Classification of Frauds :
Frauds are classified, mainly on the basis of the provisions of Indian Penal Code (IPC), as under:-
(a) Misappropriation and criminal breach of trust.
(b) Fraudulent encashment through forged instruments, manipulation of books of account or through fictitious accounts and conversion of property.
(c) Unauthorized credit facilities extended for reward or for illegal gratification.
(d) Negligence and cash shortages.
(e) Cheating and forgery.
(f) Irregularities in foreign exchange transactions.
(g) Any other type of fraud not coming under the specific heads as above.
– Cases of ‘negligence and cash shortages’ and ‘irregularities in foreign exchange transactions’ (d & f) are to be reported as fraud if the intention to cheat/defraud is suspected/proved.
Cases such as:-
(i) Cases of cash shortage more than ` 10,000 and
(ii) Cases of cash shortage more than ` 5,000 if detected by management/auditor/inspecting officer and not reported on the day of occurrence by the persons handling cash. where fraudulent intention is not suspected/proved at the time of detection will be treated as fraud.
– Frauds involving forged instruments have to be reported only by the paying banker whereas collection of a genuine instrument fraudulently by a person who is not the true owner, the collecting bank, which is defrauded, will have to file fraud report with the RBI.
– Collection of an instrument where the amount has been credited before realization and subsequently the instrument is found to be fake/forged and returned by the paying bank, the collecting bank is required to report the transaction as fraud with the RBI as they are at loss by parting the amount.
– Collection of an altered/fake cheque involving two or more branches of the same bank, the branch where the altered/fake cheque has been encashed is required to report the fraud to its H.O. for further reporting to RBI by the H.O.
– An altered/fake cheque having been paid/encashed involving two or more branches of a bank under Core Banking Solution (CBS), the branch which released the payment is required to report the fraud to its H.O. for further reporting to RBI.
– Cases of theft, burglary, dacoity and robbery are not treated as fraud.
– Banks (other than foreign banks) having overseas branches/offices are required to report all frauds perpetrated at such branches/offices to RBI.