: Deloitte Survey

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    Deloitte India’s latest banking frauds survey conducted among 70 respondents across public, private, foreign, co-operative and region rural banks reveals expectations of a rise in banking frauds over the next couple of years.

    The pandemic has pushed a lot of people towards digital, and with increased usage of online banking services, instances of frauds are also on the rise. Deloitte India’s latest banking frauds survey conducted among 70 respondents across public, private, foreign, co-operative and region rural banks reveals expectations of a rise in banking frauds over the next couple of years.
    78 percent of respondents expect a rise in banking frauds due to a combination of factors including large scale remote working models, increase in customers using non-branch banking channels and limited or ineffective use of forensic analytics tools to identify potential red flags by bank. This is significantly higher than the last survey, when only 40 percent reported a probable rise in frauds.
    The survey also finds that about 50 percent of the respondents said they conducted fraud risk assessments only once in 2-3 years, and stresses on the need for far more frequent risk assessments to tackle rising frauds.
    About 51 percent of the respondents indicated that they do not include MSME assets in their continuous monitoring process— which is a potential area of concern, the survey found.
    Data theft, cybercrime, third party induced fraud, bribery and corruption and fraudulent documentation have been identified as the top five concerns, with over 42 percent of respondents having reported they were victims of these types of fraud.
    As per the responses from the survey, these frauds are typically detected during routine account audit/reconciliation or process reviews, through internal automated data analysis or transaction monitoring software and through a customer complaint or an internal whistle blower complaint.
    The number of fraud incidents encountered by banks over the last two years also appears to have increased in comparison to the previous survey. About 54 percent respondents indicated that they have faced more than 100 incidents of frauds in retail banking in the last two years versus 29 percent in the previous edition.
    Loan related frauds remain the biggest concern for banks, followed by mobile and internet banking frauds, data theft and phishing, the survey found.
    According to the survey, the top challenges faced by lenders in performing a forensic audit in-house are technological limitations to read and analyse the borrower’s accounting records, lack of data analytics capabilities and lack of requisite skill sets. Lack of a dedicated team is also among the major challenges that the banks face.
    Among the measures taken by the lenders to mitigate frauds in the last six months, 23 percent said they optimized existing Early Warning Signals (EWS) and fraud monitoring systems to cater to current banking conditions, using artificial intelligence or machine learning. 18 percent said they enhanced case management solutions to effectively respond to fraud incidents on time and about 17 percent arranged trainings or workshops to enhance skills of the staff dealing with frauds.
    RBI’s latest financial stability report showed that both the number and amount involved in banking frauds had come down in FY21 compared to the previous year. Banks reported 7,363 fraud cases in FY21 amounting to Rs 1.38 lakh crore and another 4,071 cases in the first half of this fiscal, amounting to Rs 36,342 crore.
    >Also Read | Q3FY22 earnings: Here’s what to expect from big banks
    YearNumber of fraudsAmount involved (Rs Cr)
    FY196,79871,534
    FY208,7031,85,468
    FY217,3631,38,422
    FY22 (Apr-Sep)4,071 36,342
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