Discuss the various means adopted in committing fraud and forgery in banks and suggest measures to check these activities

 Fraud is defined as "any behavior by which one person intends to gain a dishonest advantage over

another". In other words , fraud is an act or omission which is intended to cause wrongful gain to one person  and  wrongful  loss  to  the  other,  either  by  way  of  concealment  of  facts  or  otherwise. Losses sustained by banks as a result of frauds exceed the losses due to robbery, dacoity, burglary and theft-all put together. Unauthorized credit facilities are extended for illegal gratification such as case credit allowed against pledge of goods, hypothecation  of goods against bills or against book debts. Common modus operandi are, pledging of spurious goods, inletting the value of goods, hypothecating goods to more than one bank, fraudulent removal of goods with the knowledge and connivance of in negligence of bank staff, pledging of goods belonging to a third party. Goods hypothecated to a bank are found to contain obsolete stocks packed in between goods stocks and case of shortage in weight is not uncommon.

Despite all care and vigilance there may still be some frauds, though their number, periodicity and intensity may be considerably reduced. The following procedure would be very helpful if taken into consideration:

1. All relevant data-papers, documents etc. Should be promptly collected. Original vouchers or other

papers forming the basis of the investigation should be kept under lock and key.

2. All persons in the bank who may be knowing something about the time, place a modus operandi of the fraud should be examined and their statements should be recorded.

3. The probable order of events should thereafter be reconstructed by the officer, in his own mind.

4. It is advisable to keep the central office informed about the fraud and further developments in regard thereto.

Describe the steps for cancellation of a Draft

The purchaser may request to cancel the draft purchased by him and ask for refund of money. For cancellation of a draft the following points should be kept in mind:

a)          On receipt of application along with the demand draft for its cancellation the signature of the application is verified from the original application form and the genuineness of the Demand Draft is examined.

b)         Before the draft is cancelled it is ascertained that no Duplicate Draft has been issued.

c)          If the date of issue of the draft is much  earlier,  consent  of the payee in writing  should be obtained.

d)         If the draft is in favour of a company, semi-government body or government official, consent of

the payee in writing is essential.

e)         If the draft has been negotiated, the draft should not be cancelled.

f)          The signatures of officer on the draft should be crossed but in no case torn, and the draft be marked “Cancelled”. A note in respect of cancellation should be made in the draft issued Register and on the application.

g)          The cancelled draft should be attached to debit voucher along with the request letter of the purchaser.

h)         In case of cancellation of a DD, payment procedure would be Dr. HO General a/c drawee branch

& Credit Payee.

i)           The  drawee  branch  must  be advised  about  the  cancellation  of  draft  through  copy  of  Debit advice, second copy to be sent to Head Office and the third one to be kept with the debit voucher.

What is remittance? What are the different modes of Remittance

The synonyms of the word remittance are payment, transfer of funds, transmittal, release, discharge etc. Therefore remittance means transfer of funds from one place to another within the country or outside the country i.e a payment to a remote recipient through official channel.

Commercial Bank in Bangladesh offers the facility of transferring funds, from one place to another, to their customer  as well as to the general  public following  the rules of Money Laundering  Act. Such transfer of fund can be affected either through Demand Draft or telegraphic transfer. The aforesaid two methods  of  remitting  money  from  one  place  to  another  within  the  country  is  known  as  inland remittance. While it is for out side Bangladesh the same is called foreign remittance. The advantage of remittance is quick transfer of money with minimum cost and also the risk of physical transportation of cash is eliminated.

Remittance: DD, TT, PO issue & maintenance of the registers, TT/DD, advice issue, Responding of  TT/DD

advice, DD  paid without advice.

What is the legal position of a banker if he pays a cheque after business hour?

Late payment of cheques means cash payment of a cheque after transaction hour. Banking law does not allow  any  late  payment.  Bankers  always  try  to  discourage  this  type  of  payment  due  to  following reasons:

1.                       Cheque may be stopped before next working day

2.                       Account holder may be expired

3.                       Account holder may become insane

4.                       Account holder may be declared as insolvent

5.                       Account may be garnished/blocked.

However  on special  cases  the branch  authority  sometimes  allow late  payment  if investment/credit balance of the account exists after observing the following formalities:

1.             Manager must mark late payment on the cheque with his initial.

2.             Cash of the late payment cheque must be received by the account holder duly putting his two signatures on the back side of the cheque, not by the bearer.

3.             Cheque should be posted, to be passed by authorized officer(s) and also to be entered into the payment register.

4.             This payment cheque must be made as voucher on the following working day

Off-shore banking

Offshore banks: banks located in jurisdictions with low taxation and regulation. Many offshore banks are essentially private banks.

Offshore Banking

An offshore bank is a bank located outside the country of residence of the depositor, typically in a low tax jurisdiction (or tax haven) that provides financial and legal advantages.

These advantages typically include:

1. Greater privacy

2. Less restrictive legal regulation

3. Low or no taxation (i.e. tax havens)

4. Easy access to deposits (at least in terms of regulation)

5. Protection against local political or financial instability

While the term originates from the Channel Islands "offshore" from Britain, and most offshore banks are located in island nations to this day, the term is used figuratively to refer to such banks regardless of location (Switzerland, Luxembourg and Andorra in particular are landlocked).

Offshore banking has often been associated with the underground economy and organized crime, via tax evasion and money laundering; however, legally, offshore banking does not prevent assets from being subject to personal income tax on interest.

Offshore Banking: Advantages

01. Offshore banks provide access to politically and economically stable jurisdictions. This may be an advantage for those residents in areas where there is a risk of political turmoil who fear their assets may be frozen, seized or disappear. However, developed countries with regulated banking systems offer the same advantages in terms of stability.

02. Some offshore banks may operate with a lower cost base and can provide higher interest rates than the legal rate in the home country due to lower overheads and a lack of government intervention. Advocates of offshore banking often characterise government regulation as a form of tax on domestic banks, reducing interest rates on deposits.

03. Offshore finance is one of the few industries, along with [tourism], in which geographically remote

island nations can competitively engage. It can help developing countries source investment and create growth  in  their  economies,  and  can  help  redistribute  world  finance  from  the  developed  to  the developing world.

04. Interest is generally paid by offshore banks without tax deducted. This is an advantage to individuals who do not pay tax on worldwide income, or who do not pay tax until the tax return is agreed, or who feel that they can illegally evade tax by hiding the interest income. 

05. Some offshore banks offer banking services that may not be available from domestic banks su ch as anonymous bank accounts, higher or lower rate loans based on risk and investment opportunities not available elsewhere.

06.  Offshore  banking  is  often  linked  to  other  structures,  such  as  offshore  companies,  trusts  or foundations, which may have specific tax advantages for some individuals.

07. Many advocates of offshore banking also assert that the creation of tax and banking competition is an  advantage  of  the  industry,  arguing  with  Charles  Tiebout  that  tax  competition  allows  people  to choose an appropriate balance of services and taxes. Critics of the industry, however, claim this competition as a disadvantage, arguing that it encourages a "race to the bottom" in which governments in developed countries are pressured to deregulate their own banking systems in an attempt to prevent the off-shoring of capital

Offshore Banking: Disadvantages

01. Offshore banking has been associated in the past with the underground economy and organized crime, through money laundering. Following September 11, 2001, offshore banks and tax havens, along with clearing houses, have been accused of helping various organized crime gangs, terrorist groups, and other state or non-state actors. However, offshore banking is a legitimate financial exercise undertaken by many expatriate and international workers.

02. Offshore jurisdictions are often remote, so physical access and access to information can be difficult. Yet in a world with global telecommunications this is rarely a problem for customers. Accounts can be set up online, by phone or by mail.

03. Offshore private banking is usually more accessible to those on higher incomes, because of the costs of establishing and maintaining offshore accounts. However, simple savings accounts can be opened by anyone and maintained with scale fees equivalent to their onshore counterparts. The tax burden in developed countries thus falls disproportionately on middle-income groups. Historically, tax cuts have tended to result in a higher proportion of the tax take being paid by high-income groups, as previously sheltered income is brought back into the mainstream economy.

Garnishee order

 A garnishee order is an order of a court asking the banker to stop either absolutely or partially the usual operation in the account of a particular customer, thereby attaching the funds  of the account in the hands of third party or as the court may determine and direct for the disposal of such funds. . The banker is known as Garnesee. A garnishment is a means of collecting a monetary judgment against a defendant by ordering a third party (the garnishee) to pay money, otherwise owed to the defendant, directly  to the  plaintiff.  In the case  of collecting  for  taxes,  the law  of a jurisdiction  may  allow  for collection without a judgment or other court order.

What are the causes for liquidity crisis of a bank

Causes of recent liquidity crisis of banking sector Liquidity refers to the supply of the means of payments of an economy. In Bangladesh, the totality of liquidity is indicated by what is called 'broad money 'or M2. A shortage of money restricts demand by making it more difficult to engage in transactions. Investment is particularly susceptible to liquidity. Now the main causes of liquidity crisis of banking sector are given below: