Annexure-A
F.No. 4/5/2014-Vig.
Ministry of Finance
Department of Financial Services.
*****
New Delhi,
Dated 13th May, 2015
To:
All the CMDs/MSDs of PSBs/CBI/RBI/CEIB/DRI/MCA/ED
Subject: Framework for timely detection, reporting, investigation, etc. relating to large value bank frauds
1. In view of the serious lapse observed in the timely identification and initiation of proceeding in the matter of large value bank frauds, resulting in substantial loss to banks, misappropriation of public money and delays in brining the offenders to justice. It was decided to put new systems in place aimed at wide ranging structural and procedural reform of the prevailing system. Accordingly, RBI has since issued a circular DBS. CO.CFMC.BC.No.007 / 23.04.001 2014-15 dated May 7, 2015 lying down revised framework applicable to banks for dealing with loan frauds.
2. Banks should be prompt in identification of frauds and taking prescribed follow-up actions. While following all extant instructions issued by RBI in this regard. Timelines indicated in the RBI circular for reporting of frauds following instructions are being which would be applicable to all Public Sector Banks (PSBs).
3. The complaint to be lodged by the bank with the CBI in the event of a fraud would be in accordance with the checklist enclosed at Annexure-I.
4. Joint Director (Policy), CBI Headquarters, New Delhi shall be the nodal person for lodging of all bank fraud cases.
5. In case of frauds exceeding Rs. 50 crore, the CVO of the Bank concerned shall be designated as the nodal officer responsible for vetting complaint and ensuring that it is as per the checklist enclosed at Annexure-I herewith. The CVO shall also be responsible for any coordination required to be undertaken with the CBI in this regard.
6. The overall responsibility for ensuring compliance of the various time lines being laid down in the RBI circular would rest the concerned CMD/MD of the Bank.
7. CBI would ensure that based on the complaint the FIR is registered at the earliest and in no case should it be delayed beyond 15 Days from filing of the complaint by the Bank. Upon receipt of the complaint the CBI would examine the documents and give written comments to the CVO or any other designated officer, as the case may be either through email or at a meeting that may be covered to discuss the matter, within five working days receive the complaint.
Inputs sought by CBI would be furnished by the Bank in no later than 4 working days from receiving the comments on the Initial complaint from CBI. Thereafter, the FIR would immediately be lodged.
8. In case of a consortium lending / multiple banking arrangements only one bank will be required to file an FIR and all the other banks would extend necessary support to the investigating agencies of the fraud, including by way of providing all necessary information, documents etc.
9. Once the fraud is reported to RBI, the banks would immediately initiate examination of the issue of willful defaulters to include borrowers who are perpetrators of frauds in the process of borrowing from Banks, given the prior intension of defrauding the Bank and attempting to escape/ weaken the liability and/or responsibility to repay their debt.
10. All accounts exceeding Rs. 50 crore, if classified as NPA, shall simultaneously be examined by the banks from the angle of possible fraud. A report would be placed before the Bank’s Committee for review of NPAs on the finding of this investigation.
11. While the banks should endeavor to seek a report from the CEIB on any prospective borrower at the time pre-sanction stage, in case an account turns NPA, the banks shall be required to seek a report on the borrower from CEIB. Report would be furnished by CEIB within one week after receiving a request from the Bank.
12. The CBI will put in place a mechanism for reviewing and monitoring progress in investigations etc. of all banking coordination. Various investigating / monitoring agencies like Ministry of Corporate Affairs (SFIO), CEIB, FIU, RBI and DRI will
be associated in this mechanism, as also Department of Financial Services (DFS), which would extend all such support as required by the CBI. CBI would prepare a prescribed format for monitoring the pending cases. Decisions taken in these meeting would be bending on all constituents of this mechanism attending the meeting .
13. DFS would facilitate CBI in obtaining appropriate professional help n its investigations as and when requested by CBI.
14. Banks at the time of lodging a complaint with the CBI would also lodge a complaint with the Enforcement Directorate in those accounts where money laundering and FEMA violations also appear to be there. Similarly where the fraud also appears to involve violations in the export and/ or import of goods and services. A report will also be lodged with DRI.
(Anna Roy)
Director (Vigilance)
Checklist to Ensure Filing of complete Complaint by Banks in Fraud Cases Complaint by the Banks to CBI must include the following.
Sl. No. Details
1 The complaint has authorization from the competent authority to file the complaint.
2 The account has been declared NPA as per the laid down procedure.
3 The date of NPA and outstanding thereof have been mentioned.
4 The NPA account has been declared as fraud, with the date of declaration.
5 Where there is delay in filling complaint with CBI after declaration of fraud by the bank. The delay has been explained.
6 The grounds for declaring the fraud by the bank are mentioned clearly.
7 Details of background of company, sanctioned credit facilities. Primary and collateral securities etc. are mentioned.
8 Legal facts constituting cognizable offence have specific mention.
9 Name(s) and role of erring bank official(s) as per the staff Accounting Report is/ are clearly mentioned.
10 Findings of Forensic Audit Report, if conducted and Internal Investigation Report are duly incorporated.
11 Details of crime proceeds/ end-use funds as per the filings of Forensic Audit are mentioned.
12 In case of uncertainty about the criminality on the part of bank officials. The bank has mentioned allegations against unknown public servants.
13 Roles of CA, Statutory Auditors, Stock Auditors, Empanelled Values etc. if any are mentioned
14 Availability of relevant original documents and their safe custody with the bank is mentioned.
15 The bank has ensured that there is no contradiction in the complaint as to whether it is an act of crime or a business loss.
Reference:-Vigilance Manual 2017