Responses from a Deloitte survey of senior management responsible for compliance at banks and financial institutions, including public, private, foreign, cooperatives and regional rural banks has revealed that 78% of respondents fear banking frauds could increase over the next two years.
Retail banking was identified as a major contributor to fraud incidents, with 53% of respondents indicating that they had experienced more than 100 fraud incidents (over the last two years) - a 29% rise since the previous survey last year.
At least 42% of respondents said they had fallen victims to data theft, cybercrime, third-party-induced fraud, bribery, corruption and fraudulent documentation. As many as 25% of respondents foresee an increased dependence on analytical tools for fraud monitoring and detection. Only half of the survey respondents indicated that they conduct fraud risk assessments and update their fraud risk register once a year.
Similarly, the non-retail segment saw an average of 20 fraud incidents, highlighted by 56% of survey respondents - again, a rise from the previous 22%.
Key reasons identified for the increase in fraud incidents over the next two years include large-scale remote working models, an increase in customers using non-branch banking channels and the limited or ineffective use of forensic analytics tools to identify potential red flags.
Other findings of the survey included increased reliance on remote and electronic channels that warrant proactive efforts.
Stressed assets continue to be an area of concern, with survey respondents having cited limited asset monitoring after disbursement (38%), the economic slowdown (24%), and insufficient due diligence prior to disbursement (21%), as the top three factors leading to higher stressed assets. These suggest that banks may need to overhaul their due diligence and monitoring frameworks.
Speaking on the launch of the survey findings K V Karthik, Partner, Financial Advisory, Deloitte India, said, “the impact of the pandemic has resulted in institutions across the globe operating in an entirely new environment. An increase in the use of digital channels for transactions by customers, on one hand, has contributed to the ease and speed of transactions. On the other, with evolving and complex business models and increased use of technology, existing fraud risk management frameworks have been introduced to newer and more complex challenges".
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