FRAUDS AND SCAMS IN BANKS & INSURANCE

NAME OF REASEARCHER:SONALI DAMODAR KHANDE CLASS: TY B & I ROLL NO: TY B&I- 21 PROJECT GUIDE:PROF. M.R.SONGIRE M.COM, DBM, GDCA, B.ED, .COS- ,AICM, GDCA, M M M DB ST

COLLEGE METS S.J.R.S DEGREE COLLEGE OF ARTS, SCIENCE & COMMERENCE. MANISHA NAGAR, KALWA, THANE.

TRAINING CENTER:-COLLEGE CAMPUS

CERTIFICATE
This is to certify that master/miss sonali khande of TY B&I of Academic Year 2012-2013 have successfully completed the project under the guidance of Prof. M.R.SONGIRE.

Student signature

Research signature

Place: date

ACKNOWLEDGEMENT
This gives me and immanence pleasure to submit my project in a subject frauds & scams in banks & insurance. In completion of the said project my college principal Dr. Rajkumar kolhe, teachers, librarian, my friends help me in providing valuable material for the project. I especially thanks to my project guide Prof. M.R.Songire in completion of the project. I thanks to all who help to me completion of project.

Place - Kalwa

Signature

Date -

INDEX SECTION NO: I

PAGE NO 1 2 3 4 PARTICULARS NAME OF PROJECT CERTIFICATE ACKNOWLEDGEMENT DETAILS OF INDEX SIGNATURE

SECTION NO: II
PAGE NO 5.1 6.1 7.1 PARTICULARS ABSTRACT OF PROJECT NEED OF RESEARCH IMPORTANCE OF RESEARCH BANKS 8.1 9.1 10.1 INTRODUCTION SOURCES OF FRAUD MECHANICS OF BANK FRAUD SIGNATURE

11.1 12.1

TYPES OF FRAUD FRAUDS PREVENTIONS & DETECTIONS CLASSIFICATIONS OF FRAUDS ACTIONS REQUIRED BY FRAUDS BANKS FRAUD STATISTICS IN INDIA INSURANCE

13.1

14.1

15.1

INTRODUCTION TYPES OF INSURANCE FRAUD MEASURES TO PREVENT INSURANCE FRAUD DIVISION OF INSURANCE FRAUD HYPOTHICSIS RELATED REFERENCE BOOK METHODOLOGY TOOL & REASEARCH

16.1 17.1

18.1

19.1 20.1 21.1 22.1

ABSTRACT OF PROJECT

Fraud has been acknowledged as one of the principal threat to the development of the banking sector worldwide. This study examines the cases of fraud and its prevention in the banking sector. The respondents were selected using purposive non-probability sampling technique. Responses to rating-scale questions were tested for significance using Test. The findings revealed that Greed is a foremost cause of fraud, as greater part of the staff considered their remuneration as sufficient. It was also observed that banks staff got involved at all stages of fraud, including: initiation, execution and concealment. Moreover, computer fraud accounted for the majority of the fraud perpetuated in the bank. Meanwhile, among the consequences of fraud, loss of revenue and loss of customers confidence top the list. One of the recommendations included establishment of adequate internal control system.

NEED FOR RESEARCH

A lot of what we do in our daily lives is based on common sense, what we have learnt from others or what we have learnt through personal experience or observation. But sometimes common sense is not the best approach and sometimes there are conflicting theories about what is best or what works in a particular situation. Moreover, what works in one situation or for one condition might be ineffective or even dangerous in another, or when combined with other measures. Common sense approaches may overlook the impact of external factors which may contribute to what is observed. Even in the domain of healthcare, there are gaps in knowledge, theories about how something might work better and ideas for improvement. Carefully organized and controlled research enables researchers to test and compare different theories and approaches, explore different methods and learn from other peoples experience. It also enables them to rule out or at least consider external factors which might influence their results.

IMPORTANCE OF RESEARCH
We must first understand what research is. It is another word for gathering of information. The more information we have the closer we get of making our own decision. Research is the result of advancing knowledge created in the past. There are people from all walks of life that contribute to gathered information. These are ordinary people and extraordinary people. They include teachers, students, professors, scholars, librarians, book keepers, writers and many more unknown out there. These are everyday citizens we interact with. They all help with the flow information that people use for self help. Research is designed to solve a particular existing problem so there is a much larger audience eager to support research that is likely to be profitable or solve problems of immediate concern. We also must understand how research impacts our decision making. Most people make decisions without gathered informations to back them up. Only few do. The problem is most people aren't patient enough to put in the effort. Research requires time, effort, and sometimes money to have the evidence you need to make a sound decision that's why many avoid it. The research you do and evidence you gathered will have impact on your future. Be advised, considered the risks or consequences of making an important decision with inadequate evidence. In conclusion research is very vital to our everyday decision making. It arms you from wrong informations and save time and money. It is important to your success as you take on life's challenges and career decisions making. But be careful though, because too much research without action on what youre learning is not good either. The question is how much information is enough? How much information can you afford? Information obesity can be research problem just my advice. Research plus action will most likely guarantee a successful research. Now go out there and make good decisions. I wish you success.

INTRODUCTION
Fraud causes loss to the victim directly or indirectly. Fraud has not been described or discussed clearly in The Indian Penal Code but sections dealing with cheating concealment, forgery counterfeiting and breach of trust has been discusses which leads to the act of fraud. In Contractual term as described in the Indian Contract Act, Sec 17 suggests that a fraud means and includes any of the acts by a party to a contract or with his connivance or by his agents with the intention to deceive another party or his agent or to induce him to enter in to a contract. Fraud is any dishonest act and behavior by which one person gains or intends to gain advantage over another person. Banking Frauds constitute a considerable percentage of white-collar offences being probed by the police. Unlike ordinary thefts and robberies, the amount misappropriated in these crimes runs into lakhs and crores of rupees. Bank fraud is a federal crime in many countries, defined as planning to obtain property or money from any federally insured financial institution. It is sometimes considered a white collar crime. The number of bank frauds in India is substantial. It is increasing with the passage of time. All the major operational areas in banking represent a good opportunity for fraudsters with growing incidence being reported under deposit, loan and inter-branch accounting transactions, including remittances. Bank fraud is a big business in todays world. With more educational qualifications, banking becoming impersonal and increase in banking sector have gave rise to this white collar crime. In a survey made till 1997 bank frauds in nationalized banks was of Rs.497.60 crore.

DEFINITION OF FRAUD:
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.

Fraud is defined u/s 421 of the Indian Penal Code and u/s 17 of the Indian Contract Act. Thus essential elements of frauds are: 1. There must be a representation and assertion; 2. It must relate to a fact; 3. It must be with the knowledge that it is false or without belief in its truth; and 4. It must induce another to act upon the assertion in question or to do or not to do certain act.

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SOURCES OF BANKING FRAUD

Bank fraud is the use of fraudulent means to obtain money, assets, or other property owned or held by a financial institution. In many instances, bank fraud is a criminal offense. While the specific elements of a particular banking fraud law vary between jurisdictions, the term bank fraud applies to actions that employ a scheme or artifice, as opposed to bank robbery or theft. For this reason, bank fraud is sometimes considered a white-collar crime.

Sources of Fraud
Internal Fraud (Employees and insiders) External Fraud

40% 60%

MECHANICS OF BANK FRAUD

a) Stolen Checks Some fraudsters obtain access to facilities handling large amounts of checks, such as a mailroom or post office or the offices of a tax authority (receiving many checks) or a corporate payroll or a social or veterans' benefit office (issuing many checks). A few checks go missing; accounts are then opened under assumed names and the checks (often tampered or altered in some way) deposited so that the money can then be withdrawn by thieves. Stolen blank checkbooks are also of value to forgers who then sign as if they were the depositor. b) Cheque kiting Cheque kiting exploits a system in which, when a cheque is deposited to a bank account, the money is made available immediately even though it is not removed from the account on which the cheque is drawn until the cheque actually clears.

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c) Accounting fraud In order to hide serious financial problems, some businesses have been known to use fraudulent bookkeeping to overstate sales and income, inflate the worth of the company's assets or state a profit when the company is operating at a loss. These tampered records are then used to seek investment in the company's bond or security issues or to make fraudulent loan applications in a final attempt to obtain more money to delay the inevitable collapse of an unprofitable or mismanaged firm. Examples of accounting frauds: Enron and WorldCom. These two companies "cooked the books" in order to appear as they had profits each quarter when in fact they were deeply in debt. i. Uninsured deposits There are a number of cases each year where the bank itself turns out to be uninsured or not licensed to operate at all. The objective is usually to solicit for deposits to this uninsured "bank", although some may also sell stock representing ownership of the "bank". Sometimes the names appear very official or very similar to those of legitimate banks. For instance, the "Chase Trust Bank" of Washington D.C.appeared in 2002 with no license and no affiliation to its seemingly apparent namesake; the real Chase Manhattan Bank is based in New York. Accounting fraud has also been used to conceal other theft taking place within a company. ii. Demand draft fraud Demand draft fraud is usually done by one or more dishonest bank employees. They remove few DD leaves or DD books from stock and write them like a regular DD. Since they are insiders, they know the coding, punching of a demand draft. These Demand drafts will be issued payable at distant town/city without debiting an account. Then it will be cashed at the payable branch. For the paying branch it is just another DD. This kind of fraud will be discovered only when the head office does the branch-wise reconciliation, which normally will take 6 months. By that time the money is unrecoverable. d) Fraudulent loans One way to remove money from a bank is to take out a loan, a practice bankers would be more than willing to encourage if they know that the money will be repaid in full with interest. A fraudulent loan, however, is one in which the borrower is a business entity controlled by a dishonest bank officer or an accomplice; the "borrower" then declares bankruptcy or vanishes and the money is gone. The borrower may even be a non-existent entity and the loan merely an artifice to conceal a theft of a large sum of money from the bank.
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e) Bill discounting fraud Essentially a confidence trick, a fraudster uses a company at their disposal to gain confidence with a bank, by appearing as a genuine, profitable customer. To give the illusion of being a desired customer, the company regularly and repeatedly uses the bank to get payment from one or more of its customers. These payments are always made, as the customers in question are part of the fraud, actively paying any and all bills raised by the bank. After time, after the bank is happy with the company, the company requests that the bank settles its balance with the company before billing the customer. Again, business continues as normal for the fraudulent company, its fraudulent customers, and the unwitting bank. Only when the outstanding balance between the bank and the company is sufficiently large, the company takes the payment from the bank, and the company and its customers disappear, leaving no-one to pay the bills issued by the bank. f) Payment card fraud Credit card fraud is widespread as a means of stealing from banks, merchants and clients. i. Booster cheques A booster cheque is a fraudulent or bad cheque used to make a payment to a credit card account in order to "bust out" or raise the amount of available credit on otherwise-legitimate credit cards. The amount of the cheque is credited to the card account by the bank as soon as the payment is made, even though the cheque has not yet cleared. Before the bad cheque is discovered, the perpetrator goes on a spending spree or obtains cash advances until the newly-"raised" available limit on the card is reached. The original cheque then bounces, but by then it is already too late. ii. Stolen payment cards Often, the first indication that a victim's wallet has been stolen is a phone call from a credit card issuer asking if the person has gone on a spending spree; the simplest form of this theft involves stealing the card itself and charging a number of high-ticket items to it in the first few minutes or hours before it is reported as stolen.

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A variant of this is to copy just the credit card numbers (instead of drawing attention by stealing the card itself) in order to use the numbers in online frauds. f) Empty ATM envelope deposits A criminal overdraft can result due to the account holder making a worthless or misrepresented deposit at an automated teller machine in order to obtain more cash than present in the account or to prevent a check from being returned due to non-sufficient funds. United States banking law makes the first $100 immediately available and it may be possible for much more uncollected funds to be lost by the bank the following business day before this type of fraud is discovered. The crime could also be perpetrated against another person's account in an "account takeover" or with a counterfeit ATM card, or an account opened in another person's name as part of an identity theft scam. Later this decade, this scenario may become a thing of the past due to the emergence of ATM deposit technology that scans currency and checks without using an envelope.

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TYPES OF FRAUDS
Fraud can be classified into two: 1. Offline fraud and 2. Online fraud 1. Offline fraud Most offline fraud incidences happen as a result of theft of your mail, sensitive information related to your bank or credit card accounts, stolen atm/debit/credit cards, forged/ stolen cheques etc. You can protect yourself from such instances by exercising caution while receiving, storing and disposing your account statements as well as your cheques, atm/debit and credit cards 2. Online fraud Online fraud occurs when someone poses as a legitimate company (that may or may not be in order to obtain sensitive personal data and illegally conducts transactions on your existing accounts. Often called "phishing" or "spoofing", the most current methods of online fraud are usually through fake emails, Web sites and pop-up windows, or any combination of such methods. The main objective of both offline as well as online fraud is to steal your 'identity'. This phenomenon is commonly known as "identity theft". Identity theft occurs when someone illegally obtains your personal information - such as your credit card number, bank account number, or other identification and uses it repeatedly to open new accounts or to initiate transactions in your name. Identity theft can happen even to those who do not shop, communicate, or transact online. A majority of identity theft occurs offline. Stealing wallets and purses, intercepting or rerouting your mail, and rummaging through your trash are some of the common tactics that thieves can use to obtain personal information. The more you are aware about identity theft the better prepared you will be.

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Frauds- Prevention and Detection:

A close study of any fraud in bank reveals many common basic features. There may have been negligence or dishonesty at some stage, on part of one or more of the bank employees. One of them may have colluded with the borrower. The bank official may have been putting up with the borrowers sharp practices for a personal gain. The proper care which was expected of the staff, as custodians of banks interest may not have been taken. The banks rules and procedures laid down in the Manual instructions and the circulars may not have been observed or may have been deliberately ignored. Components of Fraud: There are two important components in any fraud committed by an employee of a bank, himself or in collusion with a burrower. They are, firstly, the intention which is subjective; and secondly, the opportunity which is objective. Conditions must be created in the bank that the person who intends perpetrating a fraud does not get the opportunity to commit it. In India, the design, management and regulation of electronically-based payments system are becoming the focus of policy deliberations. The imperatives of developing an effective, efficient and speedy payment and settlement systems are getting sharper with introduction of new instruments such as credit cards, telebanking, ATMs, retail Electronic Funds Transfer (EFT) and Electronic Clearing Services (ECS). We are moving towards smart cards, credit and financial Electronic Data Interchange (EDI) for straight through processing.

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Prevention of frauds:
i) Internal Prevention: It is said that failures are the stepping stone for success. What this means is that if we are able to analyse why a particular failure by way of a fraud took place, we can then detect the loopholes in our system which led to the fraud and take corrective measures or change the system. For instance the great Harshad Mehta scam took place because among other things, the public debt office of the Reserve Bank of India was not computerised and was operating on a manual system. This gave a float of fifteen days, which gave opportunity for people like Ketan Parekh to perpetrate the fraud. Even after this scam while in the case of the RBI the defect was rectified the overall banking system is still manual. Only 5000 out of the 65000 branches of banks are computerised. In today's competitive market, it is necessary that the banks are able to service their clients effectively. Therefore strongly urge is that we should have a massive effort at computerisation of the banks. ii) External Prevention: In the banking and financial sectors, the introduction of electronic technology for transactions, settlement of accounts, bookkeeping and all other related functions is now an imperative. Increasingly, whether we like it or not, all banking transactions are going to be electronic. The thrust is on commercially important centers, which account for 65 percent of banking business in terms of value. There are now a large number of fully computerized branches across the country.

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a) Appropriate controls: The first steps in prevention of frauds in computerized systems involve setting up of proper access controls both physical and logical. The physical protection of Information System assets means physical control of access to computer and network systems and the devices to which they are connected. Access to these systems could be controlled by security guards, installation of code locks, smart card driven door opening devices or modern biometric devices (which control the access on the basis of certain individual characteristics such as finger-prints, eyes retina image etc., which cannot be changed or falsified). b) Proper Implementation; Second step in prevention of frauds would be to ensure that the users properly implement the control systems. Control measures could be either software driven like passwords or system driven like exception reports and transaction authorization processes. In this connection, it may be noted that access controls are a system in themselves and existence of such controls means existence and maintenance of such control systems Examples: 1) When data relating to inter-branch reconciliation flows through network simple processes like check sum or hash totals may suffice. However, in the case of INFINET used for Real Time Gross Settlement, which uses dial-up connections, leased lines as well as VSAT technology for access, use of Public Key Infrastructure (PKI) with a larger key-size is necessitated.

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Detection of Frauds:
i) Internal detection: 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. ii) External detection: Despite all such measures, as technology is taking rapid strides (for fraudsters as well as organizations), system security administrators are discovering that they have to constantly improve upon the technological tools. However, security can only reduce the possibility of fraud and not totally rule it out. In a computerized environment, the perpetrators of fraud also expect their crime to be near impossible to detect among the thousands or millions of transactions processed by the organization. Hence to reduce the losses, timely detection of the frauds plays an important role.

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CLASSIFICATION OF FRAUDS AND ACTION REQUIRED BY BANKS

The Reserve Bank of India had set-up a high level committee in 1992 which was headed by Mr. A... Ghosh, the then Dy. Governor Reserve Bank of India to inquire into various aspects relating to frauds malpractice in banks. The committee had noticed/observed three major causes for perpetration of fraud as given hereunder: 1. Laxity in observance of the laid down system and procedures by operational and supervising staff. 2. Over confidence reposed in the clients who indulged in breach of trust. 3. Unscrupulous clients by taking advantages of the laxity in observance of established, time tested safeguards also committed frauds. In order to have uniformity in reporting cases of frauds, RBI considered the question of classification of bank frauds on the basis of the provisions of the IPC. Given below are the Provisions and their Remedial measures that can be taken. 1. Cheating (Section 415, IPC) Remedial Measures The preventive measures in respect of the cheating can be concentrated on cross-checking regarding identity, genuineness, verification of particulars, etc. in respect of various instruments as well as persons involved in encashment or dealing with the property of the bank. 2. Criminal misappropriation of property (Section 403 IPC). Remedial Measure Criminal misappropriation of property, presuppose the custody or control of funds or property, so subjected, with that of the person committing such frauds. Preventive measures, for this class of fraud should be taken at the level the custody or control of the funds or property of the bank generally vests. Such a measure should be sufficient, it is extended to these persons who are actually handling or having actual custody or control of the fund or movable properties of the bank.

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3. Criminal breach of trust (Section 405, IPC) Remedial Measure Care should be taken from the initial step when a person comes to the bank. Care needs to be taken at the time of recruitment in bank as well.

4. Forgery (Section 463, IPC) Remedial Measure Both the prevention and detection of frauds through forgery are important for a bank. Forgery of signatures is the most frequent fraud in banking business. The bank should take special care when the instrument has been presented either bearer or order; in case a bank pays forged instrument he would be liable for the loss to the genuine costumer.

5. Falsification of accounts (Section 477A) Remedial Measure Proper diligence is required while filling of forms and accounts. The accounts should be rechecked on daily basis.

6. Theft (Section 378, IPC) Remedial Measures Encashment of stolen' cheque can be prevented if the bank clearly specify the age, sex and two visible identify action marks on the body of the person traveler's cheques on the back of the cheque leaf. This will help the paying bank to easily identify the cheque holder. Theft from lockers and safe deposit vaults are not easy to commit because the master-key remains with the banker and the individual key of the locker is handed over to the costumer with due acknowledgement.

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7. Criminal conspiracy (Section 120 A, IPC) In the case of State of Andhra Pradesh v. IBS Prasad Rao and Other, the accused, who were clerks in a cooperative Central Bank were all convicted of the offences of cheating under Section 420 read along with Section 120 A. all the four accused had conspired together to defraud the bank by making false demand drafts and receipt vouchers.

8. Offences relating to currency notes and banks notes (Section 489 A489E, IPC) These sections provide for the protection of currency-notes and bank notes from forgery. The offences under section are: (a) Counterfeiting currency notes or banks. (b) Selling, buying or using as genuine, forged or counterfeit currency notes or bank notes. Knowing the same to be forged or counterfeit. (c) Possession of forged or counterfeit currency notes or bank-notes, knowing or counterfeit and intending to use the same as genuine. (d) Making or passing instruments or materials for forging or counterfeiting currency notes or banks. (e) Making or using documents resembling currency-notes or bank notes.

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Bank Frauds Statistics in India:

Year

Loss in Fraud Cases Rs.Crores 399.53 Cr. 653.5 Cr 600.16 Cr. 1744 2207 2663

2010 2011 2012

A survey On Frauds:
Highlights of the first annual survey published by India forensic Research Foundation. This study was carried out in the period of August'2011 and January '2012. This is the first independent and privately funded study carried out in India on the banking sector frauds.400 participants contributed their valuable views on this subject.

Total fraud loss to Indian Banks in 3 year was Rs. 1653.19 corers according to the report published by Reserve Bank of India.

Existence of the internal controls is still the methodology in India to catch the frauds.

Collusion of the borrowers and the employees is the biggest cause of the bank frauds.

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 At least Rs.690 crores worth of frauds are known to the banks but are not reported to various authorities for reasons like unclear definition of word frauds, damage to the banks image etc.

Technology related frauds like (ATM Card, Debit card, Credit card) are expected to be going un-exposed on the vast proportion.

Estimated minimum loss to the banking industry because of the unknown frauds could be more than Rs.828 crores.

Total impact of frauds on banking revenues = 1.7% of the total consolidated revenues of the banks are lost to frauds.

Money laundering is considered to be the risk of frauds in future.

Educating the bank employees is the most effective way to prevent the bank frauds.

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INSURANCE FRAUD
MEANING
Insurance fraud is any act committed with the intent to fraudulently obtain payment from an insurer. Insurance fraud is widespread in most countries and India is no exception. Insurance frauds are found in areas like healthcare, automobile, life, fire insurance. Insurance fraud has become a lucrative business for criminals who find it very easy to plant evidence and demand insurance cover for any damage or loss that is internationally carried out.

INTRODUCTION
Insurance fraud has existed ever since the beginning of insurance as a commercial enterprise. Fraudulent claims account for a significant portion of all claims received by insurers and cost billions of dollars annually. Types of insurance trades are very diverse and occur in all areas of insurance. Insurance crimes also range severity, from slightly exaggerating claims to deliberately causing accidents or damage. Fraudulent activities many time3s affect the lives of innocent people , both directly through accidental or purposeful injury or damage and in directly as there crimes cause insurance premiums to be higher. Investment fraud pose a very significant problem and govt. and other org. are making efforts to defer such activities.

Causes of insurance frauds

i. ii. The chief motive in all insurance crimes is financial profit. Many times it is observed that false insurance claims can be made to appear like ordinary claims. This allows fraudster to file claims for damages that never occurred and so obtain payment with little or no initial cost. To attract maximize customers towards the insurer than competitors. With intention, of concealing true information w.r.t. age, disease, etc.

iii. iv.

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TYPES OF INSURANCE FRAUD

Many time insurance frauds exist from scanning whether it is auto insurance, life or properly. All types of insurance fraud can be divided into : 1) Hard fraud 2) Soft fraud

HARD FRAUD:
Hard frauds includes someone a car accident, injury, arson, loss, break-in or someone writing false bills to medicare to illegally receive money from their insurance company. This types of frauds often receives more media attention and it is easier to detect. Hard fraud often involves criminal activity of insurance company. But individual can also be found guilty of hard fraud.

SOFT FRAUD :
This is more difficult to detect. It happens when a person pads their insurance claims by telling white lies, such as, they are feeling, to till to come to work, so they can receive workers compensations benefits that they wouldnt have otherwise. Insurance fraud are also divided on following grounds: 1) 2) 3) 4) Automobile insurance fraud Life insurance fraud Health insurance fraud Property insurance fraud

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Fraud in insurance is also divided on the basis of:

1) Internal frauds There those perpetrated against an insurance companies or its policyholders by agents, managers, execution or other insurance employees.

2) External frauds There are direct against on insurance by individual or entities as diverse an policyholders medical providers, beneficiaries, vendors, ect.

Sources of Fraud
Internal Fraud (Employees and insiders) External Fraud

35% 75%

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MEASURES TO PREVENT INSURANCE FRAUD

It is necessary to adopt proper fraud prevention programme to control the rising insurance fraud:

GENERAL MEASURES
1) Role of the Govt. Govt. should take lead in prevention of fraudulent activities n the main important sector of insurance. 2) Awareness among the consumers Through proper training programmes, street plays, consumer fares, the awareness can be created w.r.t. understanding of fraudulent areas in insurance. 3) Role of media Media can play important role in spreading of awareness and knowledge.

SPECIFICS MEASURES
1) It requires high standards of integrity from directors management and employees of insurance org. 2) It is necessary to set the realistic goals and objective resources. for best use of

3) It is necessary to organize, collect and evaluate the effectiveness of information so that the management may avoid frauds. 4) To prevent fraud in insurance the audit function must be carried out in proper manner.

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Division of Insurance Fraud

The Division of Insurance Fraud was originally formed in 1976 to investigate only fraudulent automobile tort claims. In the early years, investigators had arrest powers but could not carry firearms. Today, the division investigates all types of insurance fraud crimes. Investigators are assigned to work general fraud cases, workers compensation fraud, medical and health-care fraud, and agent and company fraud. Areas of assignment may include: Insolvency - Fraud committed by insurance companies that fail financially due to internal fraud by owners and corporate officers. Unauthorized Entities - fraud, both criminal and civil, committed by insurance companies operating illegally in the state. Health Care Fraud - focuses on organized medical and health care scams. Workers Compensation - investigates employers for workers compensation premium fraud. Public Employee Fraud - investigates state and local government employees for workers compensation claimant fraud.

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HYPOTHISIS
The most important feature of Bank frauds is that ordinarily they do not involve an individual direct victim. They are punishable because they harm the whole society. It is clear that money involved in Bank belongs to public. The Indian Banking Industry has undergone tremendous growth since nationalization of 14 banks in the year 1969. There has an almost eight times increase in the bank branches from about 8000 during 1969 to mote than 60,000 belonging to 289 commercial banks, of which 66 banks are in private sector. Insurance, a very well known concept today and many people could relate to in more than one ways. This is the influence of the changing times that have changed the concept of insurance in the minds of the young and the old. People have changed their attitude towards insurance and accepted its new look from being an entry of luxury to an investment and a necessity. The number of people taking insurance has increased considerably in the past few decades due to the entry of private players in the market. One knows that every coin has two sides. Similarly, insurance also has two faces. One of which is investments and getting regular returns from financial institutions for oneself and for loved ones. The other, awfully, is of which people deceive insurance companies for their undue advantage and cause intimidation to many others.

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RELATED REFERENC BOOK

1) BOOKS : EDITION FIRST EIGHT FIRST FRIST SECOND REVISED

PUBLICATION SETH VIPUL MANAN VIPUL HIMALYAS

AUTHOR ARCHANA PRABHUDESAI VINAY PRABHU MICHAEL VAZ CHNDRA HARIHARAN IYER RIYA RUPANI

2) NEWS PAPAR 1) ECONOMICS TIMES 2) TIMES NEW ROMANS 3) HINDUSTAN TIMES 4) INDIA TIME

3) WEBSITE 1) www.humanresourcesabout.com 2) www.hrm.com 3) www.google.com 4) www.scribd.com

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METHODOLOGY For the subject frauds & scams in banking & insurance. I have selected historical method for gathering the data & valuable information. These method have provided me valuable data from the various books returns by the scholars in management. I personally thanks to them for the particular subject which I have selected for my project.

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TOOLS & RESEARCH

Bank fraud is the use of fraudulent means to obtain money, assets, or other property owned or held by a financial institution. In many instances, bank fraud is a criminal offense. While the specific elements of a particular banking fraud law vary between jurisdictions, the term bank fraud applies to actions that employ a scheme or artifice, as opposed to bank robbery or theft. In banking sector external frauds are 40% and internal frauds are 60%.It will shown in the following pie diagram:

40% 60%

Internal Fraud (Employees and insiders) External Fraud

INSURANCE FRAUDS Internal frauds:There those perpetrated against an insurance companies or its policyholders by agents, managers, execution or other insurance employees. External frauds:There are direct against on insurance by individual or entities as diverse an policyholders medical providers, beneficiaries, vendors, ect.

Sources of Fraud
35% 75%

Internal Fraud (Employees and insiders) External Fraud

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