BEWARE: YOUR DORMANT ACCOUNT CAN BE A TARGET FOR FRAUD!

“A bank executive has been arrested for stealing almost Rs. 50 lakh from the inactive account of an NRI who had died, by breaking every rule of professional ethics, ferreting out customer information and manipulating safety procedures  ............” That was a news item carried in "The Times of India" dated 07/01/2014 (Read full report link at the bottom).

Bank frauds are not new.  Dormant account frauds are almost always carried out by a few insiders.  If a staffer is involved in an embezzlement of Rs.50 lakh, how else you can term him other than a bankster (blend of banker and gangster).  Money and crime always share a  nefarious nexus.   A banker looting the customer funds is like a police robbing.

A savings account/current account is considered as inoperative account if there are no transactions in the account for over two years.  Dormant account  results from a variety of reasons: death of a customer who has failed to update his legal heirs the requisite information, failure by account holders to notify their bankers in the event of change of address, the fact of the account-holder himself having forgotten about the existence of an account opened many years before, or cases in which a person has opened an account in the name of another without informing the latter person (eg. Account opened in the name of minor by his parents/grandparents).  Depositing aside money for a rainy day ...... and then forgetting about it; senior citizens affected by Alzheimer disease...

All of us have savings banks accounts, at times end up having many.  Tracking of multiple accounts often breeds confusion.  Ignoring a bank account for a long time can cost time, money and also the accompanying agony.

While frauds are committed even in operative accounts, it is no wonder such frauds are happening in inactive accounts.  The reason is that in case of inactive accounts, the constituents do not come to know immediately that a fraud has been perpetrated, as they do not track the account regularly.  Moreover, maintaining such accounts increases the overall cost for the bank.  Banks need to maintain the database of dormant accounts, which increases the cost.  Also, it requires manpower which can be used elsewhere.

It is learnt that a mind-numbing amount of about Rs.2,500 crore is lying as unclaimed deposits. The largest stash of unclaimed money is in savings bank accounts of nationalised banks amounting to Rs.425 crore in 8.7 million accounts.

The fradulent staffer  tampers with the inactive accounts by executing or authorising scores of  fraudulent entries. When a few customers became aware of unauthorised activity in their accounts, s/he corrects the “errors” by depositing funds from other customer’s accounts.  Then s/he sends letters to the customers reporting that there had been an error in their accounts and falsely note in the bank database that  the accounts had been “corrected” and the customers notified.

Although most dormant accounts have small balances, those with larger balances are tempting targets for dishonest employees.  A Teller or other bank insider authorised to access these accounts simply need to make debit entries and steal the money.  Because the legitimate account holder is not monitoring the account, there is little chance the fraud will be detected (in a few cases, the legitimate account holders are deceased).

A similar version of this embezzlement involves external fraudsters who intercept the bank statements that arrive at the address from where the legitimate account holder has moved.  If funds are available in the account, the fraudsters can use the account information to commit identity fraud by posing as the legitimate customer and withdraw the funds.

What to do?

Spare a few minutes to verify the entries appearing in your statement.  Promptly notify the change of address and ensure you get the acknowledgement to the new address.  Though you have ATM and online banking facility, visit your branch periodically.  Share all the bank details to all your family members.  Close the unwanted accounts rather than merely abandon them, as it is easy to monitor minimum number of needed accounts.  Destroy unused cheques from inactive accounts.

The bank audit team has a special and serious role to play.  The team should always make surprise visit, as some banks still give sufficient notice before the visit which alerts the insiders. The latter defeats the very purpose of audit.  We receive many cold calls from bank sales team regarding credit card, home loan, auto loan etc., whereas they extend secondary treatment  to customers if account is about to become “inactive”. If the bank shows little concern to inform processing either by SMS, phone or email (all of these), frauds can be reduced.  An autogenerated email advice appears suffice from management’s perspective, where the personal touch and courtesy is missing.

Preventive and positive measures from the banks' reach is imperative apart, proactively protect yourself from the predators.  After all, the value of money is better appreciated when it is not there!

Happy banking!

                ====    

Also read: http://kmurthy608.blogspot.in/2014/08/bank-frauds-are-direct-attacks-on.html

                

 Reference:

1) www.http://timesofindia.indiatimes.com/nri/Bank-executive-forges-signature-of-dead-NRI-steals-Rs-50L-from-account/articleshow/28489329.cms

2) www.http://timesofindia.indiatimes.com/business/india-business/Rs-2500cr-lying-unclaimed-in-bank-accounts/articleshow/18981034.cms

Your feed back is welcome at: krs1957@hotmail.com

How secure are banks?

                                                           

OPEN PAGE (March 18, 1986)

How secure are banks?

(By C.S. Krishnamurthy)

"Armed men rob bank", "Rs.14 lakh stolen from bank", "City bank manager murdered".  Dailies greet you with such pungent headlines.  Crimes in general are on the rise.  Banks are potential treasure chests for criminals, since currency is obviously more tempting and less traceable than other valuables.

The daring hold-up of the Karnataka Bank in Madras some time ago with the diabolical murder of a bank official, still green in memory, showed that such offences are not exclusive to the north.

Socio-economic and political reasons alone with the negative application of technological innovations have abetted organised crime.

Statistics put the number of  robberies/dacoities at only three in 1973.  It has mounted at least 20 times annually in recent times.

"Modus operandi"

It is interesting to know the modus operandi.  A gang of bandits loot at gun-point during banking hours or prior to opening or soon after the business time.  They lock up the entire staff, often in the strong room, and use the keys obtained to rummage the lockers and flee with the booty.  Some vanish after extracting currency bundles from the cashier.

Bank funds are robbed while in transit from one bank to another on public roads, the looters at times killing the driver and security guard in the vehicle.

Removal of money from cashiers or customers by diverting their attention, using a blade to cut the wallet, or stealthily throwing some "itching" powder on the victim and suggesting that he go for a wash are other tricks of the trade!  While distracting the attention, the culprit flicks the cash and passes it on to his associates though he himself may still be present, consoling the victim!

How do they plan and execute it?  Dacoits mostly in the 20-25 age group, work overtime to accomplish their target.  Frustration in life, failure in securing jobs, glorification of horror,  settling political vendetta are the usual reasons that make a delinquent.

Ninety to ninety five per cent of the crimes are successfully carried out, says a security official of a leading bank.  Their preliminary planning dwells on how many are to operate.  The number is kept to three or four.  To draw a detailed plan, they spot the target and closely study the bank's mode of functioning, for which even neighbouring premises may be hired.

The time of operation: bandits prefer minimum staff and no customers.  The vulnerable time: around 11 a.m. when the staff go in groups for tea/cigaratte; lunch-break when other staff leave and the cashier is alone to close the counter; or evening, when the deposit is removed to the "safe-room".  The duration of the operation: An average of 10 minutes; most masterly loots are over in seven to eight minutes.  The operating time is minimised as the chances of their actions being observed are greater.

After looting, they flee using a vehicle, often stolen with changed number plates.  Vehicles, preferably two-wheelers in immaculate condition, are spotted ahead.  The local law and order situation, alternative routes against the blockade (like a procession) are considered in their escape plan.

The post-nationalisation period had witnessed a high rate of branch expansion and functional diversification, with emphasis on rural and urban areas.  There are over 40,000 branches as against 8,262 in 1969.  This swift expansion, however, is not reflected in the infrastructural base.  Some branches are sadly located in lanes where even an auto cannot enter.

Another reason relates to the flouting of norms and procedures.  Cash remittance from one branch to another, or to the Currency Chest or the RBI must be transported only in an enclosed vehicle.  Strangely, remittances are effected even by cycle-rickshaws! While cameras are banned in many public places, they can easily be brought inside the banking premises during busy hours - a vulnerable prelude indeed to a hold up!

The conspicuous absence of armed guards make "late sitting" of officials more hazardous.  Blind faith in colleagues, negligence in properly latching the cashier cabin door from inside and accepting cash after business hours are often over-looked.  White-collared bank staff often invariably deal with white-collared customers.  Criminals, on the other hand, are well trained to challenge the staff, with violence if necessary, to  hit their target.

A joint-custodian of  the Currency Chest of a nationalised  bank observes: "As long as the currency in the banks is insured against robberies, bankers will continue to be lethargic.  Insurance companies, more business-oriented, do not even insist that certain norms like provision of armed guards, ensuring safe and secure premises, etc. to be observed".  He is outraged that culprits, after being nabbed, are imprisoned for a year or two before being released to resume their activities, instead of being dealt with sternly.  He cites the Emergency period when the miscreants were aptly dealt with and the crime rate was negligible.  It is the intervention of political pressure that obstructs the punishment process, he deplores.

Comments an executive with three decades of experience: "As bankers, our role is limited. The government has a greater responsibility in controlling the menace.  A hot line between the branch and the nearest police station is essential".

Effective aids

A senior inspecting official says: "Police personnel report daily at all Calcutta banks at the opening hour and remain till the cash is taken back to the strong room.  All branches have a siren and the panic buttons are concealed in three places - one each in the manager's and cashier's cabins, the third at some other desk.  Access to any of these during a hold-up will the raise the alarm".

A bank officer reveals that a new electronic alarm is being devised, which sets off panic signal when a key is pushed to unlock the "safe-room".  A former chairman of a primary bank suggests making in-depth studies of ten cases and analysis of the weaknesses of the system.

What is to be done after a hold up?  Apart from contacting the police control room (in a  city) or the nearest police station, note the vehicle number of the escape vehicle, its make, type, prints, etc.  The crime scene must be left intact to help sleuths trace clues.  Forensic experts confirm even  cigarette-buds and sweat stains help identify the blood group.  Blood stains, voice, eyes, feet, vaccination marks, scars, height, weight, colour, hair (in a comparitive manner) are effective aids for follow-up.

Laments a Director General of Police: "When crimes are committed against individuals the victims provide a continuous source of motivation that helps in the pursuit of clues.  Crimes occurring in public institutions, however, lack such individual and enthusiastic sources of inspiration".

What can be done? Armed guards should be posted before every bank door and secure premises selected.  Shutters should be unfailingly pulled down after banking hours.  A half-closed door is as good as open.  Alarm bells and emergency lamps should be fitted inside the strong room, and access to cash vaults must be strictly confined to authorised personnel.  Surplus cash (cash in excess of sanctioned limit) must be scrupulously remitted to the bank's Currency Chest, the Reserve Bank, or needy banks.

Joint-custodians should not leave the keys of the strong room in their table drawers overnight.  The location of the manager's cabin must ensure his visual supervision of all the departments, particularly the cash counter.  The training curriculum of staff should include lectures/group-discussions/ and role-play on this subject.  Checking unauthorised loitering and prominent display of warning notices to alert the public must be observed.  Arrangement of cash counters in such a manner that movement towards the exit door is delayed, is worth pondering.  Finally, the Police should be trained to nab culprits with minimum identity data.

======

ATM gives free money!

• Buy one – Get one free! A common form of sales promotion!
• Ask 20  Take 40 – ATM special scheme! New marketing?

“An ATM in London has paid twice the money asked for” (Times of India, June 23, 2012) – due to human error- “an employee accidentally loaded GBP10 tray with GBP 20 notes.  Soon the word  spread (thanks to SMS, FB……); long queues were formed outside the ATM, some queued up repeatedly and withdrew even more. One person clinically “checked his online statement, only to find the amount asked for had  been debited, not what was paid out”.   Some customers claimed they were “lucky”.  The programming  should generally be to debit amount of cash dispensed by the machine.  Dangerously strange!

The acronym for ATM , as we all know, is Automated Teller Machine. Any Time Money, doesn’t matter. All Time Money, accepted.  In Canada, it is known as ABM – Automated Banking Machine.  But has Any Time Money at any time  become Any Time Double Money?!

Last month I read a news item that “Residents cash in ATM pays out double – and the bank says they can keep the windfall” (The Daily Mail, May 19, 2012).  Some customers walked away richer by thousands of pounds. A very reputed multinational Bank (the benevolent institution!) said “they would not be asking any customers to return the money as the mistake was theirs”. A spokesman of the bank 'dutifully' added that it was not the customer’s fault. Atrociously distressing to digest how spokesman could dish out such a blatant assertion!

Human error is understandable (not acceptable, though).  Machines sometimes misdispense other than the amount of the withdrawal request.

Two things are nagging:

• The responsibility of the bank (for a moment even ignoring the human error factor and/or computer glitch)

Is this the way the bank authorities safeguard the organization’s interests?  Instead of rectifying the mistake and initiate instant efforts to recover the excess funds from those customers (?), it is harmfully damaging that the bank “would not ask any customers to return the money”.  Highly despicable!   Whose money is it, anyway?  Where do the bank draw the authority to make such extravagant resolutions and throw such “free cash”?  Are they, by compelling such decisions, trying to glorify the excess cash receivers as any sort of Lucky/Lottery Winners?

The excess payment spewed by the rogue ATM should engage a functional guilt and  be a nightmare to the bank.  Even if it is a system outage, how can the management  respond in such negligent and reckless mode?  Clearly sending a wrong signal!

The bank should have sought the local police help and warned the ‘excess’ customers that those who failed to return the money would face criminal charges.  They should have created an alarm that even though ATM had threw up excess cash, they are not legally and morally entitled to that money and are committing criminal offence if they keep it, adding that ATM locations are under surveillance.  No initiative  has been made to contact the customer at all!  In view of no due diligence was exercised by the concerned officials of the bank, whoever has been a party to the decision not to call back the excess money should be shown the exit door and the loss incurred thereof must be recovered in full from his/her wages/end of service benefits without any prejudice.

• Customer ethics

Just because a bank makes a mistake, doesn’t mean you get to benefit. If the ATM  “accidentally” gives you more money than it should, report it and return the excess cash.   Make no mistake! The moment you bid to grab the excess cash , you instantly cease to be a customer.  That is not all! You have wilfully defrauded the bank, looting on their inefficiency.

Beware! What would you have done if it is the other way? If you punched $1000, but got $500?  You would have used the choicest language in bad-mouthing the bank and its officials. The reverse error would have baffled and infuriated you, true?

We have interfaced with many bank frauds and robberies.  Even wherever bank lapses/errors were highlighted, no where it has been advocated that the “beneficiary” can enjoy the spoils. Disgrace, there is a queue for “doubling their money” in front of the ATM!  We think only of one Lehman Brothers or one Ramalinga Raju for corporate scams and malpractices.  What about any number of small thieves we witness in cases like these, such small drops which make up a stinking mighty ocean! We may forget the individuals (like we have for instance deleted Harshad Mehta from our memory), but we are steadily merging with the depth of the virus.

Well, coming to the ATM plight, the bank is well within its ambit to impact the so-called  customers of criminal charge of fraudulently acquiring pecuniary advantage by conscious and wilful deception, which amounts to a clear case of theft.

All said and done, I am ashamed on both counts - as an ex-banker and a customer!

CUSTOMER DELIGHT

Cheques meant for someone else get deposited in your account or vice versa, dividend warrants go astray, account balances on the ATM terminal are wrong and overstate or understate the actual by thousands of rupees, cheques get bounced and are re-credited with no explanation and the Internet banking facility is so full of glitches that one can never be sure how far one can trust the replies one gets on the paperless mail.  None of this is mere speculation or hypothesis but based on actual happenings. If one cannot be sure of reasonably immediate attention and a fair hearing from bank officials, one should not be surprised to see irate customers bad-mouthing the bank.

Has the combination of high technology and competition in financial services in particular served us well as customers? Has it truly introduced a service orientation amongst those staff who manage the various points of contact between the company and the general public? The answers to these questions depend upon your personal experience with institutions such as banks, hotels, airlines, railways, which in turn seems to be largely a matter of luck.

Global competition today is fierce, and customers who are merely satisfied with the products and services of an organization will soon be lured away by competition.  If you need to stand up to the competition and retain your customer base, you need to move beyond “satisfaction” to discover and fill each customer’s essential needs.  So customer service is steadily being attempted to be replaced by customer delight.

Two most fundamental requirements for creating delight—a thorough understanding of customers’ expectations and the commitment of service providers. Companies who fail to make customer delight a part of their business strategy will quickly be overrun by those who embrace this concept and make it an essential part of their daily lives. That means that not only organizations, but also every department within them must understand the principles of what delights their customers and eliminate anything that causes pain.

The trouble with banks which catch the limelight with high key advertising and glossy, plush offices are the ones that find the smaller savings bank account holder a thankless job to deal with, from their business point of view and at times deal with him in a cavalier way. The returns on the time spent on the individual customer must seem trivial in comparison with the lucrative large corporate accounts. Even less attractive is the prospect of dealing with the daily aches and pains of the retail customers due to myriad faults and slips that seem inevitable in transactions running into millions.

Some companies measure customer satisfaction daily and rewards its staff monthly for exceeding customer satisfaction targets.  Short term cost reduction and profit maximization decisions often outweigh investment in service levels and customer satisfaction, turning out to be a myopic view.

If you are serious about the importance of satisfied customers, you need to have objective measures of the extent to which you are succeeding.  Feedback from customer contact staff is very useful, but it may not be objective.  Monitoring complaints is essential.  Not all dissatisfied customers complain, and even if they did, a complaints measure provides no indication of the extent to which you are satisfying and retaining the customer who are for complaining.  It is also an established fact that satisfied customer do defect.  Being a good service provider alone is not enough.  Today’s customer decide whether the value delivered by your business is better than they could provide elsewhere.

A customer satisfaction programme must be launched in every unit/branch of the organization, which will enable to: 1) understand how customers perceive your organization and whether your performance meets their expectations. 2) Identify priorities for improvements in performance. 3) Pinpoint “understanding gaps” where your own staff have a misunderstanding of customers’ priorities or their ability to meet customer’s needs. 4) Set goals for service improvement and monitor progress against a customer satisfaction index. 5) Benchmark your performance against that of other organization. 6) Increase profits through improved customer and loyalty and retention.

Satisfaction is customer’s perception that his expectations have been met or surpassed.  You buy something and you expect it to work properly.  If it does, you are satisfied.  If it does not, you are dissatisfied.  Now, it is up to the seller to find a way to fix the problem so that you can become satisfied. Satisfied customer buy more, and more often.  It is a simple truth.  Quality, service, satisfaction and retention all are important in a distinct way.  Your main goal should be to produce a satisfied and loyal customer who will stay with you over time.  Quality and service are the means to the ends of satisfaction and retention.  

Superior customer service and quality performance that result in customer delight can only be provided by competent, quality people.  After hiring, train them extensively to provide superior customer service.  Once trained, compensate them well. One may be aware of the costs associated with losing a customer and acquiring the new ones.  The same formula holds goods true for recruiting, hiring and training new staff.  The acquisition costs can be staggering.  Finally empower your people to make decisions and do the right thing to satisfy your customer. The staff should not look for you or a manager every time a customer asks a question.  There are stories about empowered employees whose decisions that were against the company policy but that satisfied and retained a customer, with the end result of both the customer and the business winning.

At times, we come across instances, where a few  relationship managers, stressed with approaching deadlines, give false promises, unable to deliver, ultimately lose customers.  No doubt they are able to grab the next.  In the bargain, professionalism and reputation become the primary casualty. Also. If you need to deliver delight, it is not only the role of the Relationship Managers and their support Customer Service Officers, but those working in the back office should also show same level of zeal and commitment.  Every back office employee should initially be posted in the branch to have a first hand experience of the customer expectations and the responsive service that accompanies to make a perfect harmony.