Authors: Raman Narasimhan, Director, Forensic and Investigative Services
                 Vidya Rajarao, Partner, Forensic and Investigative Services


Type of FraudMitigation techniques

Insider Threat

  • Understand targets and motivations
  • Strengthen whistleblower mechanism  
  • Periodical training
  • Job rotation
  • Segregation of duties
  • Conduct market intelligence and lifestyle checks

Cyber Crime

  • Conduct technological fraud risk assessment that encompass insider threat assessment
  • Create a robust incident response system
  • Carry out periodical systems audit including VA & PT assessments
  • Conduct training or awareness programs on a periodical basis
  • Implement encryption to strengthen security

Money Laundering

  • KYC controls review
  • Periodical review of AML violation rules
  • High value transaction monitoring
  • Conduct systems audit and review periodically
  • AML Training & Assessment

Bribery & corruption

  • Setting up a robust Anti-Bribery Management Systems
  • Conduct periodical Anti-Bribery & Anti-Corruption (ABAC) assessment
  • Third party Due-Diligence
  • Strict policies for gift and charitable contributions
  • Periodical training program for employees and select third parties
  • Check the design and operative effectiveness, efficiency and adequacy of current whistle blow mechanism

India’s diversified financial and services sector is undergoing rapid exponential expansion, both in terms of growing financial services and addition of new entities into the market. Innovative disruptive technologies have transformed the banking and financial services. New entrants such as payment banks and mobile wallets have taken the people away from the traditional mode of banking. A new realm of cashless or branchless banking has replaced the conventional modes of banking. Thanks to cloud services, such operations without a physical infrastructure are becoming a reality. However, these changes brought by disruptive innovators, bring with them the amplified need to protect business from risks and frauds.

The relevance

A fast growing economy such as India creates lucrative opportunities and incentives to commit fraud. Instances of money laundering, cybercrime, accounting fraud and asset misappropriation cases are increasing day-by-day. India’s e-commerce market was worth about US $23 bn in 2015. Since 2009 it has witnessed a growth of over 500 percent and is expected to touch a whopping US $38 bn mark by 2016. According to RBI records, an impressive number of about 22 mn bank account holders use mobile banking apps and the volume of mobile banking transactions has risen by 100 percent. In 2014-15, mobile transaction were a whopping US$ 151 bn from the level of approximately US$26 bn recorded in in 2011–12.

The management or controls review including appropriate understanding of early warning signals are required under each of the six core functions such as payments, market provisioning, investment management, insurance, deposits and lending and capital raising.

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Key fraud risks in financial services:

Insider threat:

Various studies indicate that non managers have been the primary perpetrators of malicious activity.   Malicious insiders make a conscious decision to deliberately cause harm. The number of accidental insiders who start without intention are also on increasing. The current trend is to use the accidental insider for the malicious intent through compromising sensitive data through abusing the IT and financial controls.

When an insider (including employees, former employees and contractors) decides and colludes, they can fail business continuity plans, leaving no alternatives for the continuation of business.

Cyber crime

Cyber-related incidents represent a continuous, growing and persistent threat to the reputation and stability of our financial institutions.  The cost for fraudulent mobile transactions is the highest for any channel. While the cost of online fraud transactions has dropped 15 percent since 2013, the cost of mobile transaction frauds has increased more than 18 percent. .

Many of the financial service institutions have little financial information on the red flags or knowledge about identifying red flags or early warning syndromes. Particularly the payment banks with the advance technologies in use, the pattern of the crime or fraud also differ with the schemes that may exist elsewhere in traditional banking or financial services set up.

Money laundering:

The analysis by the U.S. Government’s Accountability Office (GAO), revealed that financial institutions between January 2009 and December 2015 paid US$6.8 bn for violations of US sanctions programmes, US$5.2 bn for infractions tied to anti-money laundering (AML) requirements and US$27 mn for breaches of the Foreign Corrupt Practices Act (FCPA).

The Financial Services (FS) sector is particularly exposed to certain types of economic crime such as money laundering and faces unique regulatory challenges as a result.

Bribery and corruption

Bribery is a plague! A mere offering or soliciting of bribe is enough to incur a criminal liability. Laws prohibiting bribery can be used to punish both the person offering the bribe, and the person receiving it. These laws are designed to root out corruption in the public and private sectors. India ranked 76 out of 168 countries in the Corruption Perception Index released by Transparency International with a low score of 38 out of 100.

Mitigation techniques

‘With great return comes even greater risk’.

Return is the reward for taking risks; and in order to attain higher returns, one must be willing to take risks. Since in this context risk is the possibility of fraud and return is the potential revenue of financial services, it is imperative for financial services to mitigate their fraud risks in order to maximise their returns.

With the changing landscape in banking and financial services, and the disruptive technologies changing the dynamics of fraud risk controls, organisation need to revisit their anti-fraud programmes on a frequent basis. Regular monitoring of controls and reviewing fraud risks can be crucial in maintaining an effective risk mitigation. Fraud risk assessment, periodical forensic due diligence at various stages, corporate intelligence will assist the financial services institutions to a greater degree in mitigating frauds and to avoid the long legal battles. Organisations should keep an eye on emerging fraud trends and activities through deploying appropriate monitoring mechanism. 

Is your organisation secure from the risks inherent in the financial services sector? Share you views with us at Stay tuned for more insights on the latest fraud trends in India.

With contributions from Adhiraj Chand, Forensic & Investigative Services.


The blog is first in a series of insightful and informative write ups from our experts that will present various aspects of fraud risks and their mitigation.