Banking Offence

By Ragunath Pradhan

Banking offence, crime or fraud is social evil. It hinders on the development process of financial system, damage the carrier of staff/fraudster, imprisonment and financial penalty. On the other hand, it will cause not only financial loss to the bank but also reputational loss and damage on its goodwill as well.  Banking crime is the misuse of the assets owned by a bank with an aim to have illicit benefits. It involves fraud, money laundering, embezzlement of cash, bribery, cyber crime, terrorist financing and misuse of funds as well. It covers all unlawful act performed with an intention to have illicit benefits at the cost of bank.

With a view to promoting trust towards banking and financial system mitigating the consequences and the risks that the banking and financial system may suffer due to offences that may occur in course of transactions of Banks & Financial Institutions “Banking Offence and Punishment Act, 2064’ has been formulated in Nepal. The Act has made provision on banking offences and punishment. As per the Act banking offences includes opening an account or demand cash payment in an unauthorized manner, obtaining or issuing cheques, cheque-books or bank statements in an unauthorized manner, making unauthorized withdrawals or payments, obtaining or making payment by way of abuse or unauthorized use of electronic means,  availing or providing loans in an unauthorized manner, abuse of the credit facility, abuse of banking resources, means and assets with or without applying position power, acquiring assets or opening account by borrower who has over dues, stopping approved credit facility without valid reasons, making alteration in the account or ledger committing forgery or fraud, deriving excess, low or false valuation, carrying out or  cause to carry out irregular transactions, raising fund as per mutual understanding with an aim to take or give the raised amount turn by turn among the members (Dhukuti).

The act has also defined punitive aspects of banking offence. There is a provision of fine and imprisonment upto twelve years after recovering the claimed amount on the basis of claimed amount and nature of committed offence. In case the culprit could not be identified, the person working in the capacity of the organization head at the time of the occurrence of such offense shall be held liable. Further it is also stated that the person or organization attempting to commit a banking offense or the person or organization indirectly involved in committing such offense or assisting in committing such offense shall be punished with a half of the punishment applicable to the offender.

Despite of stringent provision as above the cases of banking offences are in increasing trend. It is reported that out of 9256 cases registered in Kathmandu  during first ten months of this running fiscal year 5312 cases were related with financial crime and banking offence which is almost 58% of total case lodged. The financial crime and banking offence lodged during the last fiscal year for the same period were only4343.

Fraud may commit by the staff of a bank itself or by the external or in connivance of both the parties.  Fraud can not be eliminated. It is not risk free. Defining and placing standard operating procedures (SOP), bank can control the possibility of occurrence of fraud. It is notable here that SOP is followed by the staff members so they need to be well educated providing opportunity of training very frequently. There should be SOP in all sphere of banking activities which standardized on the performance of the bank staff. Staff members of the bank needs to acquainted with all applicable rules and regulation including act, rules and regulatory guidelines at least related with their department or section. There should also be robust mechanism of internal control, internal audit and surprise visits from the provincial office and Head office as well.

Fraud may also occur due to heavy load to the staff members. So, adequate staff needs to be deployed by the organization. Many of the frauds are occurring due to greediness of the staff members of the bank or its stakeholders. It is notable here that need may be satisfied but never greediness.

Banking education/awareness needs to provide through different mechanism in order to boost up financial literacy of the general people. Most of the people are still drawing cheques without confirming their account balance due ignorance of its consequence. No doubt, some people are betraying their payee pretending he has maintained sufficient balance to cover the cheque amount. Bank needs to deploy only such person who is very sound on the ground of morality. Banks use to select staff force only evaluating the qualification holding by them. No doubt qualification is the basic requirement for the selection. But at the same time it is also required to know his or her expectation and the environment on which he grown up. This will help the interviewer to assess his or her morality.