Banking frauds are on a steep rise in India. Recent RBI data revealed that private banks saw the most number of frauds in FY22. Public sector banks, on the other hand, accounted for the highest frauds in terms of value. 1 2 The data further revealed that most (42%) of these frauds were in the Advances segment (which contributed to nearly the entire fraud value). Meanwhile, Cards/Internet was the second largest segment in terms of number of frauds.
Technology in financial services is rapidly evolving, but so are criminal minds who seek newer avenues to defraud individuals and financial institutions every day. Another challenge affecting FIs is the time lag for fraud detection, as highlighted by the RBI report.
Most of these frauds come under the following four categories: Identity, contactability, income falsification, and diversion of funds. Delving into detail will help understand these better.
Identity Fraud: It is not uncommon for one’s identity to get stolen in the digital age, where privacy may be illusory. It is often that a person’s personal information is misused by another (impersonator) without authorization to commit a crime or defraud that person or another. Common ways in which identity fraud occurs in banking is criminals use someone else’s bank statements and identity documents like Aadhar, PAN, etc. to avail credit.
Income Falsification Fraud: This is a widely used tactic by fraudsters to showcase a false financial situation by forging income statements like salary slips, bank statements, IT returns, and so on. Eventually, the ability to repay is falsified, leading to a default on credit.
Diversion of funds: A customer/entity availing a loan for a said purpose may use it for an entirely different one. This may include using working capital borrowings for personal expenses, transfer to subsidiaries or creation of assets without the consent of the bank.
Now, let’s talk about the aversion of these banking frauds.
For identity thefts, it is important for banks and FIs to verify information from golden sources such as the ITD portal. Liveness and face match checks are also imperative from the point of view of identity verification. Penny drop for account verification can add an extra layer of safety for banks.
While this sounds too much to be done manually, Karza’s Total KYC can help authenticate the identity of the customer using automated solutions like Face Liveness and Matching, OCR capabilities, document verification, and more. The suite can also help minimize contactability and income falsification frauds with comprehensive address and employment checks.
Moreover, contactability of customers can be enhanced with K:Lookup , a one-of-its-kind skip tracing tool that scours through many public and private data sources to authenticate email IDs, mobile numbers, and addresses using powerful ML algorithms. K:Lookup has improved traceability of uncontactable customers by 33%, helping banks better their collection efforts significantly.
Banks would also need to access sources like EPFO to verify proof of income like salary slips. This can be accomplished using Karza’s many automated due diligence solutions that scan a wide array of government data sources.
Finally, with award-winning cognitive features like Name Match, Face Match, and Address Match, Karza’s VideoKYC solution can further enhance identity verification and fraud detection for banks.
In order to combat diversion of funds or misappropriation, banks would need to scrutinize financial statements periodically, check associations between entities owned by the borrowing company, and even track fund transfers. Banks can automate these processes with the help of K:Scan , which identifies shell entities, builds related party networks, and provides micro financial insights. Constant monitoring can throw in early warning signals for banks to prevent frauds related to fund diversion.
Karza’s state-of-the-art automation capabilities have translated to Rs.3000cr worth of fraud aversion for banks so far. Pioneering automation in identity verification and diligence, Karza is reshaping the way banks and financial institutions go about risk management and fraud containment.
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Karza Technologies is the largest data, analytics, automation, and decisioning solution provider to FIs, catering to the entire lending lifecycle from onboarding to diligence & monitoring to collections. Karza Technologies solutions enable systemic fraud prevention, risk management, compliance & automation through superior data engineering and deep tech applications.
In a nutshell, Karza stands on the trifecta of digitization: automation, enhanced diligence, and robust decisioning for straight-through processing; thus, creating a state-of-the-art digitization process without compromising on security and quality. Karza Technologies is a pioneer in the services it offers and has successfully acquired a very diverse portfolio of 300+ live clients, spanning across the largest gamut of use cases in the industry.
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