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Precautions and safeguards against frauds while sanction of loans against high value Fixed Deposits


by Team

Recently, a high value fraud was reported with one of the banks, wherein amount invested by a Government agency was prematurely closed and the proceeds were credited to a newly current account.  Thereafter, the funds were transferred through RTGS to a 3rd party account in another bank by producing an authorization letter which was disowned by the depositor.

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Brief Particulars

A high value term deposit account was opened by a Government agency in a Public sector bank.

After few months, bank had received a letter, apparently issued by the Government agency along with the discharged 'Term Deposit Receipt', requesting for premature closure of the term deposit account and crediting the same to the current account.  Thereafter, remitting the proceeds to the credit of a 3rd party account in another bank.

Subsequently, the bank had received a letter along with the term deposit receipt on the date of maturity by the Government agency, requesting for the closure of the term deposit account and remitting the proceeds to the current account.

After verification, the bank found that the account was already prematurely closed however, the Government agency had denied having issued any such letter.

Learning points:

*While procuring/payment of high value deposits of Individual/Firm/Company/Society/Government agency, the bank should exercise due diligence by strictly complying with the KYC norms/personal contact/personal visit.

*The bank should not employ any Firm/Company for collection of deposits.

*A confirmation letter in form of a 'letter of thanks' along with the acknowledgement should be send through speed post to the depositor's address.

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*A SMS/E-mail could also be send directly to the depositor.

*Apart from this, the concerned branch official should make a personal visit to the office/residence of the depositor within a week to hand over the term deposit receipt. If the depositor is not available, the official is required to meet the next available representative.

*In case, the bank receives the request for premature closure of the term deposit account, the concerned branch should contact the depositor over the phone or in person and take the confirmation in order to make sure that the request was genuine.

*While opening a new high value term deposit account in a non-home branch, the branch should properly verify the signature of the authorized signatories and cross check the specimen signatures of authorized signatories and the mandate to operate the account with the home branch.

*The bank should exercise due diligence by strictly complying all KYC norms while opening new operative accounts.

*The concerned branch should invariably send a confirmatory letter to the depositor.

*The proceeds of the term deposit should only be credited to the depositor's account.

*Bank should not remit the proceeds to any 3rd party account.

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