Nironjan Roy

When I started my banking career, I was posted in a branch in Dhaka's busiest commercial area, where a cheque forgery involving BDT2.2 million occurred. The criminals targeted a non-resident account having sufficient balance. They submitted a request letter to the bank for issuing a duplicate chequebook, claiming the original one to be lost. Head Teller (Cashier) verified the signature of this request letter.

Later, upon investigation, the Head Teller was convicted of negligence of duty and, thus, dismissed from the bank. Till now, I do not understand and cannot find justification for how only the Head Teller was held responsible for cheque forgery, particularly when fraud involved with issuance of duplicate cheques. The cheque fraud took place three decades ago. During this long time, the standard of banking service has gone through phenomenal changes.

The use of cheques has significantly reduced, and many sophisticated means of banking transactions, including Electronic Fund Transfer (EFT), have become very popular banking products. Nevertheless, banking fraud using cheques has not stopped yet; instead, these financial crimes have become a global problem because fraudsters have established strong networks globally and are stealing money from banks in different forms, of which cheque and EFT fraud are very common.

Reports and analyses in banking professional publications and even in the periodical reporting of US-based ACAMS (Association of Anti-Money Laundering Specialists) say that cheque and EFT fraud has alarmingly risen in Asia, Europe and North America. The USA, having established a technologically advanced banking system with stringent control and security features, is also struggling to combat cheque and EFT fraud.

According to banks and credit unions in the USA, cheque fraud accounted for the largest share of suspicious activity. Moreover, the US Financial Crime Enforcement Network, commonly known as FinCEN, said that depository institutions suspected instances of cheque fraud on nearly 529,000 in 2023, 5% higher than that of in 2022 (501,000). Fraudsters are getting much better at creating counterfeit cheques and accessing original chequebooks through either stealing from the mail or physical force. It is further learnt that fraudulent wires and other electronic fund transfers have also risen by 15%. The report also revealed that suspicious activity on automated clearinghouse transactions has also risen by 9% in the USA.

The introduction of FedNow has indeed reduced the average time between the clearing and settlement of transactions from days and hours to only minutes. However, such instantaneous money services have invited tremendous fraud risk because banks responsible for handling the underlying transfers of funds have very little to practically no time to identify transactions.

There are some specific reasons behind the alarming rise in cheque fraud. It is obvious that nowadays, the use of cheques in banking transactions has drastically declined; however, the cheque depositing and scrutinising process has been made so easy, simple and convenient that many security features are compromised. Now, multiple options, viz.

mobile banking, ABM (Automated Bank Machine) and online banking apps, are used to deposit cheques. So, tempering features or material alteration can hardly be detected when cheques are deposited and processed through machine-readable devices. Previously, a cheque was hardly sent through the postal service, which is now common practice.

Similarly, fraud related to EFT is also rising because EFT has been introduced to provide instant cash service to customers. Although this facility has been brought under the pretext of customers’ benefit, eventual beneficiaries are the technology companies who have convinced the bank to adopt this technology and provide instant cash services only for making money on technology sales. However, the popularity of instant cash transactions is being abused by fraudsters.

The criminals use various hacking techniques to have easy access to different customers’ accounts with banks and process internal online fund transfers, and then, EFT transaction is carried out to take the money out of the bank. Since there is no practice of holding period and real-time reconciliation, the fraudsters can easily take this money out within the shortest possible time. When this fraud is detected, it is too late.

In our country, the banking system is rapidly advancing with the use of sophisticated applications. Mobile baking and online banking are very popular banking services here. However, to what extent the standard security features have been established prior to adopting these modern banking facilities remains a big question. Lack of industry practice, weak reconciliation process, no holding period, lack of need-based customer rating and weak KYC (Know Your Customer) are common weaknesses in our banking practices that may easily be abused by fraudsters. If cheque and EFT-related frauds can rise all over the world, it can occur in our country too. So, Bangladesh Bank must consider this issue with serious attention and compel the country’s commercial banks to put stringent control on app/technology-based banking services.
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The writer is a Certified Anti-money laundering Specialist and Banker based in Toronto, Canada. Email: [email protected]