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India Focus - FincrimeTrends and Case Studies
Session 1
2
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Boring but Important Things – Event Logistics
6
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• Most sessions being recorded, available until August 14
• Certificates of participation • Attend 80% of the session• Fill out the survey – Triggers at end, available
throughout
Boring but Important Things – Troubleshooting
7
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For customer support: • [email protected]• 786-591-1346
G.Jagan MohanGeneral Manager – Reserve Bank Of India
India’s Banking Frauds
India Country Facts
GDP
USD 2.87 Trillion (2019)
FDI
USD 50.60 Billion (2019)
Population
1.37 Billion (2nd Largest) (2019)
Foreign Exchange Reserves
USD 522.63 Billion (Jul 2020)
Inflation Rate
6.09% (Jul 2020)
GDP Growth Rate
5.02% (2019)
Imports
USD 473.99 Billion (2019-20)
Remittances
USD 83.13 Billion (2019)
Banks & FIs
95,946 (Dec 2017)
GDP (PPP)
USD 9.06 Trillion (2018)
Exports
USD 313.22 Billion (2019-20)
India Regulatory Overview
Central Board of
Indirect Taxes and
Customs
Telecom
Regulatory
Authority of India
Central Drugs
Standard Control
Organisation
Ministry of
Housing and
Urban Affairs / RERA
Medical
Council of
India
Department f or
Promotion of
Industry and Internal
Trade
Securities and
Exchange Board of
India
Major Risk & Financial Crimes Regulations
❑ BlackMoney (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015
❑ The Benami Transactions(Prohibition) Amendment Act, 2016
❑ CompaniesAct, 2013
❑ The Banking Regulation Act, 1949
❑ The Foreign Exchange ManagementAct, 1999
❑ Narcotic Drugs and Psychotropic SubstancesAct, 1985
❑ Foreign Contribution Regulation Act, 2010
❑ The Prevention of Corruption Act, 1988
❑ Prevention of Money Laundering (Amendment) Act, 2012
❑ Indian ContractsAct, 1872
❑ The Payment and Settlement SystemsAct, 2007
❑ The Telecom Regulatory Authority of India (Amendment) Act, 2014
❑ The Consumer Protection Act, 1986
❑ DepositoriesAct, 1996
❑ The Life Insurance Corporation (Amendment) Act, 1957
❑ The CompetitionsAct, 2002
❑ The Lotteries(Regulation) Act, 1998
❑ Real Estate (Regulation and Development) Act, 2016
Insurance Regulatory
and Dev elopment
Authority
Reserve Bank
of India
Pension Fund
Regulatory &
Development Authority
Central Pollution
Control Board
0
5000
10000
15000
20000
25000
30000
# of Reports Amt in $m
Banking Frauds Reported(Amounts involved >USD 1,500)
Break up by Value and Volume(Cases >USD 1,500)
# of Reports
$1500-150000 $150000-750000 >$750000
Amt Involved $m
$1500-150000 $150000-750000 >$750000
*Amounts reported do not translate into losses incurred as there would be recoveries made subsequent to reporting
Operational Areas of Banking(>USD 1,500; Outstanding frauds reported until March 2020)
88%
0%1%
2%
9%
Loans Card & Internet Deposits Forex transactions Others
Tell-tale Signs of Frauds
❑ Banking outside lenders consortium
❑ Non-cooperate with stock/forensic inspections
❑ Large write-offs of Sundry Debtors
❑ Related firms with common addresses, Directors, etc.
❑ Dodgy documents – Lorry Receipts, Freight bills etc.
❑ Bank funds used to repay loans from related people
❑ Over/under insurance – Rejections of claims
Framework for Loan Frauds(since May 2015)
➢ Indicative list of Early Warning Signals (EWS) for red flagging (RFA)
➢ Consortium leader to convene meeting and declare fraud in time-
bound manner
➢ Forensic audit to be concluded within 3 months
➢ Overall timeline of 6 months for fraud to be declared by all
➢ Deficiencies in implementation of EWS - RFA Mechanism by banks
➢ Non-integration of the mechanism into banks’ credit monitoring software
➢ Not concluding investigation after RFA within the stipulated 6 months
➢ Inconclusive forensic audits due to non-cooperationby the borrowers
RBI’s Current Framework (2)
➢ For addressing information asymmetry at banks
➢ CFR – Online search-based portal on perpetrators
➢ CRILC – Large Credit Exposure database
➢ Third Party Entities (TPEs) reporting platform
➢ Advocate, Chartered Accountants, Valuers, Architects etc. covered
➢ Caution Advices on SWIFT, Malware attacks, Mobile app vulnerabilities
etc
➢ Special investigations carried out in large value accounts
➢ Penalties being levied on banks for violation of instructions
Proposed Framework
➢ Revision of Instructions
➢ Strengthening staff accountability
➢ Creation of Market Intelligence Units in banks
➢ Dedicated cells for monitoring large-value credit exposures
➢ Strengthening the governance and audit framework in banks
➢ Integrating Registry of frauds of banks and NBFCs
➢ Legal authority for forensic auditors appointed by banks
➢ Separate investigation bureau and
➢ Special Courts for banking frauds
Abhishek BaliCEO, ZIGRAM
India Risk Overview
India and Global Indices
BASEL AML Index Ranked 70 out of 142
Corruption Perception Index
Ranked 80 out of 180
Global Terrorism Index Ranked 7 out of 163
Global Peace Index Ranked 139 out of 163
Fragile States Index Ranked 68 out of 178
Cyber Security Index Ranked 47 out of 189
Global Competitiveness
IndexRanked 68 out of 141
Human Development
IndexRanked 129 out of 189
Global Innovation Index Ranked 52 out of 129
Human Capital Index Ranked 115 out of 157
Global Manufacturing
Risk IndexRanked 3 out of 48
Ease of Doing Business Index
Ranked 63 out of 190
Data, Fraud and Technology
Frauds & Scams In India
13,993 Cases E-commerce fraud cases since Aug 2016
21,041 casesBank fraud cases reported in Q4 2019
Identity theft is the
largest contributor
to fraud
475% increased in
E-commerce Fraud
Cases
USD 2.1 Billion Biggest Bank Scam in 2018
USD 6.25 Billion Insurance Companies lost to frauds
USD 28 Billion Telecom sector fraud losses as per CFCA
3,000 casesHealthcare fraud cases detected in 2019
Scheduled banks
reported six cases
every minute
Financial services
Most vulnerable
sector for fraud
USD 17 BillionBank fraud in 18 PSBs in Apr-Dec 2019
Corporate Fraud
have increased
over the years
41% firms affected Firms affected by data theft in 2019
48% Indians hitIndians hit by Online Retail fraud as per a 2017 survey report
51% people paid bribes As per India Corruption Survey 2019 report
USD 5.5 BillionTax Fraud detected in 2018-19
43% rise in cases Fraud cases related to Import increased in FY2017-18
Cybersecurity and
digital payment
fraud cases are a critical concern
Prev ention of Money Laundering Act
Fugitiv e Economic Of f enders Act
Benami Transactions (Prohibition) Act
Foreign Exchange Management Act
Black Money and Imposition of Tax Act
Narcotics, Drugs and Psy chotropic
Substances Act
Income Tax Act and Regulations Banking Regulation Act
Reserv e Bank of IndiaFinancial Intelligence
Unit - India Enf orcement DirectorateSecurities and Exchange
Board of IndiaEconomic Of f ences
Wing Narcotics Control Bureau Income Tax DepartmentInsurance Regulatory
and Dev elopment Authority
Anti-Money Laundering Laws
Major Regulating Agencies
ICICI Bank was f ined USD 9 Million in March 2018, f or non-compliance of directions issued by RBI
ABW Inf rastructure Limited was f ined USD 6 Million in December 2018, f or real estate laundering
Punjab National Bank was f ined USD 2.3 Million in July 2019, f or f ailure to f ile STRs
Bank of Baroda was f ined USD 1.3 Million in March 2019, f or f ailure to f ully implement CDD
Mani Anbazhagan was sentenced to 7 y ears in prison and f ined USD 0.14 Million in March 2019, f or money laundering
Top 5 Penalties in India
583
Total Events
AML In India
1,476 Months
Total Imprisonments
360
Total Entities Fined
31
Total Individuals Implicated
$0 $0 $0 $0 $0 $22 $283 $37 $0 $0 $119$845
$306
$11,825
$1,094
$2,388
$4,821
$1,306
$20,734
$26,246
$2
0 0 0 0 0 2 27
0 07
90
23
52
34
78
52
27
47
154
3 0
20
40
60
80
100
120
140
160
180
0
5000
10000
15000
20000
25000
30000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Penalties (Thousand USD) Events
Actions & Penalties
2016 2017 2018 2019
USD 92,703 USD 48,366 USD 441,153 USD 170,428
India has the third highest number of AML actions in the world… but one of the lowest
fines/penalties per action
❖ Lots of laws & regulations
❖ Limited… But Increasing Actions
❖ Cybercrime and Money laundering are major growth areas
❖ Data Protection Issues / Thefts etc. have seen explosive growth
❖ Insolvency Laws and reporting norms have led to enhanced focus on Corporate
Fraud
❖ Lead in deploying technology & processes at scale
❖ Enhancement in sharing information with other countries and extradition for
financial crimes
❖ India is one of the fastest growing markets for Financial Crimes compliance,
solutions and service
Panel Discussion
Panelists
Dhruv ChawlaPartner & Financial Crimes
Compliance Leader, PWC India
Pradeep KocharGlobal Head AML KYC Quality
Execution & Strategy at Citi
Induvant TomarAssociate Director, PWC India
G Jagan MohanGeneral Manager, Reserve
Bank Of India
Sunil KumarConsulting Partner - Financial
Crime Risk Management, Tata Consultancy Services
Anti-Money Laundering
Fraud Technology
THANK YOU!