RBI has further strengthened its policy control measures to reduce the incidence of fraud.
Welcome to the January 2011 edition of The Fraud Watch, a newsletter on fraud and dispute.
This newsletter encapsulates industry news, regulatory updates and articles on emerging issues. With this issue, we are introducing a new section Viewpoint, featuring article from an expert or an industry leader.
In recent times, revelations of major scams have dotted the Indian corporate landscape. These include:
- The LIC Housing Finance scam was uncovered, and its CEO, along with other top banking officials, were arrested for sanctioning large-scale corporate loans, overriding mandatory regulations for such approvals, along with other irregularities.
- The 2G scam revealed special favors that were granted to certain telecom companies for the illegal grant of the 2G spectrum.
- The microfinance industry is facing the wrath of the Insurance Regulatory Development Authority (IRDA) and state governments for charging relatively high rates of interest and lending to families that have limited capacity to repay these loans.
- The Commonwealth Games (CWG) scandal is finally drawing close to its judgment day with the arrest of Suresh Kalmadi’s close aides.
Regulatory: On the regulatory front, the Reserve Bank of India (RBI) has further strengthened its policy control measures to reduce the incidence of fraud. The RBI has issued a notification on a dispute-resolution mechanism under the Payment and Settlement Systems (PSS) Act 2007.
It has also issued a notification on the opening of bank accounts for salaried employees as a safeguard against anti-money laundering (AML) standards and for combating financing of terrorism (CFT). India has become the ninth member of the regional anti-money laundering body, the Eurasian Group, which is involved in enforcing global standards on anti-money laundering and preempting financing of terrorism in Europe and Asia.
Article: An article on fraud in the Indian oil and gas sector by Dip Mehta, Manager at EY. Fraudulent activities in this sector primarily include irregularities in oil and gas exploration, corruption in global oil and gas operations and fraud at gas stations or retail outlets.
Viewpoint: The concluding section of this edition features an article by Dan Torpey, Vince Walden and Mike Sherrod, members of Ernst & Young LLP’s Fraud Investigation & Dispute Services (FIDS) practice. The article talks about using forensic technology for email analysis during an investigation, based on Cressey’s fraud triangle theory.
Instances of fraud and misappropriation in Indian companies are increasing by the day. This calls for enhanced vigilance and more robust control measures. However, implementation of such measures will be challenging for the corporate sector.
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*Refer to the attached PDF for source information.