Fraud Analytics

Assignment 2

Group 3

Top 5 Frauds in Banking Sector

Submitted by
Ayush Gupta 22030242011
Robin Dutt 22030242042
Siddharth Awasthi 22030242050
Sriraj Varanasi 22030242059
Vaibhav Deodhar 22030242064

SYMBIOSIS CENTRE FOR INFORMATION

TECHNOLOGY
SYMBIOSIS INTERNATIONAL (DEEMED
UNIVERSITY)
“HDFC Customers Targeted by Scammers with Fraudulent Messages – Exercise
Caution and Refrain from Clicking Links"

1. Highlight of the Frauds:

The realm of digital finance has, unfortunately, become a breeding ground for unscrupulous activities, and
one recent instance spotlighted the audacious tactics scammers employed to target unsuspecting HDFC
Bank customers. These fraudsters embarked on a sophisticated phishing SMS campaign that ingeniously
impersonated the bank itself. Capitalizing on the anxiety associated with potential loss of access to bank
accounts, these fraudulent messages proclaimed impending account suspension due to incomplete KYC
(Know Your Customer) updates. This emotional manipulation, coupled with a sense of urgency, aimed to
extract sensitive information from recipients under the guise of a necessary account reactivation
procedure.

2. Fraud Amount:

While specific financial details pertaining to the mentioned fraud are not furnished, the broader landscape
underscores the substantial financial repercussions. A report emanating from the Reserve Bank of India
(RBI), cited by the Minister of State for Finance, illuminates the magnitude of the issue. In the fiscal year
2021-22, the category of fraud encompassing card-related incidents, internet banking irregularities, and
other digital transaction scams encompassed a staggering sum of approximately Rs 128 crore. This
sobering figure provides a somber insight into the potential fiscal devastation awaiting victims of such
deceitful activities.

3. Impact or Outcome of the Fraud:

Unfortunate victims ensnared in the web of this phishing SMS ruse faced a cascade of dire
consequences. Responding to the manipulative call-to-action by clicking on the malevolent links
cunningly embedded within the messages provided scammers with a gateway into victims' personal
information. Remote access to mobile devices and unauthorized entry into bank accounts was the
harrowing outcome. The aftermath was characterized by financial losses ranging from moderate to
severe, contingent upon individual account balances and the speed of detection. The once-trusted
conduit of digital banking metamorphosed into a conduit for exploitation, leaving victims grappling with
financial setbacks.

4. Mitigation Strategies used to Tackle the Fraud:

The urgency of mitigating the perilous spread of phishing SMS frauds prompted HDFC Bank to respond
with alacrity and multifaceted countermeasures:

● Customer Enlightenment: Recognizing the importance of informed customers, HDFC Bank

promptly disseminated alerts and advisories, shedding light on the mechanics of the phishing
SMS campaigns. They provided customers with the tools to discern legitimate communications
from nefarious ones, nurturing a sense of empowerment in navigating the digital landscape.
● Social Media Vigilance: The bank's responsive customer care team actively engaged with users
on social media platforms, leveraging these platforms as conduits of education. They cautioned
against responding to unsolicited SMS requests and extended an empathetic ear to customer
concerns.
● Authentication Assurances: HDFC Bank, cognizant of the fragility of trust in the digital domain,
reaffirmed their authentication protocols. They communicated that all bona fide messages would
emanate exclusively from official IDs like hdfcbk/hdfcbn. Additionally, the bank assuaged
customers by asserting that links in their messages would uniformly reside under the secure
domain http://hdfcbk.io, substantiating the veracity of the correspondence.
● Confidentiality Cultivation: To inoculate against future breaches, the bank exhorted customers
to exercise discretion and restraint. HDFC Bank unequivocally advised against divulging
confidential information like PAN details, OTPs, UPI credentials, passwords, and card particulars
to anyone, be it over SMS, email, or telephonic communication.

5. Security Measures taken to Prevent Future Fraud:

Beyond immediate damage control, HDFC Bank and its customers can orchestrate a symphony of
security measures, orchestrated to thwart phishing and its ilk:

● Preservation of Personal Information: A cardinal decree in the digital age, abstain from sharing
personal data, especially sensitive components like OTPs, bank details, and identification
numbers, via SMS or unsolicited phone calls.
● Reinforced Password Prowess: The fortification of passwords as a bastion of defense stands
paramount. HDFC Bank encourages customers to craft formidable passwords for assorted
platforms, while also encouraging periodic password changes to outwit potential breaches.
● Sender Scrutiny: A vigilant approach to sender verification preempts unwarranted compromises.
When faced with banking alerts, direct interaction with the bank or reporting of suspicious
messages becomes a reliable course of action, fostering a culture of security consciousness.
● Two-Factor Triumph: The inclusion of two-factor authentication (2FA) for online banking
assumes the form of a formidable barricade. This dynamic defense necessitates users to furnish
not only a password but also a one-time code, thus bolstering the verification process.
● SMS Sophistication: A discerning eye towards the finer nuances of SMS communication pays
dividends. Analyzing the security posture of links embedded within messages, as well as
scrutinizing linguistic anomalies, empowers individuals to discern the spurious from the authentic.
"Unraveling the Axis Mutual Fund Fraud: A Deep Dive into Suspected Front-
Running and Its Impact on the Financial Landscape"

1. Highlight of the Frauds:

The financial sector was jolted by a stunning revelation in May 2022 when Axis Mutual Fund found itself
embroiled in a perplexing and disconcerting case of suspected front-running. The central figure in this
intricate web of deception was Viresh Joshi, the chief dealer at Axis Mutual Fund, whose alleged
involvement in fraudulent activities sent shockwaves through the industry. As a result of these revelations,
Axis Mutual Fund took the unprecedented step of terminating Joshi's employment. However, this marked
only the beginning of a convoluted saga that saw further developments, including income tax raids at
Joshi's premises and a subsequent legal battle as he sued his former employer for wrongful termination.
The situation grew even more complex when the Securities and Exchange Board of India (SEBI) stepped
in to initiate an investigation into the matter.

2. Fraud Amount:

Although the specific financial quantum tied to this intricate fraud is not explicitly disclosed in the
information provided, the gravity of the situation can be gauged from the substantial penalties imposed by
SEBI. The regulatory authority identified and penalized a cohort of 21 entities believed to be involved in
the fraudulent scheme. The cumulative penalty levied amounted to a staggering ₹30.55 crore. This
significant sum attests to the severe nature of the transgressions under scrutiny.

3. Impact or Outcome of the Fraud:

The fallout from this fraudulent episode had far-reaching consequences that reverberated across multiple
layers of the financial landscape. The termination of Viresh Joshi, a prominent figure within Axis Mutual
Fund, not only cast a shadow over his personal reputation but also brought significant negative attention
to the institution itself. The subsequent income tax raids and legal battle further exacerbated the situation,
casting an air of uncertainty and skepticism over the mutual fund's integrity. Beyond the specific
organization, the broader financial market also felt the impact, as trust and investor confidence were
eroded. Instances of fraud of this nature strike at the very heart of the financial system's credibility and
integrity.
4. Mitigation Strategies used to Tackle the Fraud:

In response to this distressing turn of events, Axis Mutual Fund and the financial sector at large were
compelled to take a series of corrective actions to mitigate the damage and reinforce trust:

● Swift Action: Axis Mutual Fund's immediate response of terminating Viresh Joshi underscored
the institution's commitment to maintaining ethical standards and swiftly addressing wrongdoing.
● Legal Proceedings: The legal battle initiated by Joshi against his former employer underscored
the seriousness of the allegations and the resolve to seek justice. Legal actions serve as an
essential mechanism for seeking accountability and establishing the truth.
● SEBI's Role: The intervention of SEBI in launching a thorough investigation highlighted the
regulatory body's role as a guardian of market integrity and investor protection.
● Penalties and Deterrence: SEBI's imposition of substantial penalties on the implicated entities
and the subsequent ban from participating in capital markets, coupled with freezing of bank
accounts, acted as a stern deterrent against potential future misconduct.

5. Security Measures taken to Prevent Future Fraud:

In the aftermath of the Axis Mutual Fund scandal, the financial sector faces an imperative to fortify its
defenses against fraudulent activities:

● Robust Due Diligence: Financial institutions must implement meticulous due diligence when
hiring personnel, ensuring that individuals entrusted with critical responsibilities possess
impeccable track records.
● Ongoing Audits: Regular internal audits and risk assessments can serve as early warning
systems, identifying irregularities and suspicious activities before they escalate into crises.
● Enhanced Regulations: Regulatory bodies must continually refine and tighten regulations to
adapt to evolving risks and emerging fraudulent practices.
● Education and Vigilance: Cultivating awareness among employees about unethical practices,
the ramifications of front-running, and the significance of promptly reporting suspicious activities
can foster a vigilant organizational culture.
“Unveiling the Web of Deception: The Unraveling of the PMC Bank Fraud and Its
Far-reaching Impact"

1. Highlight of the Frauds:

The PMC Bank fraud is a multifaceted tale of financial deception that unfolded through a web of intricate
maneuvers. At its core, the fraud revolved around the concealment of non-performing assets (NPAs)
primarily associated with the prominent real estate conglomerate, Housing Development and
Infrastructure Limited (HDIL). This elaborate scheme of misrepresentation and manipulation was
orchestrated by key figures within PMC Bank, notably its Managing Director, Joy Thomas. The fraudulent
activities entailed concealing NPAs, underreporting defaults, and even creating fictitious accounts to
mask the true extent of the financial distress.

2. Fraud Amount:

The staggering financial toll inflicted by the PMC Bank fraud amounted to an astonishing ₹6,155 crore.
This astronomical sum underscored the immense damage inflicted upon the bank's financial stability due
to the orchestrated deception that centered around concealing HDIL's defaults and the subsequent
misreporting of NPAs.

3. Impact or Outcome of the Fraud:

The reverberations of the PMC Bank fraud extended far beyond mere financial numbers, causing
substantial consequences across various dimensions:

● Erosion of Financial Health: The deliberate misreporting of NPAs precipitated a rapid

deterioration in the bank's financial health. As the hidden defaults surfaced, the bank's liquidity
position crumbled, causing concerns over its ability to meet depositor demands and maintain
operational integrity.
● Trust Deficit Among Depositors: The fraud shattered the trust of PMC Bank's depositors. With
access to their funds severely restricted due to regulatory interventions, depositors faced anxiety
and apprehension about the safety of their hard-earned money.
 ● Regulatory Intervention: In response to the unfolding crisis, the Reserve Bank of India (RBI)
stepped in with regulatory measures to curb the damage. These measures included imposing
withdrawal limits to prevent panic-driven bank runs and initiating investigations to unearth the
depth of the fraud.
● Legal Implications: The fraudulent activities led to legal consequences for key individuals
implicated in the scheme, most notably Joy Thomas. The legal proceedings sought accountability
and sought to bring justice to those affected by the financial irregularities.

4. Mitigation Strategies used to Tackle the Fraud:

The discovery of the PMC Bank fraud prompted a comprehensive response aimed at mitigating its
immediate impact and preventing its recurrence:

● Emergency Stabilization: To prevent a potential liquidity crisis, the RBI imposed restrictions on
withdrawals and operational activities, preventing mass withdrawals and safeguarding the bank's
stability.
● Legal Proceedings: Legal actions were initiated against the key actors involved in the fraud,
sending a strong message of accountability and deterrence against future fraudulent activities.
● Thorough Investigations: In order to uncover the full extent of the fraud, investigations were
launched to identify all parties involved and quantify the actual financial losses.
● Operational Overhaul: PMC Bank underwent a rigorous review of its operational processes to
identify vulnerabilities that had enabled the fraud. The bank introduced stringent internal controls
and transparency mechanisms to prevent similar incidents.

5. Security Measures taken to Prevent Future Fraud:

In the aftermath of the PMC Bank fraud, the banking sector took significant steps to bolster its defenses
against potential future frauds:

● Technological Advancements: The introduction of cutting-edge technology enabled enhanced

monitoring of transactions, real-time data analytics, and the identification of unusual patterns that
could indicate potential fraudulent activities.
● Employee Training and Ethics: Employees underwent comprehensive training programs to
instill a culture of ethical conduct, compliance with regulations, and a heightened awareness of
reporting any suspicious activities.
● Whistleblower Protections: Confidential channels were established to encourage
whistleblowing, offering employees a secure platform to report any irregularities without fear of
retaliation.
● Robust Risk Management: The bank fortified its risk management framework, enabling early
detection of red flags in loan portfolios, investments, and financial operations.
● Audit Strengthening: Regular internal and external audits were conducted to verify the accuracy
of financial data and unearth any inconsistencies or discrepancies.
● Governance Enhancement: Governance structures were revamped to promote transparency,
accountability, and strict adherence to regulatory guidelin.
“Navigating the Depths of Deceit: Unveiling the Complex Web of Fraud in Punjab
National Bank's IL&FS Tamil Nadu Power Account”

1. Highlight of the Frauds:

The Punjab National Bank (PNB), a stalwart among India's public sector banks, finds itself grappling with
a grievous issue—fraudulent activities that have rattled its stability and integrity. The intricate tale centers
around the non-performing asset (NPA) account of IL&FS Tamil Nadu Power Company Ltd (IL&FS
TNPL), highlighting a disturbing pattern of deceit and manipulation within the financial sector. These
episodes of borrowing fraud underscore the urgency of a deeper analysis into the vulnerabilities and
lapses that allowed such fraudulent activities to take root.

2. Fraud Amount:

The staggering amount of ₹2,060.14 crore stolen through these frauds is a testament to the meticulous
planning and strategic execution employed by the perpetrators. This astronomical sum leaves no doubt
that the impact of these fraudulent activities extends far beyond mere financial losses.

3. Impact or Outcome of the Fraud:

The repercussions of these frauds have reverberated across various spheres, causing a domino effect
with far-reaching consequences:

● Financial Quandaries: PNB's financial health has taken a considerable hit, with the weight of the
fraudulent activities manifesting as significant monetary losses. Such a substantial financial
setback not only disrupts PNB's operations but also challenges its stability.
 ● Reputation Erosion: The pillars of trust and credibility that financial institutions like PNB are built
upon have been shaken. The erstwhile esteemed reputation of the bank has been tarnished,
raising questions about the bank's adherence to ethical standards and regulatory norms.
● Regulatory Scrutiny: Regulatory bodies, particularly the Reserve Bank of India (RBI), have
intensified their vigilance in the wake of these frauds. The RBI's involvement reflects not only its
role as a watchdog but also the pressing need to fortify the regulatory framework to prevent
similar incidents in the future.

4. Mitigation Strategies used to Tackle the Fraud:

PNB's response to these crises exemplifies the multifaceted approach required to combat and address
the aftermath of such frauds:

● Forensic Audit: The decision to engage Grant Thornton India for a forensic audit demonstrates
PNB's commitment to unveiling the intricate layers of these fraudulent activities. This audit acts
as a magnifying glass, dissecting the transactions and activities linked to the IL&FS TNPL
account.
● Provisions as Per Norms: Adhering to the prudential norms set by the RBI, PNB has taken a
proactive step by provisioning ₹824.06 crore. This strategic move aims to absorb a portion of the
financial blow while maintaining alignment with regulatory guidelines.
● Legal Action: PNB's prompt reporting of the frauds to the RBI and its initiation of legal action
against the culprits reflects its adherence to its fiduciary duty and a dedication to seeking justice.
These actions not only hold those responsible accountable but also send a powerful message
against fraudulent activities.

5. Security Measures taken to Prevent Future Fraud:

Preventing the recurrence of such fraudulent activities necessitates a comprehensive and holistic
approach that embraces advanced technologies and strategic policies:

● Enhanced Due Diligence: Financial institutions must institute stringent due diligence processes
that thoroughly vet potential borrowers. These measures can help detect inconsistencies and
anomalies in financial data, thwarting the entry of fraudsters into the system.
● Audit Vigilance: Regular audits, including forensic audits, are essential to identify potential red
flags, irregularities, and discrepancies in financial transactions. This proactive approach equips
banks to address fraudulent activities swiftly.
● Robust Internal Controls: Establishing a system of strong internal controls, including
segregation of duties and multi-layer authorization, can fortify the defenses against unauthorized
transactions and manipulative activities.
● Whistleblower Mechanism: Encouraging and nurturing a whistleblower mechanism empowers
employees and stakeholders to report suspicions without fear of reprisal. This channel acts as a
safeguard, allowing institutions to detect and address fraudulent activities at an early stage.
● Leveraging Technology: Cutting-edge technologies like data analytics, artificial intelligence, and
machine learning can play a pivotal role in detecting unusual patterns and trends associated with
fraudulent activities. This tech-driven approach enhances the institution's ability to detect and
prevent fraud.
● Regulatory Alignment: Collaboration with regulatory bodies such as the RBI is imperative to
ensure that financial institutions align with evolving regulatory guidelines and standards. This
partnership enhances oversight and reinforces robust risk management practices
“Unveiling a Vast Network of Deceit: The ABG Shipyard Bank Fraud Saga”

1. Highlight of the Frauds:

The intricacies of this fraud reveal a meticulously planned conspiracy. Rishi Kamlesh Agarwal, along with
other accused individuals such as Santhanam Muthaswamy, Ashwini Kumar, Sushil Kumar Agarwal, Ravi
Vimal Nevetia, and ABG International Private Limited, allegedly conspired to cheat the consortium of
banks that had provided loans to ABG Shipyard between 2005 and 2012.

2. Fraud Amount:

At the heart of this fraudulent web lies a substantial financial impact that underscores the audacious
nature of the scheme. The First Information Report (FIR) filed in February reveals that the total fair market
value of the securities offered by ABG Shipyard against the credit facilities extended was a staggering
$8,608.35 crore. This colossal sum signifies the significant stakes involved and emphasizes the dire need
for stringent preventive measures and vigilant oversight.

3. Impact or Outcome of the Fraud:

The aftermath of this grand deception has left a lasting imprint on the financial landscape. The forensic
audit, conducted to uncover the intricacies of the financial maneuvering, exposed a series of nefarious
activities. Funds were purportedly diverted for undisclosed purposes, misappropriated, and subjected to
criminal breaches of trust. Investments, allegedly made through a Singapore-based subsidiary, raised
suspicions. Substantial payouts were reportedly made to related parties, while the misused funds were
also funneled into property acquisitions, casting doubt on the transparency of the company's financial
operations.
4. Mitigation Strategies used to Tackle the Fraud:

In response to the labyrinthine nature of this fraud, the company must adopt robust strategies to mitigate
future risks. A comprehensive due diligence process during the loan approval phase is crucial to identify
potential red flags. Frequent and rigorous financial audits can help scrutinize transaction patterns and
detect irregularities promptly. Collaborative efforts among banks, financial institutions, and regulatory
bodies can enhance the collective ability to identify and respond swiftly to fraudulent activities.
Mitigation Strategies Sub-Bullet Points:

● Enhanced Due Diligence: Rigorous checks on loan applicants, financial background, and
creditworthiness to identify potential risks.
● Regular Financial Audits: Conducting thorough and frequent audits to scrutinize transaction
patterns and promptly detect anomalies.
● Collaboration: Strengthening communication and cooperation among banks, financial
institutions, and regulatory bodies to collectively combat fraud.
● Technology Adoption: Leveraging advanced technologies like AI and data analytics to enhance
fraud detection capabilities.
● Transparent Reporting: Establishing a culture of transparent reporting to encourage employees
to identify and report irregularities without fear.

5. Security Measures taken to Prevent Future Fraud:

In light of this complex and audacious fraud case, the banking industry must chart a new course towards
enhanced security. The industry can no longer afford to overlook the importance of stringent internal
controls, vigilant transaction monitoring, and robust reporting mechanisms. Harnessing the power of
technology can revolutionize fraud detection capabilities and offer a proactive defense against fraudulent
activities.
Security Measures Sub-Bullet Points:

● Internal Controls: Strengthening internal control mechanisms to prevent unauthorized access

and enhance transaction monitoring.
● Technological Advancements: Utilizing AI, machine learning, and data analytics to detect
irregular patterns and potential fraud.
● Employee Training: Conducting regular training programs to empower employees to recognize
and report fraudulent activities.
● Collaborative Initiatives: Establishing partnerships with cybersecurity experts and law
enforcement agencies to combat cyber fraud.
● Transparency and Accountability: Promoting a culture of transparency and accountability at all
levels to discourage fraudulent intentions.