Summer Internship Project Report

On

“A study on Role of IT in Loan verification process and

Prevention of frauds”

At

Simran Management Services Pvt. Ltd.

Submitted to

S. R. Luthra Institute of Management

Under the Guidance of

Mr. Paresh Dave

(Assistant Professor)

In partial Fulfillment of the Requirement of the award of the degree of

Master of Business Administration (M.B.A.)

Offered by

Sarvajanik University
Surat

Submitted by:

Shah Deep Divyeshkumar, LM21MGMB239

MBA (Semester – 3)

August, 2022
 Acknowledgement

I have put effort into this project. However, it would not have been possible without
the cooperation and help of many individuals and organizations. I would like to
express my heartfelt thanks to all of them.

I am also highly indebted to Mr. Krunal Sir (Simran MGT Services Pvt Ltd -
Ahmedabad Office Head) and Mr. Manish Panchal Sir (Simran MGT Services Pvt
Ltd - Surat Office Head) for their guidance. Ms. Varsha Ma'am (Simran MGT
Services Pvt Ltd - Guide for my entire training program at Surat) for her continuous
supervision and also providing necessary information regarding the project and good
training program.

I would like to express my gratitude to my parents and member of Simran Mgt.

Services Pvt. Ltd. for their kind co-operation and encouragement which help me to
create a wonderful training program.

I also thank and appreciate my colleagues and those who have volunteered their
abilities to help me in developing the project.
 Executive Summary

I did my SIP work as part of MBA program. My project work is a study on “Role of
IT in Loan Verification Process and Fraud Prevention”.

The purpose of the study is to know about the loan verification process and various
types of fraud in loans and how to prevent it and also the main purpose of the study is
to know about how IT helps and facilitates the loan verification process and prevents
fraud.

This study includes introduction of loan and its verification process, introduction of
fraud and its types and how to prevent fraud and last part how IT helps and what is the
role of IT in loan verification process and fraud prevention.

This study concludes that automation has increased the efficiency of various lending
platforms. The landscape of lending is changing with more technology-enabled
competition and the emergence of better cloud-integrated platforms. Lenders need to
recognize the importance of automating their process in terms of cost-efficiency,
time-saving, better data integrity and powerful analytical tool. While automation may
pose some challenges initially, doing so gradually can increase the brand value of an
organization. And same in prevention of fraud.
Table of Contents
Chapter: - 1...............................................................................................................................1

Introduction to the study...........................................................................................................1

1.1 Introduction to Loan verification process:-.....................................................................2

1.2 Introduction to Prevention of fraud:-..............................................................................3

Figure: 1.2 Fraud prevention.....................................................................................................3

1.3 Introduction to IT role in Loan verification process & Prevention of fraud:-..................3

Chapter: - 2...............................................................................................................................4

Industry profile of Managed Services Industry.........................................................................4

2.1 Definition of Managed Services:-...................................................................................5

2.2 Advantages & Challenges by Adopting Managed Services Industry:-............................5

2.3 Types of Services that provide by Managed Services Industry:-.....................................6

2.4 Global scenario of Managed Services Industry:-............................................................7

Figure: 2.1 Chart of Global Forecast over next 2021-2030 years..............................................8

2.5 Indian scenario of Managed Services Industry:-.............................................................9

2.6 Indian State wise Scenario:-..........................................................................................10

Figure: 2.2 Geographical spread of the major Managed Service Providers in India...............10

2.7 Covid-19 Impact & Opportunity:-.................................................................................11

2.8 Key players of Managed Services Industry:-................................................................12

Chapter: - 3.............................................................................................................................13

Company profile of Simran Management Services Pvt. Ltd...................................................13

3.1 Overview of Simran Management Services Pvt. Ltd.:-.................................................14

3.2 Different services that provide by Simran Management Services Pvt. Ltd.:-................16

Chapter: - 4.............................................................................................................................19

Department study at Simran Management Services Pvt. Ltd..................................................19

4.1 Back office department:-...............................................................................................20

4.2 Field department:-.........................................................................................................21

Chapter: - 5.............................................................................................................................22
In-depth study of “A study on Role of IT in Loan Verification Process & Prevention of
Fraud”.....................................................................................................................................22

5.1 Introduction to Loan:-...................................................................................................23

5.2 Introduction to Fraud:-..................................................................................................32

Figure: 5.1 The fraud triangle.................................................................................................32

5.3 Introduction to Information Technology (IT):-.............................................................45

Figure: 5.2 IT components & functions..................................................................................47

5.4 An introduction to how IT helps in the loan verification process:-...............................51

Figure: 5.4 Loantech market capacities by 2028.....................................................................59

Figure: 5.5 Benefits of Loantech software..............................................................................59

Figure: 5.6 Type of Loantech software...................................................................................61

Figure: 5.7 Features of Loan Management System.................................................................62

Figure: 5.9 Cost in Loan Management System.......................................................................65

5.5 An introduction to how IT helps in the prevention of fraud:-........................................66

5.6 Conclusion:-..................................................................................................................76

Chapter: - 6.............................................................................................................................78

Practical learning from the depth study of “A study on Role of IT in Loan verification process
& Prevention of fraud”...........................................................................................................78

6.1 Experiential learning from in-depth study at Simran Management Pvt. Ltd.:-..............79

6.2 Complete loan verification process understandable at Simran Management Pvt. Ltd.:-79

6.3 The excel sheet contains all the case verification websites used by 'Simran Management
Pvt. Ltd.':............................................................................................................................80

Table: 6.1 All the case verification websites used by 'Simran Management Pvt. Ltd.'............84

Bibliography...........................................................................................................................85
 Chapter: - 1

Introduction to the study

1
1.1 Introduction to Loan verification process:-

Figure: 1.1 Introduction to loan verification process

Source: WWW.CIBIL.COM

 Loans have made our lives easier, providing us with financial benefits that go
beyond our earnings. Be it credit card, home loan, personal loan or auto loan
etc. A loan is a credit extended to us by lenders upon fulfilling certain key
parameters. However, getting a loan in India can often be a boring process for
the uninitiated, but not for individuals with good credit scores.

 Whenever you apply for a loan, banks check your CIBIL score and report to
assess your credit history and creditworthiness. The higher your score, the
more likely your loan application will be approved.

2
1.2 Introduction to Prevention of fraud:-

Figure: 1.2 Fraud prevention

Source: WWW.CHINA-BRIEFING.COM

 Fraud prevention is the implementation of strategies to detect fraudulent

transactions or banking actions and prevent these actions from causing
financial and reputational damage to the customer and the financial institution
(FI).

1.3 Introduction to IT role in Loan verification process & Prevention

of fraud:-
 Through use of technology removes all the difficulty required to get a loan,
work done in a week under the old system can be done in days.

 It increases the efficiency of worker.

3
 Chapter: - 2

Industry profile of Managed Services Industry

4
2.1 Definition of Managed Services:-
 Managed services is the practice of outsourcing the responsibility for
maintaining need , a range of processes and functions, or the purpose of
improved operations and reduced budgetary expenditures through the
reduction of directly-employed staff.

 It is an alternative to the on-demand outsourcing model where the service

provider performs on-demand services and bills the customer only for the
work done.

2.2 Advantages & Challenges by Adopting Managed Services

Industry:-

2.2.1 Advantages:-

1. Adopting managed services is intended to be an efficient way to stay up-to-

date on technology & have access to skills & address issues related to cost,
quality of service and risk.

2. Business & Financial benefits of Managed Services are Predictable Low Cost,
Minimized Downtime, Proven Experts, Reliable Relationships, 24/7 Support,
New Technology, Reduced Risk, Focused Energy.

2.2.2 Challenges:-

1. MSPs (managed services providers) increasingly facing the challenge of cloud

computing, a number of MSPs are providing in-house cloud services or acting
as brokers with cloud services providers.

5
 2. A recent survey claims that a lack of knowledge and expertise in cloud
computing rather than offers' unwillingness, this to be the main barrier to this
transition.

3. Managing day-to-day transportation processes and reducing related costs come

as significant burdens that require the expertise of Managed transportation
services providers.

2.3 Types of Services that provide by Managed Services Industry:-

2.3.1 Information Services:-

 Their functions:-
1. Software – Production support and Maintenance
2. Authentication
3. Systems management
4. Data backup and Recovery
5. Data storage, Warehouse and Management
6. Cloud transformation
7. Network monitoring, Management and Security
8. Human Resources and Payroll

2.3.2 Business-to-business integration:-

 Their functions:-
1. Supply chain management
2. Communications services (mail, phone, VoIP)
3. Internet
4. Videoconferencing

6
2.3.3 Supply chain managed services:-

 Their functions:-
1. Supply chain planning, monitoring and control
2. Sourcing and procurement
3. Logistics and distribution

2.3.4 Transportation:-

 Their functions:-
1. Daily transportation planning
2. Freight audit/Accounting & Payment

 And other types of services are: - Marketing, Media, Power, Water & their
different functions.

2.4 Global scenario of Managed Services Industry:-

 The global managed services market size was valued at USD 239.71 billion in
2021 and is expected to expand at a compound annual growth rate (CAGR) of
13.4% from 2022 to 2030.

 According to an International Data Group [IDG] report commissioned by

Nippon Telegraph & Telephone [NTT] Ltd., nearly 55% of companies are
approaching managed service providers to opt for their value-added services
and reduce security risks.

 These trends are expected to create huge growth opportunities for managed
service providers in the short and long term.

7
Figure: 2.1 Chart of Global Forecast over next 2021-2030 years
Source: WWW.PRECEDENCERESEARCH.COM

 Due to pandemic, many companies are resorting for business automation as

the business aggressively resorts to remote working. Managed services help in
outsourcing the management functions to a third party in order to expand the
business operations.

 In order to improve the operational efficiencies and the operating expenses

many businesses are approaching managed service providers. The outbreak of
the pandemic has largely prompted the businesses to put a strong foot forward
on remote working. Many organizations are adopting the latest technologies
like that of augmented reality. The use of cloud management will help in
optimizing the business.

 Growth factors: -
 Managed services provide optimum resource distribution utilization and they
help in augmenting the overall profit for the businesses to operate. It is always
helps in cutting down the company's operating expenses by improving the
operational efficiency. There is an increase in outsourcing the management
functions to manage service providers and to cloud service providers.

8
  The use of cloud management are solving the various functional business
requirements, managed services, helping effective functioning of the
organization with minimum cost and it does not compromise on the quality of
the work done. The major market players are investing in the development of
the new products and expansion of the products portfolio. They are also
engaging in research and development activities in order to offer reliable
services and cost-effective services.

2.5 Indian scenario of Managed Services Industry:-

 Following are the some trend points of Managed Services Industry in India:-

1. Managed services in India is estimated at USD 1.6 billion in 2009 and is

estimated to top USD 3.8 billion in 2013.
2. Banking, Financial Services and Insurance (BFSI) organizations remain the
largest contributors to the managed services market with a share of 28.2%,
followed by the manufacturing and government verticals.
3. The total Indian Managed Services market in 2007 was estimated to be USD
1.2 billion with Managed Network Services accounting for the biggest share of
the pie followed by Managed Desktop Services.
4. Managed Services market represented 20% of the total India domestic IT
Services market in 2007 (USD 5 billion revenues).
5. In the recent past, businesses are leveraging IT managed services providers for
everyday tasks (PC and Server maintenance, Network maintenance, and
Managed application services) rather than complete IT team outsourcing.
6. As per the recent Springboard report, Wipro has the highest market share in
managed services in India.

9
2.6 Indian State wise Scenario:-

Figure: 2.2 Geographical spread of the major Managed Service Providers in

India
Source: WWW.SLIDESHARE.NET

Ta
ble: 2.1 Headquarters of major MSPs

Source: WWW.SLIDESHARE.NET

10
2.7 Covid-19 Impact & Opportunity:-
2.7.1 Covid-19 impact:-

 The need to maintain employee’s safety during COVID-19 has forced many
corporations to change their regulations and policies. The foremost cause of
the business disruption was the inability to move the workforce and coordinate
HR as earlier. The inability to travel and cross borders and social distancing
has forced businesses to change their current ways of functioning and
reconsider operational choices. Governments are working closely with cloud
providers to fight the COVID-19 pandemic.

 The White House has announced the launch of the COVID-19 High-
Performance Computing Consortium to provide worldwide COVID-19
researchers with access to the world’s most powerful high-performance
computing resources that can significantly advance the pace of scientific
discovery to stop the virus. COVID-19 has forced many organizations to
reduce costs and increase operational efficiency in order to sustain. Recently,
organizations are looking to outsource their IT requirements more than ever.
The pandemic has given a boom to work from home culture creating various
new opportunities for managed services as demand for cyber-security, less
delays, and high band width has increased.

2.7.2 Opportunities:-

1. The raising investments by governments in infrastructure projects &

increasing need of asset-intensive industries to extend the life span of asset to
delay capital investments are expected to drive the market growth.
2. Managed services facilitate enterprises in managing their IT system
requirements on a regular basis so as to improve uses IT operations.
3. Over-the-cloud deployments are expected to be the most preferred choice of
end users as they reduce upfront costs & provide flexibility.
4. The increasing security concerns and regulations are further increasing
demand for managed services.

11
2.8 Key players of Managed Services Industry:-
 The managed services market is dominated by companies are IBM (US),
Fujitsu (Japan), Accenture (Ireland), Atos (France), Cisco (US), DXC (US),
TCS (India), Rackspace (US), AT&T (US), Verizon (US), Dimension Data
(South Africa), Infosys (India), HCL (India), Ericssion (Sweden), GTT
Communications (US), NTT Data (Japan), Happiest Minds (India), Huawei
(China), Nokia Networks (Finland), CenturyLink (US), Wipro (India),
Cognizant (US), Capgemini (France), BT (UK), Deloitte (UK), Secureworks
(US), Alert Logic(US), BAE Systems (UK), Trustwave (US), Hughes (US),
MeTtel (US), Microland (India), Optanix (US), Essintial (US), Intact Tech
(US), 1-Net (Singapore), Ascend technologies (US), SecureKloud (India),
Aunalytics (US), AC3 (Australia), Cloud Specialists (Australia), Corsica
Technologies (US), and Empist (US). These vendors have a large customer
base and strong geographic footprint along with organized distribution
channels, which helps them to increase revenues.

12
 Chapter: - 3

Company profile of Simran Management Services Pvt. Ltd.

13
3.1 Overview of Simran Management Services Pvt. Ltd.:-
 Simran Management Services Pvt. Ltd. is a Gujarat-based firm established in
1996. Since its beginning, the company has assisted leading public and private
sector organizations to implement effective internal and external fraud control
strategies and ethics programs. It is classified as Non-government Company
and is registered at Registrar of Companies, Ahmedabad.

 With more than two decades of experience in the field of verification and
fraud control, the firm has been able to create the perfect coordinate with the
biggest brands of industries like Banking, Telecom, and Insurance. Being the
leaders in the field of Risk Prevention and Fraud Control in all around India,
our expertise and domain knowledge is peerless. In today’s dynamic corporate
environment, it becomes necessary to partner with an agency that best in
accuracy and timely delivery. This is where the Simran Group of Companies
best in their work.

 It is classified as a private limited company and is located in Ahmedabad,

Gujarat. Its authorized share capital is INR 1.00 lac and the total paid-up
capital is INR 1.00 lac. The current status of Simran Management Services
Pvt. Ltd. is - Active. The last reported AGM (Annual General Meeting) of
Simran Management Services Pvt. Ltd., as per records, was held on 30
November, 2021. Also, as per records, its last balance sheet was prepared for
the period ending on 31 March, 2021.

 The Founder & Managing Director of Simran Management Services Pvt. Ltd.
Is Mr. Ravi Singh Mand. The Corporate Identification Number (CIN) of
Simran Management Services Pvt. Ltd. is U74910GJ2011PTC066301. The
registered office of Simran Management Services Pvt. Ltd. is at 172/2,
Premchand house behind Poplar house, Near old High court, Ashram road,
Ahmedabad, Gujarat.

14
 The approach of company's Fraud Prevention Services is proactive, aiming to
help in break fraud and corruption rather than react to a fraud that may be
discovered. The company's approach for their clients and for the environment
within which their clients operate rather than only applying American Fraud
Control Practices and Off-The-Shelf Techniques.

 Company's services follow an extensive and holistic approach. It is their role

to help organizations for establish ethical standards & communicate such
standards to their staff and associated people. They educate and provide
awareness training in fraud control and ethical issues, improve systems of
internal control, conduct fraud risk assessments, improve the investigation of
eliminating ethical breaks and ensure that effective action is taken when a
fraud occurs. It is their aim to improve the bottom line for organizations by
reducing loss occurring through fraud, corruption and unethical practices.
They transfer their skill set to their clients in order to make them self-reliant in
preventing malpractices.

 The three pillars of excellent infrastructure. The first, Skilled Team are what
help us deliver beyond expectations. Second, it is the Security with which any
information is handled and passed between peer groups and stakeholders. And
third, it is the Extensive Training and Expertise of their employees that has
helped the Company gain the trust of India’s leading organizations.

15
3.2 Different services that provide by Simran Management Services
Pvt. Ltd.:-
 There are different types of services provided by Simran Agency are as
follows:

1. Digital Screening & Sampling Services PAN India:-

 Hire the right talent with their Digital Screening & Sampling Services with
PAN India.

 They offers in this service are 1. Infrastructure Space, 2. Qualified & Expert
Samplers, 3. Customize Workstations, 4. Centralized Processing.

2. KYC, Financial & Other documents verification:-

 Battle for Customer frauds with their KYC, Financial and other Documents
Verification Services.

 They offers in this service are 1. Financial document check, 2. Income

document check, 3. Residence & Employment proof check, 4. GST
verification, 5. Loan documents check, 6. Credit history check, 7. Bank
statement verification, 8. Utility bill verification, 9. Land documents, 10.
Employment professional check.

3. Field verification:-
 Get full information on existing project conditions with Field Verification
Services.

 They offers in this service are 1. Residence verification, 2. Business

verification, 3. Company profile check, 4. Employee verification, 5. Insurance
verification, 6. Cross check activities, 7. Vendor verification, 8. Asset
verification, 9. Discreet verification, 10. Skip tracing cases, 11. Death
settlement cases verification, 12. Collection settlement cases verification.

16
4. Document collection:-
 Save time in paperwork with their Document Collection Services.

 They offers in this service are 1. PMS documents fulfillment, 2. Document

fulfillment for retail/ cards application, 3. ECS pick-up & submission/
activation, 4. Cheque pick-up, 5. Post disbursement documents collections,
6. Liability KYC document pick-up.

5. Investigation services:-
 Respond quickly to suspected fraud or misconduct with their Investigation
Services.

 They offers in this service are 1. Fraud investigation, 2. Cyber-investigation, 3.

IPR investigation, 4. Business background check, 5. Tracing skip people and
more.

6. Fraud prevention & Risk management:-

 Identify weakness & take control of finance with their Fraud prevention &
Risk management service.

 They offers in this service are 1. Digital banking fraud, 2. Card fraud,
3. Payment fraud, 4. Accounting fraud, 5. Asset misappropriation, 6. Fraud
recovery.

7. HR verification:-
 Know the Candidates Background Better with their HR Verification Services.

 They offers in this service are 1. Personal identification check, 2. Education &
qualification check, 3. Previous employment verification, 4. Address
verification, 5. Neighbor check, 6. Database check, 7. Professional reference
check, 8. Integrity check, 9. Social media profiling, 10. License check,
11. Pre-employment medical check, 12. Criminal verification,
13. Employment reference check (work history, salary, etc. check), 14. Skill
test report, 15. Driving records, 16. Credit reports.

17
8. Physical data warehousing services:-
 Convert data from diverse sources into valuable information with their
Physical Data Warehousing Services.

 They offers in this service are 1. Enterprise data management services, 2. Data
warehouse migration services, 3. Data integration services, 4. Data
governance, 5. Performance services, 6. Managed services.

9. Family/ Financial background check:-

 Reduce the controversy of hiring wrong applicants with their Family/
Financial background check services.

 They offers in this service are 1. Employment verification, 2. Family

background, 3. Family history check, 4. Criminal verification (police &
lawyers), 5. Drug test, 6. Address verification, 7. Education verification,
8. Criminal database checks, 9. Social media scan, 10. Reference verification
and more.

10. Payroll services:-

 Keep employees happy by opting for their Payroll Services.

 They offers in this service are 1. Salary processing, 2. Reimbursement

processing, 3. PF/ ESIC Job work, 4. Employee Reports, Reimbursement
Report Pay Slip, TDS Reports, Leave Reports, Pay Reports, ESI Reports, and
PF Reports, 5. Deduction reports like PF, TDS, Challan's PF Form
5/10/3A/6A/12 ESIC Form 6/7, Loan Statement, Tax payable report – Challan
281, and Profession tax deduction reports, 6. Quarterly processing- Generation
of eTDS Form 24Q and annual returns, and Updating TDS Challan payment
details, 7. Full & final processing.

18
 Chapter: - 4

Department study at Simran Management Services Pvt. Ltd.

19
  There are mainly two departments in Simran Management Services Pvt. Ltd.
1. Back office Department
2. Field Department

4.1 Back office department:-

 I have working with this department. Mostly in this department the work is
loan documents verification through use of technology & throughout online
website. And also this department is connecting with Field department's staff
and Bank managers who provide the cases.

 The back office department is the portion of a company is composed

administration and support personnel, who are not directly client-facing. Back-
office department's functions include Settlements, Clearances, Record
maintenance, Regulatory compliance, Accounting, IT services, KYC,
Financial & Other documents verification, Fraud prevention & Risk
management, Physical data warehousing services, Payroll services.

 The services that offer by this department is as follow:-

1. Record maintenance
2. KYC, Financial & Other documents verification
3. Fraud prevention & Risk management
4. Physical data warehousing services
5. Payroll services

 The above all services explain in detail with their functions in Company
profile of Simran Management Services Pvt. Ltd. that what services they offer.

20
4.2 Field department:-
 The field department consists of field staff. They work to go to different
destination areas as per applicant details. It has different staff in different
areas. This network is big around PAN India. They do a Field work like
Employee profile check, employee business profile check, etc.

 Field department are responsible for implementation and improving their

company's field marketing, verifying, and merchandising initiatives. This may
include hiring and training a team of field representative, evaluating and
analyzing their performance, and planning and managing logistics.

 Eventually, field department are the backbone of any large field team,
ensuring the team has the skills, resources, and support to successfully operate
its strategy.

 The services that offer by this department is as follow:-

1. Digital Screening & Sampling Services PAN India
2. Field verification
3. Document collection
4. Investigation services
5. HR verification
6. Family/ Financial background check

 The above all services explain in detail with their functions in Company
profile of Simran Management Services Pvt. Ltd. that what services they offer.

21
 Chapter: - 5

In-depth study of “A study on Role of IT in Loan

Verification Process & Prevention of Fraud”

22
5.1 Introduction to Loan:-

5.1.1 Definition of Loan:-

 A loan is when money is given to another party in return for repayment of the
principal amount of the loan along with interest. The terms of the loan are
agreed upon by each party before any money is exchanged. The loan can be
secured by collateral such as a mortgage or it can be unsecured such as a credit
card. Shifting loans can be spent, repaid and replenished, while term loans are
fixed-rate, fixed-payment loans.

5.1.2 Types of Loan:-

Loans can be further classified: - 1. Secured & Unsecured Loan, 2. Open-end

& Closed-end Loan, 3. Conventional Loan, 4. Based on purpose, 5. Based on
promised assets.

1. Secured & Unsecured Loan:

 For secured loan the borrower needs committed collateral for the money
borrowed. If the borrower is unable to repay the loan, the bank reserves the
right to use the collateral committed to recover the outstanding payment. The
interest rate for such loans is much lower than unsecured loans.

 An unsecured loan is one that does not require any collateral for loan
distribution. The bank analyzes the past relationship with the borrower, credit
score and other factors to determine whether the loan should be given. The
interest rate for such a loan may be higher as there is no way to recover the
loan amount if the borrower defaults.

23
2. Open-end & Closed-end Loan:
 Loans can also be described as close-end or open-end. With an open-ended
loan, the individual has the freedom to borrow frequently. Credit cards and
credit lines are perfect examples of open-ended loans, although both have
credit restrictions. A credit limit is the highest amount you can borrow at any
time. Depending on the individual's financial needs, he may choose to use all
or only a portion of his credit limit. Each time this person pays for an item
with their credit card, the remaining available credit decreases.

 With closed-end loans, individuals are not allowed to borrow again until they
make their payments. As one makes repayments on a closed-end loan, the loan
balances decreases. However, if the borrower wants more money, he needs to
apply for another loan from scratch. The process requires submission of
documentation that they are credit-eligible and awaiting approval. Examples
of closed-end loans are mortgages, auto loans, and student loans.

3. Conventional Loan:
 This term is often used when applying for a mortgage. It refers to loans that
are not insured by government agencies such as the Rural Housing Service
(RHS).

4. Based on purpose:
 Education loan: Education loans are financing tools that help the borrower get
an education. This course can be either an undergraduate degree, postgraduate
degree or any other diploma / certification course from a reputed institute /
university. You must have an entry pass provided by the organization to get a
loan. Lending is available for local and international courses.

 Personal loan: You can go for a personal loan whenever there is a liquidity
problem. The purpose of taking a personal loan can be anything from paying
off old debt, going on vacation, funding for home / car down payments and
medical emergencies to buying big ticket furniture or gadgets. Personal loans
are granted based on the applicant's past relationship with the lender and the
credit score.
24
 Vehicle loan: Vehicle loans provide money for the purchase of two-wheeler
and four-wheeler vehicles. In addition, a four-wheeled vehicle can be a new or
used vehicle. Based on the on-road price of the vehicle, the loan amount will
be determined by the lender. You have to be prepared with a down payment to
get a vehicle as the loan rarely offers 100% credit. The vehicle will remain
owned by the lender until full payment is made.

 Home loan: A home loan is dedicated to obtaining funds for buying a

house/flat, constructing a house, renovating/repairing an existing house or
buying a plot for construction of a house/flat. In this case, the property will
remain with the lender and the ownership will be transferred to the rightful
owner after the payment is completed.

5. Based on promised asset:

 Gold loan: Many financiers and lenders offer cash while borrowers pledge
physical gold, be it jewelry or gold bars/coins. The lender weighs the gold and
calculates the amount offered based on several checks of purity and other
factors. Money can be used for any purpose. The loan must be repaid in
monthly installments so that the loan can be cleared by the end of the period
and the gold can be taken back into custody by the borrower. If the borrower
fails to make timely payments, the lender reserves the right to confiscate the
gold to recover losses.

 Loan against asset: Just like promising gold, individuals and businesses
promise assets, insurance policies, FD certificates, mutual funds, shares, bonds
and other assets to borrow money. Depending on the value of the promised
assets, the lender will offer a loan with some margin on hand.

25
5.1.3 Important factors lenders look for in approving your application:-

Factors that consists of are: - 1. Credit score, 2. Income & Employment

history, 3. Debt-to-income ratio, 4. Collateral, 5. Down payment.

1. Credit score:
 Credit score plays an important role in deciding whether a lender wants to
proceed with your application or leave it at an early stage. This is especially
the case when it comes to unsecured loans. The credit score represents the
borrower's credit history, so the lender analyzes the borrower's repayment
history and concludes that the borrower can make the payment on time or he
will default on the payment. Approval of the loan is based on the decision of
the lender after the necessary analysis.

2. Income & Employment history:

 Your monthly or annual income and employment history also play a crucial
role in loan approval. Depending on your income and income stability in the
form of a continuous and stable work history, the lender can be sure that you
will be able to repay the loan. Even if you are self-employed, the lender
assumes that your business has been running well for the past few years and
that your business turnover is satisfactory.

3. Debt-to-income ratio:
 Not only sound income but his debt-to-income ratio is also important. If you
have Rs. 1 lakh income and if your debt repayment commitments are already
exceeds Rs. 75,000, you will not be given a new loan as you will need the
remaining income to take care of your household expenses. So, regardless of
your income, you must have a low debt-to-income ratio so that lenders think
you have enough cash to cover monthly repayments as well as household
expenses.

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 4. Collateral:
 Based on the current market value of the collateral you provide.
And the lender can determine the interest rate applicable to your loan.
Providing collateral will make the deal more secure from the lender's
perspective, which can result in greater trust and lower interest rates.
Unsecured loans are notorious because they involve comparatively high
interest rates.

5. Down payment:
 The money you have saved and the effective execution of your savings plan
towards the down payment will increase the lender's confidence in you. The
higher the down payment, the lower the loan amount required.

5.1.4 Features and benefits of the loan:-

 Different types of loans are classified based on different factors.

 You can choose the type of loan you want to take based on your need and
eligibility.
 The lender will have the final authority to decide the loan amount they want to
offer you based on several factors like your ability to pay, income and others.
 The repayment period and interest rate will be associated with each loan.
 Banks may apply several fees and charges to each loan.
 Many lenders offer instant loans that take a few minutes to a few hours to
disburse.
 The interest rate is fixed by the lender based on the guidelines of the Reserve
Bank of India.
 The lender determines the security requirement.
 In some cases third-party guarantees can be used instead of security.
 The loan should be repaid in equal monthly installments over the pre-
determined loan tenure.
 There may or may not be an option for full/partial prepayment.
 Some loan types and lenders may charge a prepayment penalty.

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5.1.5 Eligibility for Loan:-

The eligibility criteria for getting a loan varies depending on the type of loan
you are looking for. Generally speaking, you can consider the following
simple criteria to check your eligibility.

 A decent credit score

 A steady stream of income
 Age between 23 years and 60 years at the time of admission
 Some assets like FD, investment, immovable property etc.
 A good relationship with your bank
 History of timely debt repayment

5.1.6 Necessary documents:-

 For salaried applicants:-

 Application form with photograph
 Proof of identity and address
 Last 6 months bank account statement
 Latest Pay Slip
 Form 16

 For self-employed applicants:-

 Application form with photograph
 Proof of identity and address
 Last 6 months bank account statement
 Proof of business
 Business Profile
 Income Tax Returns (Self and Business) for last three years.
 Profit/Loss Statement and Balance Sheet for last three years

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5.1.7 Loan EMI Calculator:-

 Loan EMI Calculator is a simple tool to calculate the monthly amount payable
to the lender as well as the total interest. To calculate the EMI applicable on
your loan amount, you just need to enter the values for principal amount (P),
time period (N) and interest rate (R).

5.1.8 How to apply for a loan?

Applying for a bank loan is easier than you think. But before you apply for
one, you should be aware of your financial situation, as you may have to repay
the loan amount later.

You should first understand your requirements and if you think it is an ideal
route for you, you can either go to the bank and speak to the loan manager or
skip all that and apply online.

 Step 1: Choose the lender you want to borrow from based on your research
and check your eligibility.

 Step 2: Visit the bank branch or their official website to apply for the loan.

 Step 3: Submit or upload all required documents and proofs.

 Step 4: The bank will process your application and contact you to inform them
of their stand within the stipulated time frame.

5.1.9 What is a loan cycle?

A loan cycle is defined as the period from which a borrower applies for a loan
and it is repaid to the lender with interest. The average loan cycle consists of
five stages and here is how borrowers can manage the processes at each of
these stages.

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1. Pre Loan Calculations:
 Even before a borrower begins the process of applying for a loan, there are
several prerequisite financial calculations to be made. The first step is to
decide what type of loan they want to get; this will help in reducing the loan
amount. The next step is to create a monthly income and expense chart to
understand how much you can allocate to monthly loan payments. These
calculations are necessary because any bank/digital lender has the ability to
instantly measure the borrower's ability to repay. Scores of online tools like
the Simple EMI Calculator can help with this task.

2. Research:
 Digital lending has increased its footprint in the market, now borrowers can
get information about various financial products. They also have online tools
readily available that help in comparing different financial products. Hence,
borrowers should do their due diligence to find the best offer in the market. It's
important to be fiercely strategic when it comes to choosing low interest rates
and being aware of hidden charges like processing fees and other pre-payment
charges. Borrowers should be smart and up-to-date on financial information to
choose best-in-class loans and not get drowned by extremely attractive offers.
The goal is to find a loan that fits your needs and financial situation.

3. Application:
 Although this step seems pretty self-explanatory, filling wrong information on
the documents can cause your loan application to be bounced within days or
weeks. It is important to keep all supporting documents in order while
applying for a loan as banks and digital lenders will use them to determine the
borrower's creditworthiness.

4. Verification of documents:
 Each financial institution has its own multi-level verification process and the
timeline can vary from a week to 15 working days, however, some digital
players may take a few minutes. Only when the lender is fully satisfied with
the documents and paperwork do they proceed to verify the borrower and
approve their loan request.

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 5. Loan approval & disbursement:
 Once the lender verifies the borrower based on their credit score and other
paperwork, they proceed to the disbursement process and the loan amount is
transferred to the borrower's bank account as per the determined terms.

6. Loan repayment & Loan closure:

 The customer must remember to continue paying the EMIs on time otherwise
their credit score risks being negatively affected. The most common mode of
payment is auto-debit; it can be done using National Automated Clearing
House (NACH) / Electronic Clearing System (ECS). And finally, once the
loan is paid in full, the customer should make sure to get confirmation from
the lender that the loan is actually closed as per their records.

5.1.10 Points of caution for borrowers to keep in mind while taking loans:-

 Keep the loan tenure as short as possible.

 Borrow only if necessary and do not spend on luxury items and do not spend
beyond your limit.
 Avoid defaults in loan payments.

 Although India's borrowing system is still very different compared to other

developed countries, the trend is rapidly changing in favor of borrowing,
lending and loans. And digital lending has played a key role in this revolution
in India's financial sector. More digital players mean increased
democratization of the credit sector and greater inclusion of previously
underserved communities. It also means that credit processes are faster and
more streamlined, and this ultimately leads to an improved customer
experience.

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5.2 Introduction to Fraud:-
5.2.1 Definition of Fraud:-

 Fraud involves deception with the intent to gain illegally or immorally at the
expense of another. In finance, fraud can take many forms including false
insurance claims, fake books, pump and dump schemes and identity theft
leading to unauthorized purchases. Fraud costs the economy billions of dollars
each year and those caught are subject to fines and jail time.

5.2.2 Why does cheating happen?

 A fraud triangle is a tool used in forensic auditing that explains three

interrelated elements that assist the commission of fraud.

Figure: 5.1 The fraud triangle

Source: WWW.PNGKEY.COM

5.2.3 Fraud circle:-

 The circle of fraud consists of 4 stages: 1. Attitude to fraud, 2. Key issues

related to fraud, 3. Root cause of fraud, 4. Response to fraud.

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1. Fraud trend:
 Senior Management Fraud and Overrides - Fraud at its core, it's all
about leadership and rule
 Lender Fraud - Fund Diversion and Siphoning
 Fraud of investors – Diversion and siphoning of funds
 Fraud of investors - between business partners
 Abuse and misuse
 Related party fraud – between business partners
 Procurement fraud and turnkey project fraud

2. Core issues related to fraud:

 Round tripping and ever-greening
 Siphoning and related parties
 Timing & Lading
 Override, misuse and abuse of authority
 Leadership and governance
 Empowerment v/s centralization
 Cyber-governance versus digital ease and experience

3. Responses:
 Fraud Risk Reference: The Forensic Eye in IA - A Fraudster's Mindset
and Detection Techniques
 Whistleblower engagement: Anonymous calling, written complaints
and interactions & Protection of WB in all conditions
 Abuse and misuse: Business, Market and Business Intelligence
 Reversing the forensic cycle: From - reactive > detective > preventive
& to - preventive > detective > reactive.
 Anti-fraud regime: Integrating anti-fraud controls into the IFC
framework and the internal audit framework-fraud risk grading of
internal audit missions; fraud risk integration into an enterprise risk
management framework; Integrating fraud risk into corporate
governance policy frameworks and cyber-security framework.

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  Technology support: Digital forensics; Forensic Data Analytics.
4. Root Causes of Fraud:
 Inadequate and ineffective internal audit: ineffectiveness of
technology, attention to detail, forensic eye.
 Inadequate and ineffective internal controls: ineffectiveness of
technology, attention to detail, forensic eye.
 Organizational culture health
 The third and fourth eyes are missing
 Size, scale and complexity of growth
 Tone of leadership and governance
 Conflict of interest and lack of independence

5.2.4 Types of Fraud:-

“Fraud &deceit are anxious for your money. Be informed & prudent.”

 A forensic accountant may be asked check for different types of fraud. There
are three categories of fraud: 1. Corruption, 2. Misappropriation of assets, 3.
financial statement fraud.

1. Corruption:
 Corruption is a form of dishonesty or criminal offense carried out by a person
or organization entrusted with a position of power, to obtain illegal benefits or
abuse power for their own personal gain.

 Bribery: A bribe is the offering, giving, receiving or solicitation of anything of

value to influence the actions of an official or other person charged with a
public or legal duty.

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 Challenges in fighting bribery and corruption:
 Unwillingness amongst stakeholders in complaining about people in
power
 Lack of appropriate cyber-security and data protection measures
 Lack of awareness amongst employees
 Complex regulatory landscape
 Lack of adequate and efficient internal financial controls &
documentation process
 Inappropriate selection of business partners

 Global Act | Global Anti-Corruption Landscape:

 India - Prevention of Corruption Act, 1988
 USA - Foreign Corrupt Practices Act, 1977
 United Kingdom - Bribery Act, 2010
 Australia - Criminal Code Act, 1995
 South Africa - Financial Intelligence Central Act, 2001
 Hong Kong - Prevention of Bribery Ordinance
 Brazil - Brazilian Anti-Corruption Act
 Singapore - Prevention of Corruption Act, Chapter 241 of Singapore

 Leading practices | Issues & Solutions:

 Issues:
 Entering into agreements with third parties on high rate of commission
to enable with additional cash generation Distributor/Supply Chain
Partner for Bribery Government officials.
 Lack of documentation creates difficulties in identifying anonymous
payments.
 Illegal payments between contacts for which government officials and
companies are obtaining various licenses and approvals.

35
 Solutions:
 - Do due diligence / background checks When on-boarding the seller.
- Periodically verify the range of commission/charges paid is par with
the industry standard.
 - Digitalize the process of storing documents
- Link the account team's bonus to the document maintenance
 - Records must be maintained for each visit Government office to
obtain purpose of visit (with permission) and minutes of discussion.
- There should be periodic rotations of employees dealing with the officials.

2. Misappropriation of assets:
 By far the most common fraud involves misappropriation of assets, and there
are many different types of fraud that fall into this category.

 Before assets are recorded:

 Profit Skimming
 Refund Theft
 No Sale Transactions
 Cash Theft

 As assets are being purchased:

 Payroll scams
 Fraudulent Expenses Reimbursement
 Billing Fraud

 While the assets are being retained:

 Steal office supplies
 Take raw materials
 Use equipment
 Steal inventory

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 Assets misappropriation – some examples of fixes:
 Unauthorized Use of Equipment: Set strict policies and limits for
employees and enforce them. Physically secure valuable equipment.
Trust . . . but verify!

 Fake Sales / Purchases: It bears repeating that a formal policy of

separation of duties, strict supervision, voucher accounting and all
relevant internal controls must exist and be enforced at all times.

 Inventory shrinkage: formal policy of separation of duties, strict

supervision, voucher accounting, physical counts, reconciling shipment
records with sales invoices.

 Fake Employees: Large companies, or companies that employ remote

workers, can be scammers use fake employees to defraud company
funds. These ghost employees can do either completely fake or real ex-
employees who stay on the payroll after they have left the company.

 How to find it: Compare employment documents with payroll records

and distinguish any employees with questionable appearance or
incomplete employment records.

 How to avoid it: Regular all-staff meetings and occasional face-to-face

meetings are essential verify the existence of personnel who would
otherwise fly under the radar.

3. Financial statement fraud:

 It may include deliberate untruth of accounting records; Extended of Non-
disclosure of details relating to transactions- either income or expenditure
financial statements, balance sheets or disclosures from financial statements;
Or Misapplication of financial reporting standards.

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  Companies use this type of fraud to try to show the company's finances a
better performance than what it actually is.

 The goal of presenting fraudulent numbers may be to improve liquidity, to

ensure top management continues to receive bonuses or face market pressure
performance.

5.2.5 Some Internal Indicators:-

“An informed lender is simply less vulnerable to fraud and abuse.”

 Delay in finalization of accounts

 Frequent changes in accounting policies
 Constant damage
 Over draw of loans and advances
 High cost per unit of production
 A higher amount of damage or deterioration is indicated Books Vs. standards
 More investment in group companies
 Profit growth is not supported by cash availability

5.2.6 Types of e-commerce fraud:-

 In the past, credit card fraud was the only thing people were wary of.
However, with technological advances and all the personal information people
willingly input online, hackers are becoming more "resourceful" and
"creative" in their means of deceiving people. Here are some types of e-
commerce fraud that we can all fall victim to:

1. Identity theft:
 No matter the era, identity theft will always be a major concern for everyone,
especially online merchants, credit companies and banks. What hackers do is
impersonate the account owner and make purchases, for example, using stolen
credit card information.

38
 As long as they are in possession of a person's personal details such as name,
address, phone number and credit card details, they can actually successfully
buy what they want online at the credit card owner's expense.

2. Friendly fraud:
 Merchants are often victims of this type of fraud. Fraudsters make purchases
using their debit or credit cards and then demand a chargeback, claiming their
credit card details have been stolen. The merchant offers a refund while the
fraudster keeps the goods.

3. Clean fraud:
 Not calling it clean cheating also makes it clean or decent. Clean fraud
involves stealing credit cards and using the cards to make purchases while
ensuring that criminals can avoid detection of the theft by payment processors.
Using the card owner's personal details, thieves can successfully make
purchases using stolen cards.

4. Merchant fraud:
 Merchant fraud is very common, especially online. This is why many people
are suspicious about purchases that don't do cash-on-delivery transactions. In
merchant fraud, the order is received and confirmed by the e-commerce store
but then no product or service is delivered and no chargebacks are allowed.
Merchant fraud is also called internet fraud.

5. Check fraud:
 Issuing a check even knowing that the account does not have sufficient
balance is considered fraudulent. Check fraud also occurs when someone
steals another person's check and forges their signature to make a purchase or
payment.

6. Pyramid schemes:
 Pyramiding involves a company encouraging people to invest with the
promise that they will be compensated if they are able to recruit down lines
and when their down lines are also able to recruit their own down lines.
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 7. Charities fraud:
 People should be wary of groups claiming to support or run charities and
asking for donations. Before doing so, people should make sure that the group
is really legitimate - that the charity actually exists before falling into the trap
of charity fraud.

5.2.7 Fraud warning signs:-

 Fraud can happen to anyone who is not careful or selective in the offers they
accept. Everyone should be aware of the warning signs to avoid falling prey to
such fraudulent activities.

1. Suspicious phone calls:

 People should watch out for telephone calls claiming to be from the federal
government asking for their Social Security numbers and other personal
details. There are also some scammers who call and offer something in
exchange for money.

2. Random emails:
 Random emails that ask the recipient to input their login details into a link as
this can be a form of phishing. Once they click on the link and they enter their
details, fraudsters can now use the login information to steal their account.

3. Unknown text messages or emails:

 Receiving a text message from an unknown number or an email from an
unknown sender that the recipient has won a grand prize in a raffle and if they
deposit a certain amount to the sender, they can get the prize money.

4. Questionable job listings:

 There are job listings online asking a person to handle payments for a "boss."
A person will receive money in their account, and they have to forward it to
some recipients. It should be avoided at all costs as it may involve illegal
activities like money laundering.

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 5. Unverified wire transfer requests:
 People asking their victims to give them money are definitely another sign of
fraud. Wiring money cannot be undone, and the criminal can get the money
almost immediately, making reversal impossible.

 Cheating is very common, and it can happen to anyone, regardless of life

situation. Fraudsters don't just target the wealthy but anyone willing to take
their bait. So everyone should be alert.

5.2.8 What is fraud prevention?

 Fraud prevention is the implementation of strategies to detect fraudulent

transactions or banking actions and prevent these actions from causing
financial and reputational damage to the customer and the financial institution
(FI). As online and mobile banking channels become more popular and FIs
continue to digitize, a robust fraud prevention strategy becomes even more
important.

 Fraud prevention and cybercrime are intertwined and ever-changing. As fraud

prevention professionals develop new authentication and fraud detection
solutions, fraudsters are networking with each other, monetizing and
exchanging information on the dark web. Fraudsters today are using
sophisticated strategies and malware to succeed in their fraudulent activities.
Although fraud prevention technology has advanced and continues to do so, it
is important to be aware of fraudulent tactics and understand how to prevent
fraud.

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5.2.9 Fraud Prevention vs. Fraud detection solutions:-

 Financial institutions continue to invest money in fraud detection and

prevention to protect their customers. These are related concepts in cyber-
security, but they differ in important ways:

 Fraud prevention:
 Fraud is prevented before fraud is attempted.
 The goal of fraud prevention is to reduce the risk of future fraud.

Fraud detection:
 Fraud is detected during a fraud attempt.
 The goal of fraud detection is to reduce fraud.
 Sophisticated fraud detection solutions also reduce false positives
which improve user experience and increase the productivity of fraud
teams.

5.2.10 Common fraud schemes and fraudulent activities:-

A data breach occurs when a fraudster infiltrates a corporate network and

copies information from a database. Often fraudsters are looking for customer
records, credit card information or other personally identifiable information.
Once acquired, this information is sold on the dark web. Although the result is
often the same, the means by which fraudsters carry out their attacks may
vary. What's more, attackers are always changing their approach. Below,
we've included some of the most common types of fraudulent activities that
still occur today.

 Denial of Service:
A denial of service (DoS) attack attempts to overwhelm a website's computing
resources so that it crashes. By running hundreds or thousands of zombie
computers, a fraudster can command their botnet to, for example, complete a
contact us form thousands of times until a website stalls trying to process a
stream of requests.

 Malware:
Short for "malicious software," malware is a broad term to describe various
types of harmful software, including viruses, ransom ware, spyware, and
more. Creeper viruses have been a threat to individuals and organizations
since the 1970s when they were first discovered.

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  Phishing:
Phishing attempts to exploit people in an organization to obtain valuable
information. With an email, SMS message, phone call, or other form of
communication, a phishing message will attempt to trick the user into
revealing information or downloading malware onto their device.

 Ransom ware:
Ransom ware is a form of malware that encrypts your local files on an infected
device. In order to get the encryption key to access your files one more time,
the fraudster will demand payment. Effectively, the fraudster holds your data
ransom. Worse still, paying the ransom is no guarantee that the fraudster will
provide the encryption key. It is not uncommon for a fraudster to simply
receive payment and cease all contact.

5.2.11 What is loan application fraud?

Many applicants default for legitimate reasons, but some criminals apply for
loans and lines of credit with the intention of maxing out their payments.
Some criminals use their own identities to apply for loans, and then go off the
grid to avoid paying them back. However, stolen or artificial identities—also
known as third-party fraud—remain the method of choice. With third-party
fraud, scammers use multiple identities to open different lines of credit. In
2020, identity theft accounted for over 29% of all fraud reports received by the
FTC. Their data showed a sharp increase in loan application fraud between
2018 and 2019, with a 105% increase in auto-loan and lease fraud. Similarly,
business and personal-loan fraud increased 116% during the same period.
Federal student loan fraud increased 188% between 2018 and 2019,
representing the fastest growing type of identity fraud. Additionally, it is
estimated that more than 10% of accounts considered bad debts by banks are
actually fraudulent accounts.

5.2.12 Top 7 steps to detect and prevent loan application fraud:-

Adhering to Know Your Customer (KYC) and anti-money laundering best

practices minimizes the risk of fraud. Despite this, your loan application fraud
prevention and detection efforts should go beyond these baseline
requirements. Here are seven steps you can take to further reduce the risk.

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1. ID verification and facial recognition:
 A simple step like asking for two or more forms of ID helps prevent
application fraud by introducing an additional barrier for fraudsters. For online
applications, you can implement a real-time automated ID verification solution
that requires the user to take a picture of the ID along with a selfie. Liveliness
technology verifies that a selfie is an image of a person and not a snapshot of a
photograph. After that, facial recognition technology verifies that the selfie
and the ID match. A simple video call offers another possible option. Loan
officers ask a few questions during the call to verify the applicant's identity
and make sure they look like their ID photo.

2. Identity data validation:

 On average, synthetic identity (ID) fraud costs $6,000 per fraudulent account.
Fake ID fraudsters use different real or fake identity data to create a new
identity that looks legitimate. Cross-referencing identity data with public and
private databases helps reveal some inconsistencies and flag synthetic
identities. Often, data such as name date of birth, address or SSN does not
match the record.

3. Financial documents from a bank or employer:

 Asking applicants to upload bank statements, pay stubs and other financial
documents themselves mean they risk tampering with this evidence. Instead,
request permission to contact their bank or employer to verify their claim. The
app provides a reliable way to prevent fraud as you can validate income, assets
and other financial details.

4. Bank account verification:

 Bank account verification ensures that applicants can access the bank account
they plan to use to make payments and protect personal information. Ask for
account information and make a micro-deposit, usually ten to fifty cents. This
step verifies the existence of the bank account. Additionally, asking the
applicant for a certain amount of micro-deposit ensures that they have access
to the account.

5. Knowledge-based authentication:
 Knowledge-based authentication helps prevent application fraud by going
beyond data points that criminals can steal or defraud. Use the applicant's
credit report to generate multiple-choice questions only they know the answers
to. For example, include questions about previous addresses, other lines of
credit, or past vehicle purchases.

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 6. Phone & social media verification:
 You can send a push notification through your app to perform out-of-band
verification. This step verifies that the phone is a physical device registered to
the mobile network and not a VoIP number. Additionally, social media
verification helps confirm the legitimacy of an identity based on social media
activity and connections with other users. If an applicant uses a fake identity,
their social media presence may not exist. Or, they lack a common pattern for
profile associations in the same geographical area.

7. Identity risk scoring:

 Machine learning-based solutions, such as the one Fraud.net offers, analyze
multiple data points and cross-reference information with different databases.
This approach helps flag identities that have been stolen in the past and detect
synthetic identities with data points taken from multiple stolen identities. In
addition, machine learning solutions look at past account activity, establish
links to other loans or lines of credit that have defaulted, and analyze
geographic location data to detect any anomalies in fraud detection. The
machine learning solution helps prevent application fraud by generating a risk
score that indicates the likelihood of an application being fraudulent so loan
officers can prioritize high-risk applications and take additional identity
verification steps if necessary.

5.3 Introduction to Information Technology (IT):-

5.3.1 Why Introduction to IT?

Information technology, commonly referred to as IT, refers to the use of

technology to organize, store, share and process information. The IT industry
is growing rapidly as companies become more technology-based and the need
to manage information becomes increasingly important. Introduction to IT is
geared towards complete beginners looking to take their first steps into the
world of information technology.

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5.3.2 Take-Away skills:-

Introduction to IT will cover material such as:

 Getting started with IT
 Computer Basics
 Networking and the Internet
 Operating systems and applications
 Software Development Basics
 Databases
 Cyber-security

5.3.3 What does information technology consist of?

The IT department ensures that the organization's systems, networks, data and
applications are all connected and functioning properly. The IT team handles
three main areas:

1. Deploys and maintains business applications, services and infrastructure

(servers, networks, storage);
2. Monitors, optimizes and troubleshoots the performance of applications,
services and infrastructure;
3. Oversees the security and management of applications, services and
infrastructure.

Most IT staff teams have different responsibilities that fall into a few key areas
including:

1. Administration: Administrators manage the day-to-day deployment,

management, and monitoring of the IT environment including systems,
networks and applications. Admins often perform a range of other duties such
as software upgrades, user training, software license management,
procurement, security, data management and compliance with business
process and compliance requirements.

2. Support: Help desk staff specialize in answering questions, gathering

information and directing troubleshooting efforts for hardware and software.
IT support often includes IT asset and change management, assisting admins
with procurement, backup and recovery of data and applications, monitoring
and analyzing logs and other performance monitoring tools and following
established support workflows and procedures.

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 3. Applications: Businesses depend on software to function. Some applications
are obtained and deployed from third parties, such as email server
applications. But many organizations maintain a staff of skilled developers
who build the applications and interfaces such as APIs necessary to deliver
critical business capabilities and services. Applications can be coded in a wide
range of popular languages and can be integrated with other applications to
create simple and seamless interactions between different applications.
Developers may also be tasked with creating interactive business websites and
mobile applications. The trend toward clever or continuous development
examples requires developers to be increasingly involved in IT operations
such as application deployment and monitoring.

4. Compliance: Businesses are obligated to comply with various government and

industry driven regulatory requirements. IT staff play a key role in securing
and monitoring access to business data and applications to ensure that such
resources are used in according to established business governance policies
that meet regulatory requirements. Such staff is deeply involved in security
functions and interacts regularly with legal and business teams to prevent,
detect, investigate and report potential breaches.

5.3.4 IT components & functions:-

Figure: 5.2 IT components & functions

Source: WWW.TECHTARGET.COM

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5.3.5 Why is information technology important?

It is said that data powers industries worldwide. It may be too much, but few
businesses – large or small – can remain competitive without the ability to
collect data and turn it into useful information. IT provides the means to
develop process, analyze exchange, store and secure information.

Data processing plays a significant role in these core business practices

including among others:

 Product development and design;

 Marketing and market research;
 Sales and invoicing;
 Customer development and retention;
 Accounting and taxes;
 Human resources and payroll;
 Regulatory compliance.

 Computing has permeated practically every part of business and our personal
lives. The ubiquity of computing also known as pervasive computing is
another reason why IT is important. Computing devices have evolved well
beyond personal computers and servers. Today, all businesses and most
individuals own and use multiple computing devices, including phones,
tablets, laptops, game consoles, and doorbells, thermostats, vacuums, and
many kitchen appliances.

 Virtually all of these devices, many of which are part of the Internet of Things,
tap into the Internet, which interconnects billions of devices worldwide. It is a
complex and potentially dangerous environment that requires IT expertise for
management, security, maintenance and reliability.

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5.3.6 Issues and challenges in Information Technology:-

 As computing systems and capabilities expand worldwide, "data overload" has

become an increasingly critical issue for many IT professionals. Efficiently
processing vast amounts of data to produce useful business intelligence
requires large amounts of processing power, sophisticated software, and
human analytical skills.

 Teamwork and communication skills have also become essential to manage

the complexity of IT systems for most businesses. Many IT professionals are
responsible for providing services to business users who are not trained in
computer networking or other information technology but who are only
interested in using IT as a tool to get their work done effectively.

 System and network security issues are a primary concern for many business
executives, as any security incident can potentially damage a company's
reputation and cost a large sum of money.

5.3.7 Computer Networking and Information Technology:-

 Because networks play a central role in the operation of many companies,

business computer networking topics are closely related to information
technology. Networking trends playing a major role in IT include:

1. Network capacity and performance: The popularity of online video has greatly
increased the demand for network bandwidth on both the Internet and IT
networks. New types of software applications that support richer graphics and
deeper interaction with the computer also generate large amounts of data and
therefore network traffic. Information technology teams must plan not only for
their company's current needs but also for this future growth.

49
 2. Mobile and wireless uses: IT network administrators must now support a wide
range of smartphones and tablets in addition to traditional PCs and
workstations. IT environments require high-performance wireless hotspots
with roaming capability. In large office buildings, deployments are carefully
planned and tested to eliminate dead spots and signal interference.

3. Cloud services: Where in the past IT shops maintained their own server farms
to host email and business databases, some have migrated to cloud computing
environments where third-party hosting providers maintain the data. This
change in computing model dramatically changes the traffic patterns on a
company's network, but it also requires significant effort to train employees on
this new breed of application.

5.3.8 Types of roles in the field for IT:-

 There are many types of roles in the field for IT such as:

 Data scientist
 Network Administrator
 System Administrator
 System Analyst
 Technology expert
 Database Administrator
 IT Manager
 Support Analyst
 Database Developer
 Software Tester, Engineer, Architect
 Software Development Manager
 Network Engineer
 Software / Application Developer
 Technical Advisor

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5.4 An introduction to how IT helps in the loan verification process:-

5.4.1 Online loan application and verification system:-

 Getting a loan in India is a very boring and complicated process. Loan

approval can take weeks to months and people have to visit the loan office
frequently for documentation and verification. Our proposed project here
automates the loan process from both bankers and customers. Here customers
can see the various loans offered along with the interest rate and required
documents.

 Here once the customer fills the basic inquiry form, he reaches the bank server
and gets the login id and password. The server administrator can now check it
and choose whether to proceed or reject the candidate. The banker can choose
to send the customer to the next stage if he needs to go further. Now the
customer gets Stage 1 approval and needs to upload his scanned documents to
the site through his login.

 Once the documents are submitted they are cross verified on the server and a
response is sent to the server. The system server also secretly captures the
person's location and his image, through which he submits the documents to
the bank server required for bank verification.

 Banks can now cross-verify customer details and also request additional
documents by sending online alerts to customer emails. The customer just
needs to upload the required documents online and can also track the loan
status. Once his loan is approved, he receives an SMS to confirm the process.

 Advantages:
 This system removes all the difficulty required to get a loan.
 This system removes all the difficulty required to get a loan.
 Work done in a week under the old system can be done in days.

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  Disadvantages:-
 The authorized person shall check any forged documents or other
similar material.
 The user needs to have an internet connection to use this system.

5.4.2 Maximizing Efficiency: How Automation Can Improve Your Loan

Origination Process:-

Manual and paper-based underwriting practices lack consistency, auditability

and accuracy and are most time consuming. Automation can allow different
systems to be streamlined, provide reliable and consistent dataflow for any
stage of the loan origination process, and speed up the entire process while
delivering solid audit and control benefits.

Automated financial spreading can assist the analyst by accurately and

efficiently tabulating the borrower's financial statements for the rating process.
Using automation tools such as optical character recognition (OCR) and
machine learning methodologies to read financial information provided by
borrowers, it is now possible to map that data to balance sheets,
income/expenses, cash flows and charts of accounts, tax forms.

Automation in whole loan process:

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 Figure: 5.3 Loan process
Source: WWW.MOODYSANALYTICS.COM
The above figure shows a typical business lending process. Every banker
reading this article can immediately recognize the stages and visualize each
step in their own organization. Think about each key step in terms of the
number of employees involved, where bottlenecks appear in the process,
which steps are the most challenging, and how long a loan application
typically takes to move between steps.

1. Customer management:
 The first step in any loan decision or new relationship is to gather financial
and other necessary information from the prospect or customer. Today, this
task can be labor-intensive and difficult to accomplish. Often it is dominated
by form filling, electronic or printed documents and the physical customer file.
The more often the information contained in these electronic and paper
documents is entered and re-keyed into the lender's system, the greater the
chance of inaccurate data being recorded.

 Automation can reduce inconsistencies and delays in manually collecting

financial data and other mandatory customer information. Customer-facing
web-based portals and application program interfaces (APIs) can facilitate the
digital onboarding of new prospect and existing customer data onto a lender's
loan origination platform. After the data is received, business rules defined by
the lender can automate the next step in the process, distinguishing between

53
 loan applications that are decision-ready and loan applications that require
more documentation.

 More advanced automated loan origination platforms are also capable of

receiving data feeds that pre-populate customer information fields within the
origination platform. One of the more useful applications is importing
customer ownership hierarchies. Organization diagrams can be uploaded to
automatically create customer ownership hierarchies, visually showing the
inter-relationships between key units and parties within the group. For
complex borrowers, importing such information can relieve a large
administrative burden.

2. Credit analysis:
 One of the most important stages of the commercial risk assessment process is
broadcasting the financial data you obtain from your prospect or customer,
usually another manual and repetitive task.

 Today's advanced loan origination software has technology that allows a

lender to interact with its business customer's systems through a web portal,
with the right permissions. For example, it can extract relevant financial data
needed for credit risk assessment from accounting software, tax returns and
other documents.

 The process can be almost immediately and can also allow the lender to pre-
screen, score the borrower and provide a theoretical credit decision in a matter
of minutes.

 A real advantage of electronic data collection and automated financial

spreading is to allow more time for the analyst to perform their risk
assessment work. This may include data interpretation, ratio analysis and
forecasting models to measure the borrower's financial risk and ability to
repay the loan. Credit analysis can also include automated risk rating based on
probability of default (PD) and loss given default (LGD) models, tools that
deliver the immediate risk metrics needed for loan assessment.

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3. Credit presentation and decision making:
 Automation in the commercial loan approval process is all about mining the
right data and information and presenting it clearly for credit decision making.
Being able to automate your lending process from start to finish, benefits from
accuracy, near real-time data, increased efficiency and reduced decision-
making time.

 After gathering information about your customer or prospect, spreading

financial statements, running a ratio analysis, doing some hypothetical
scenarios and conducting a risk rating, most bankers have a good idea of what
their lending hunger looks like. Assuming it is positive, the next step is to
prepare a credit presentation or application for decision by the risk department.

 An automated credit application solution combines the previously discussed

elements of a customer management module, a loan structuring tool, a
collateral management system, and an electronic credit memorandum with
some form of financial analysis and risk assessment. A loan application
doesn't have to be as complicated as it first seems. Best-in-class origination
platforms also integrate with existing systems or applications that lenders
already have for these functions.

4. Monitoring:
 After the loan origination process, assets still have to be managed and risk
monitored annually, quarterly or even monthly. One of the main challenges
banks face is identifying a standardized process for collecting financial data to
satisfy ticklers, contracts and policy exceptions. Tracking can be inefficient,
not to mention dangerous, when processes are not clearly defined and rely on
manual tools.

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 Automated contract solutions can exist outside of the origination system, but
for data accuracy, efficiency and effectiveness, they are better as part of an
overall solution. Recording required agreements as part of the loan application
process saves rekeying and anchors agreement details in approval records for
audit purposes.

 The automated contract/tickler feature provides peace of mind that the correct
information can be collected in a timely manner via in-built calendar alerts.
Automatic notifications go out if proper documents are not collected or if
various agreements are not fulfilled. Automated testing can also be
implemented so that immediate or impending breaches are red-flagged via
dashboard alerts when data enters the system.
5. Portfolio risk management:
 With traditional manual, paper-based loan underwriting methods, lenders often
struggle to see what exposures a portfolio has and how these exposures change
over time. All lenders have specified risk appetite tolerances and set the most
appropriate risk-based portfolio limits to guide their loan officers. However,
devising these rules is an academic exercise, unless the lender has a specific
portfolio reporting tool at their fingertips.

 A powerful logic for automating the loan origination process lies with the
improved data integrity, data lineage and overall governance that comes with a
best-in-class origination platform. We have already discussed how data
integrity is compromised when multiple systems are used to store the same
data. The keying and rekeying sums are multiplied and the data is stored in a
sub-optimal system.

 When such situations exist, lenders spend significant time and resources
reconciling their portfolio data before they can perform useful analysis of their
portfolio data. Several weeks pass before a definitive picture emerges, by
which time it may be too late and expensive to address a particular issue or
problem.

Automation has increased the efficiency of countless industries worldwide.

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5.4.3 How has technology changed the loan approval process?

Technology has definitely brought many changes in the ways of working and
processes in every industry. Be it corporate, schools, hospitals, banks or any
other sector, now most things are automated. Every industry is trying to take
advantage of technology as much as possible. This is the reason why the
procedures in banks also vary greatly.

Talking about personal loans, they are no more long and boring processes
where the applicant has to apply for the loan with a hundred different files and
then wait for approval for months and months. With the introduction of
technology, the personal loan process has become extremely fast and easy.
Now, one can borrow from banks 24X7 and get instant financial help. Let's
take a look at how technology has changed the entire personal loan approval
process.

1. Lesser documents required:

 Traditionally, banks were really strict with their documents, and the borrower
had to submit about a hundred documents, some of which were really
irrelevant but were asked by the banks. Nowadays, with the introduction of
technology, everything is present online, and all the details are linked to a
person.

 Therefore, banks do not need to submit many documents for approval. Just a
photo ID and PAN is enough for banks to get an idea of all your background
and credit history. Therefore, if the borrower seeks an immediate loan, he does
not need to worry about collecting the documents. You can just submit the
mentioned two documents for your KYC and you are done.

2. Quick approval:

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 Nowadays, there is no delay in approvals when it comes to loans. Banks
understand that a person applies for a loan only when he has an urgent need.
Seeing the need for time, banks are promoting faster approvals. And that's
why instant loan is the term that came into limelight. Getting an instant loan is
a real thing today; in fact, there are banks that give you a loan of up to a
certain amount within an hour.

 You just need to submit the required documents online, with which the banks
will analyze your credit background and if you are found eligible, you will be
approved. This process is really simple. And the best part is, anyone can do
this at home using their mobile phone.

3. Borrow anytime:
 With the advancement of technology, now everything is present online. As
mentioned above, banks have also started providing online loans. You can find
many banks or small money lenders online, where they offer instant loans. As
there is a lot of competition in the market, everyone tries to provide the best
services.

 Also, since the entire process is now online, you don't need to physically wait
for banks to open. The online loan site is operational 24x7. This means you
can borrow anytime. This makes it a perfect solution, especially for those who
need it at odd hours.

4. Customizable EMI options:

 Technology has made every possible service user friendly. Nowadays,
borrowing is not only easy, but one can also decide when and how he wants to
repay it. It is easy to customize the payback plan depending on how your
pocket allows it. This helps the borrower to manage the finances easily.

 Additionally, customizing the payback ensures that the borrower does not feel
that paying back is a burden on the shoulders. For the ease of borrowers,
customizing EMIs really work wonders. Thanks to technology, everything can

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 now be done online. And when you mention, when you pay back, you will get
approval soon.

5. To sum up:
 All the above updates in technology have made the entire banking process
really fast and efficient. And especially, the loan approval process has become
easier than ever. People are starting to trust banks more. And, many people
find these instant loans and approvals to be their savior as they need them
from time to time.

5.4.4 Loan Management System:-

 A loan management system is a digital platform that helps automate every

phase of the loan lifecycle from application to closing. The traditional loan
management process is meticulous, time-consuming and requires collecting
and verifying information about applicants, their trustworthiness and their
reliability. Additionally, the process includes calculating interest rates and
monitoring payments. Loan servicing software not only automates these
processes but also provides useful analytics and insights for lenders and
borrowers.

 The stage for the growth of the lending software market is set by the ongoing
digitization of businesses and strict regulatory requirements that push financial
firms to build loantech software to handle increasing workloads and meet
regulatory challenges. Lontech's market is expected to reach and is currently
growing at a steady CAGR of 12.19%.

What to consider when creating Loan management system:

59
Figure: 5.4 Loantech market capacities by 2028
Source: WWW.VISARTECH.COM

Benefits of Loantech software:

Figure: 5.5 Benefits of Loantech software

Source: WWW.VISARTECH.COM

1. Eliminate human errors: It's no secret, that calculations are something that
algorithms handle better than humans. In the credit system, there are many
variables, which is why it is error-prone. The best loan servicing software,
however, is designed to completely rule out any errors, which is undoubtedly,
beneficial from every point of view.

2. Prevention of payment delay: Not being able to collect a debt is something

that most lenders are particularly wary of. However, if they take advantage of
a traditional loan management approach, they may not see it coming. Loan
servicing systems, on the other hand, integrate analytical modules capable of
detecting the most secretly fluctuations in client reliability and preventing
delays in timely payments.

3. Saving time: Loan management requires a high level of caution and attention
to detail. As a rule, an entire team is needed to handle every aspect of the loan
process. Needless to say, loan management is time-consuming and manual and
paper-based. A digital credit system, on the other hand, automates routines and
enables your team to devote time to other important tasks.

4. Automated reporting: Automated report generation is another invaluable

feature offered by digital loan servicing platforms. Accounting, tax reports and

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 invoices are frequently requested by regulatory bodies, borrowers and
investors. These high urgency reports should be provided on demand, and
should contain information, which is 100% accurate. Loan tracking software
enables lenders to generate various types of reports quickly and submit them
instantly in the required format.

5. Increased revenue: An automated loan processing system enables lenders to

process more applications, assign and manage more loans, and detect scams
and stop them all while preventing delays. Staff is freed to oversee the process
and focus on client relationships and exploring new business opportunities.
This enables financial companies to gain a distinct competitive edge and
increase revenue.

The most popular Loantech software types for organizations:

Figure: 5.6 Type of Loantech software

Source: WWW.VISARTECH.COM

1. Mortgage financing software: Mortgage apps are targeted at home buyers

applying for loans. Free loan servicing software for mortgages is generally
provided by established banks; however NBFOs can also offer mortgage
loans. There are also a range of apps that simplify the mortgage application
process and refinance mortgages.

2. Retail loan software: This loantech software is aimed at helping customers get
loans for all types of purchases, from consumer electronics to cars and real

61
 estate. Credit cards and loans against property also fall under this category.
Retail lending is, in essence, an umbrella term for all personal loan types.

3. Student loan servicing software: A large segment of personal loan software is

dedicated to student loans. This type of loan servicing software helps manage
financial relationships between students and educational institutions and the
LoanTech app is perfect for calculation, tracking, reporting and management.

4. Business loans: Business loans are used for loantech investment in a startup
company or for business development of an existing company. Companies and
entrepreneurs can avail business loans from banks, non-bank financial
companies and online lenders. There is also a segment of loan servicing
software for private lenders dedicated to peer-to-peer lending.

Top features of Loan management system:

Figure: 5.7 Features of Loan Management System

Source: WWW.VISARTECH.COM

1. Accessibility: An organization looking to build loan software may not have

sufficient on-premise infrastructure capabilities to ensure its non-disruptive
operation, updates and support. Scaling during peak workloads and managing
increases in the number of users and subscriptions can also be very
challenging. It is best to use cloud infrastructure to ensure optimal scalability
and availability.

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2. Servicing different loan types: The more types of loans your money lending
software is able to service, the better. Lending apps that have a wide range of
use cases will attract more users than apps that target only one type of loan.
LoanTech software for creating loan application estimates, for example, can
have a wide range of applications, from student loan tech calculations to
estimating business loans and mortgages.

3. Centralized data storage: Every stage of the lending process involves working
with customer data. The best loan servicing software stores this data in a
central storage accessible during each loan processing stage. Legacy loan
management systems, on the other hand, use a slide approach to data storage,
which makes the loan process more burdensome and lengthy.

4. Integrated credit assessment capabilities: Modern loan servicing software for

private lenders should be able to instantly connect with credit bureaus and any
other organizations responsible for credit worthiness evaluation. Such
platforms should receive regular credit data updates and leverage big data
analytics to assess the creditworthiness of applicants. A client's social media
activity, for example, can be a valid source of alternative assessments of
credibility.

5. Automation of routine processes: Using robotic process automation to

streamline simple rule-based processes is another essential feature of a loan
management platform. Automation accelerates loan origination and processing
and increases customer satisfaction. Besides that, it helps to avoid human
error.

6. In-built analytic modules: Leveraging artificial intelligence (AI) and big data
is another hallmark of excellent loan servicing software for lenders. It not only
helps in generating reports but enables companies to assess market trends, find
patterns in customer behavior and come up with new products and offerings.

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7. Third-party integration: Another feature that most organizations find
particularly attractive in a loan processing system is its ability to integrate with
other enterprise software. ERP and CRM solutions are able to enrich the credit
system with data and insights. Systems that integrate lending modules with
software for remote sales personnel are also enjoying high popularity among
lenders.

8. Security: Finance company software deals with classified and highly sensitive
data and security is of utmost importance to both lenders and customers. An
excellent lending system should have advanced security capabilities and
ensure the highest level of customer, data and network security.

How to choose loan management software:

 Navigating through the richness of loan management solutions can be a
daunting task. However, companies should follow certain guidelines while
choosing software for loan management.
1. Your business requirement: The needs of SMB companies are naturally
different from those of established enterprises. When choosing a loan
management solution or considering according to loan software development,
consider your business type and current business goals. For example, some
companies will prioritize loan diversity and base their decision on different
use cases and loan types. Others will go for a wide range of loan repayment
options or versatile customization opportunities.

2. User requirements: Next, you will strike a balance between the company's
strategy and the needs of your users. It is especially important to consider the
needs of each group of users and stakeholders within your company. This will
give you solid information to fall back on when choosing software for loan
management.

3. Accessibility and Availability: Knowing the needs of your customers will help
you decide on the way you want your loantech software to be deployed and
delivered. The SaaS model is currently the most frequent choice since it
enables companies to use cloud infrastructure resources to power application

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 backend and ensure optimal performance. Also, think about making your
loantech app accessible from a wide range of mobile devices and operating
systems.

How long does it take to make a Loan management solution?

Figure: 5.8 Duration of loan management solution

Source: WWW.VISARTECH.COM

How much does it cost to make a Loan management system?

Figure: 5.9 Cost in Loan Management System

Source: WWW.VISARTECH.COM

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 What is the structure of the application development teams involved?
 The backend part of app development is like building the brain of the loan
application. So he needs a particularly solid technique for this responsible
task.

Figure: 5.10 Team structure of Loantech software development

Source: WWW.VISARTECH.COM

5.5 An introduction to how IT helps in the prevention of fraud:-

5.5.1 How technology can help to prevent fraud and corruption during the rise
crisis?

Use of technology and advanced data analysis to prevent fraud:

 Data analytics tools:
 MS Excel Spreadsheet
 Audit data analytics software (ACL, IDEA, arbutus)
 Customized solutions based on artificial intelligence and machines to
learn

 Data analytics tools usage:

 Identify deviations anomalies, patterns, red the flag
 Create associations within thousands of transactions
 Understand the data and risks

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  Data analytics tools benefits:
 The entire (100%) population analysis
 Early detection of fraud indicators decrease financial loss
 Internal controls are also improved low cost
 Save time through automation tests

 Whistleblowing channels:
 SAIUAE website
 Hotline number
 E-mail
 Mobile app

5.5.2 How technology can help prevent financial crimes:

Introduction to financial crime:

 'Financial crime' has been a major issue across the world for the last few
decades. Authorities are constantly looking for new ways to combat financial
crime as criminals are always ready with new and innovative tactics to stay
ahead. If you are working in the finance or business sector, it is important that
you understand what financial crime is and how it works.

 A financial crime is a type of crime that is specifically committed against

property; such crimes are always committed for the personal benefit of the
criminal and involve the illegal conversion of property ownership.

 These crimes take different forms and are committed all over the world. So,
you all can think what can be the examples of such crimes. Some of the most
common crimes that the financial sector is facing are money laundering,
terrorist financing, financial fraud, tax theft, fake currency, identity theft and

67
 many more. These types of crimes happen every day and governments across
the country are constantly working to stop them.

 They are proceedings financial criminals while looking for new ones. The two
most prevalent types of financial crimes in India today are money laundering
and terrorist financing.

 Criminals who commit these types of crimes usually use very ultra-modern
technologies which mean that those technologies are difficult to separate and
catch.

Different types & examples of financial crimes:

 There are many large-scale examples of financial fraud in India:
1. Satyam scam
2. Punjab National Bank scam
3. Vanishing Companies, 1998

 There are many large-scale examples of money laundering in India:

1. 2G, Spectrum scam
2. Commonwealth Games scam

Different ways to prevent:

 There are many ways to prevent such financial crimes:

 Technologies:
 The main method by which authorities are currently fighting financial crimes
is widespread surveillance through the use of technology. The arrival of
technology has helped mankind in many different ways, be it connectivity,
communication and so on. Technology can be found in every sphere of life,
although it has made our life easier but it has also made crime a convention.

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 Technology helps prevent financial crimes around the world, as artificial
intelligence (AI), machine learning (ML) and data analytics are seen as the
evolutionary stages of technology. These technologies can also be applied to
safety infrastructure.

 Let us now understand with a simple example:

 The latest smartphones are equipped with functions to identify their
owners through various features like measuring pressure, face lock,
fingerprint sensor, pattern, pincode, etc. applied to unlock the phone.
At its highest peak.
 If the phone is stolen, it can be tracked and unpinned by anyone other
than the owner of the phone because they have set the security
according to their own. The same method can be applied if we come
back to financial crime. There are many similar ways this technology
can be used to prevent financial crimes.

 When we talk about India, the first thing that comes to everyone's mind would
be the intentionally defaulters. Considering the case of Nirav Modi scams, it
exposed a major flaw in the banking system. If these things had been done
earlier, this scam would not have happened and money could have been saved.
 A block chain can create a ledger where you will record every entry –
liabilities, contingent liabilities and all kinds of defined risks. Ledger
positions can be copy across multiple nodes across the bank, so it's
impossible to manipulation with them without getting caught.
However, where there is an exception someone will still need to sign
off.

 One may take over the duties for intermittent periods from one
manager to another from a different region to report any exception.
This is quite common in the private sector, where one manager fills in
for another during vacation. It helps senior management get an
alternative view of the unit's health and performance.

 The possibility of external attack will be reduced by:

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  Better reporting of exceptions
 Makes finding hacks easy
 Preventing liabilities outside the system

 Though of late, Indians have now become aware of using more and more
technology to control financial crimes. By linking Aadhaar with bank
accounts, online form filling and payments, government services have brought
transparency to the financial sector.

Artificial Intelligence:
 Artificial intelligence has the ability to recognize patterns of transactions and
allow professionals to quickly comply to better spend their time. AI (artificial
intelligence) also has the ability to analyze results, investigate root causes and
collaborate findings with other financial institutions or authorities. Through
the use of big data, financial institutions gain a clear understanding of
individuals and supply chains to establish the path of illegal profits from
activities such as drugs, arms, human trafficking, slavery, corruption, fraud
and many other crimes. This makes it easier to share information with other
organizations and authorities to reduce the flow of criminal money laundering
through these accounts.

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 Preventing money laundering is something that is on the priority list and on
the regular agenda that can be done with the use of technology in
collaboration.

 When an event is organized for it, there are many countries that come to attend
those events and share their views and ideas regarding it. The following ideas
emerged:

 A shared database of 'bad actors' is secured and distributed using

ledger technology. This will allow the financial institution to query
whether a new customer has been rejected by another financial
institution due to financial criminal activities or concerns related
thereto.
 Various modes like natural language processing, topic modeling and
text analytics are used in financial institutions to enhance financial
crime focused transactions and monitoring solutions.
 Graph/network analytics to more easily identify relationships between
entities to support due diligence and continuous monitoring of
potentially dubious entities and activities.

 The following other methods were also discussed:

 Greater sharing of crime patterns between organizations to aid

investigation and intervention capabilities.
 A financial institution queries another financial institution's
confidential data using homomorphic encryption and zero-knowledge
proof technology. These technologies can enable financial institutions
to verify certain types of information with each other without
compromising the privacy and security of the data provided.
 Data is aggregated from multiple organizations into a shared utility,
which is then analyzed for fraud, money laundering and sanctions
monitoring purposes.

71
 Financial Institution:
 Financial institutions play a very important role as they are the ones who
collect all the data. They identify and verify customers and can trace
customers involved in crime. An effective process is very important as
organizations are the first to collect data from customers and regulations
change daily and apply to more and more collections. There are ways that
banks in India should approach to protect themselves from financial crimes:

 Conduct risk assessments based on the bank's products, services,

geographies and customers to better understand the risk environment.
 Integrate the efforts of various disciplines involved in financial crime
prevention across the organization to identify synergies and overlaps in
people, processes and technologies; this will help reduce redundancy
and streamline processes.
 Improve data availability and quality to support real-time transaction
monitoring and advanced analytics.
 Apply advanced analytics to gain a holistic view of threats and the
organizations that cause them; This will help in early and effective
detection of complex and subtle threats as well as emerging threats.
 Parent a culture of high ethics and integrity by setting accountability
standards, establishing controls and policies, working closely with
regulators and raising employee awareness.
 Actively participate in industry-wide initiatives undertaken to reduce
risk and improve compliance.

 Organizations know their customers and collect data accordingly. They face
many problems and at the same time they have to work to solve those
problems because they have to create linkages between every single
department (financial crime, transaction monitoring, suspicious activity
reporting, etc.) because many of them do not have. There is good coordination
for it but they are working to develop it further.

72
 Customer Principle:
 A crucial element in the fulfillment of our obligations is known as the
customer-principle. It takes a lot of time to establish long-term business
relationships with their customers, a factor that greatly facilitates the detection
and prevention of financial crimes in banks. All credit banks also ensure that
they identify the beneficial owners behind each business terms. These are real
individuals who profit significantly from business relationships. This approach
is applied in many countries where banking supervision legislation does not
yet provide this level of discretion.

 With regular training and other measures, one can ensure their staff can
recognize the risk of financial crimes at all times as well as understand and
implement existing regulations on customer responsibilities and prevention
against money laundering.

5.5.3 Fraud management system and benefits of using it:-

What is fraud management system?

 A fraud management system should be able to automatically view transactions
and events in real time to detect and prevent fraudulent activities occurring in-
house, online or in-store. It should stop unscripted access to sensitive company
and customer data. Suspicious transactions or events are flagged and can be
manually checked through the management dashboard.

 A fraud management system prevents illegal activities related to payments,

purchases and chargebacks. It works to secure web, mobile and app based
financial transactions. It helps contain digital payment fraud and sometimes

73
 account appropriation by validating identities using two-step authentication
and identifying malicious logins and bot activity.

 A fraud management system is also used to prevent insurance fraud and

money laundering. It will help ensure compliance with security and data
privacy regulations.

 It can scan internal and external data, employees, customers, transactions,

events and databases. Detection and resistance is based on rules or predictive
models.

Benefits of Fraud Management System:

1. Proactively monitor for potential fraud or high-risk events:
 Real-time fraud management of internal and external data, employees,
customers, transactions, events and databases. Real-time transaction screening
and review. Pattern recognition / anomaly detection is also boosted with AI
integration, detecting emerging fraud to uncover anomalies faster and more
accurately. Events are extracted, automated and processed with little or no
human involvement. FMS can interface with a wide variety of data sources to
ensure visibility and access to a wide range of services.

2. Calculate transaction risk factors to determine legality:

 Custom fraud parameters are established with organization-specific
parameters and trigger fraud prevention actions. Fraudulent search detection
for cross-reference with normal user behavior. Security management via a
dashboard to manage role-based user access to transactional data to prevent
tampering or hacking. It increases sales and revenue by helping businesses
accept more promising orders.

3. Detect illegal transaction behaviors online:

 A powerful dashboard provides the ability to review transactions, identify
patterns, provide insights and make informed decisions on any reports. It
controls business impacts through customized, goal-based risk entrance.

74
4. Provide alerts and analysis tools for administrators:
 Internal fraud monitoring, where software can review internal actions to
determine the need for investigation. It reduces the cost of fraud operations by
reducing chargeback and manual inspection rates.

 Dashboard alerts and the fraud detection process in FMS is a key tool for fraud
managers. This tool allows fraud analysts to view critical performance
indicators, analyze whether fraud detection targets are being used, and review
performance metrics to ensure cases are being managed and solutions are
being implemented appropriately.

5. Ensure compliance with data privacy and security regulations:

 Proactive investigation for data security breaches and privacy compliance
violations. These compliance tools ensure that all fraud incidents are
identified, recorded and tracked in place. This information can be used to list
or block fraud syndicates and fraudsters, where links between new and old
cases are identified.

 Additionally, it provides storage for all case related information to be stored at

a later stage. This also enables tracking the performance of fraud analyzer
cases for further optimization of the processes followed.
6. Increase coverage to prevent fraud:
 Many of the new services that are being introduced by telecom do not stick to
the transaction record principle, services like IPTV, IoT and those being
launched on 5G; involve multiple technologies and multiple third-party
players. . While each of these services may be naturally secure, they typically
have weaknesses at the seams or integration points. New types of phishing
attacks on these services exploit such weaknesses. By monitoring signaling
levels, fraud teams essentially create a safety net that can monitor traditional
offerings, new services, and anything in the future, thus greatly expanding
fraud teams' coverage from voice, messaging, and data.

7. Preventing complex fraud:

75
  As fraudsters develop their attacks and tools, it becomes the prerogative of
fraud detection teams to remain awake and rapidly development their
detection and mitigation techniques; this is becoming extremely difficult using
the traditional data sets that FMS uses. A first-principle approach to the most
basic of network traffic, i.e. signaling, gives the team the ability to create
complex detection mechanisms to identify and mitigate complex fraud.

 Organizations that leverage machine learning are empowering their decision

makers with the ability to access data, make sense of it, and make informed
decisions to prevent fraud before it affects the business's bottom line and
overall brand. Risk and fraud management managers face real-time constraints
while implementing fraud strategies with real-life resources such as costs,
performance cycles, data permissions, detecting legitimate vs. fraudulent
orders, customization and scalability with the business, etc.

 Although we can combat fraudsters through these means, fast-moving telecom

systems and the need to rapidly launch complex products to capture market
share and maintain a competitive advantage, lead to weak technical systems
and high risks that fraudsters exploit does to keep the business going.
Activities are underway. But fraud management systems equip a company to
stay ahead of criminals regardless of the tools and tactics they use to commit
fraud.

5.6 Conclusion:-
For loan verification process:
 The traditional paper based loan application by the customer is replaced by an
online loan application and verification system which helps user to apply loan
through registration, uploading documents, and loan approval or rejection
status done online by admin such as bank employee with the help of CIBIL
score.

 The PAN number of customer is used for getting CIBIL report where it gives
details of one’s debt accounts and their payments in other banks. The

76
 customers get loan approval or reject status when he logins, if approved
uploading of documents to admin and then rest process will be done manually.

 Online and digital lending is growing in popularity. Online lending is

increasing customer satisfaction. Additionally, the online lending business has
seen a growth of 4%.

 Therefore, organizations must switch to digital. Digital platforms are customer

centric. The new generation of consumers is also more used to digital
interfaces. It allows organizations to reach the next generation of customers.
Digital platforms enable businesses to gain more information on how to
optimize workflows. Loan management systems come with sophisticated
reporting and analysis techniques. These features help lenders understand
where they should invest more.

 Automation has increased the efficiency of various lending platforms. The

landscape of lending is changing with more technology-enabled competition
and the emergence of better cloud-integrated platforms. Lenders need to
recognize the importance of automating their process in terms of cost-
efficiency, time-saving, better data integrity and powerful analytical tool.
While automation may pose some challenges initially, doing so gradually can
increase the brand value of an organization.

For prevention of fraud:

 This study shows that first information technology affects internal control.
Second, internal controls affect fraud prevention. Third, information
technology influences fraud prevention. This research makes an important
contribution to organizational managers realizing good governance and being
able to reduce fraud.

 From the whole concept of financial crimes, you will now know that what
financial crimes are? And how many countries are dealing with them with the
advent of technology? Because the criminals who commit such acts are always
ahead of the workers. But many countries are working on it with different
77
 manual or technological variations and have created different ways to fight
financial crimes.

 Because there are ways in which technology can help reduce financial crime.
But the key issue is activation of the financial sector as well as successful
implementation of technology. If we talk about our country India is on the
right track but the process and implementation needs to be speeded up.

 The best computer technology application for fraud detection and prevention
is an expert system because its characteristics are user-friendly. Expert
systems can combine rules and rule extraction into fraud detection
frameworks. This is a great advantage for auditors as they can enter their own
limits to detect fraud. It is also a reliable system that can work on real-time or
historical data. This option enables auditors to compare the latest results with
previous results, thus they can maintain their performance at the top.

 Implementation and proper management of advanced information technology

systems and applications help banks to control risk and fraud associated with
the banking system.

78
 Chapter: - 6

Practical learning from the depth study of “A study on Role

of IT in Loan verification process & Prevention of fraud”

6.1 Experiential learning from in-depth study at Simran

Management Pvt. Ltd.:-
 At 'Simran Management Services Pvt. Ltd.' the entire process of loan
verification is done through more use of computer technology and online
websites for verification. And I learn how the entire loan process is done.

79
6.2 Complete loan verification process understandable at Simran
Management Pvt. Ltd.:-
 The loan verification process is as follows:
1. First of all loan applicant cases come from bank only through mail in pdf,
word, image etc. format.
2. And then the whole process is done by computer technology. Coming cases
are allotted to verifiers (field executive) according to area and items which can
be verified. All details & address shared through whatsapp communication
medium.
3. All cases are then entered into the trigger.
4. And after that all case negative record check from negative record which
provide by all connect member bank in excel sheet format. And if found any
case in this record then immediately is marked as negative.
5. Finally the cases are positive so far which will verify the cases in further
process. All the case details are checked like Income Tax Return, Residential
Profile, Office Profile, Aadhaar Card, PAN Card, Business Profile, GST
Number, Bank Statement etc. through online website and based on providing
original documents by bank is verified.
6. After that a banking statement check issued by the bank.
7. Then when the verifier (field executive) sends the report of business profile,
residential profile, office profile etc. through whatsapp then make final
remarks of verifier report and after end make final report of all verified cases
from field verifier in word or pdf format and send by mail to relevant Bank to
give status like Positive/Negative.

6.3 The excel sheet contains all the case verification websites used by
'Simran Management Pvt. Ltd.':
Sr. Link Search Name
No.
1 http://dnh.nlrmp.in/avanika/ 7/12 Dadra and
Silvassa
2 https://anyror.gujarat.gov.in/ 7/12 Details
Gujarat/CITY

80
 SURVEY
3 https://resident.uidai.gov.in/verify Aadhar Card number
check
4 https://portal2.bsnl.in/myportal/viewbills.do BSNL Bill
5 http://112.133.194.254/locm.asp CA Member
6 https://e-milkat.gujarat.gov.in/Default.aspx City Survey Check
7 https://commercialtax.gujarat.gov.in/ Commercial Tax
vatwebsite/home/home.jsp
8 https://www.zaubacorp.com/ Company Details
Search
9 https://www.dnhpdcl.in/Consumer/ Dadra Nagar Haveli
QuickPay/DuplicateReceipt.aspx Bill Check
10 http://dgbill.dgvcl.co.in/CheckBillDetails/ DGVCL
index.php
11 https://www.nmc.org.in/information-desk/ Doctor Registration
indian-medical-register/ check
12 https://www.domainsearch.com/oldindex.htm Domain Search
13 https://www.whois.net/ Domain Search
14 https://parivahan.gov.in/rcdlstatus/? DRIVING LICENCE
pur_cd=101 CHECK
15 https://enagar.gujarat.gov.in/DIGIGOV/ E Nagar (Gujarat All
digigov.htm? SMC site)
actionFlag=loadQuickPayPage&pagedisp=sta
tic&isCertVerification=1
16 https://www.shcilestamp.com/eStampIndia/ E Stamping
VerifyCertificate.es?rDoAction=VerifyCert
17 https://unifiedportal-epfo.epfindia.gov.in/ EPFO CHECK
publicPortal/no-auth/misReport/home/
loadEstSearchHome
18 https://xln.gujarat.gov.in/ FOOD & DURGS
XLN_Citizen_Menu.aspx LICENSE (NEW)
19 https://foscos.fssai.gov.in/ Food License Search
20 https://www.tdscpc.gov.in/app/tapn/ Form No 16 (TDS

81
 tdstcscredit.xhtml CHECK)
21 https://www.mylpg.in/ Gas Book
22 http://agguj.cag.gov.in/gpf_status_new.aspx GPF Search
23 https://services.gst.gov.in/services/searchtp GST Search with GST
number
24 https://services.gst.gov.in/services/ GST Search with pan
searchtpbypan number
25 https://www.nmc.org.in/information-desk/ GUJARAT MEDICAL
indian-medical-register/ LICENCE
26 https://customerservice.hdbfssupport.com/ HDB Finance
BillDesk/Billdesk/Transactions/
Billdesk_Payment.aspx?intro_chk=on
27 https://nli.icicibank.com/NewRetailWeb/ ICICI Home Finance
homeLoanStmtLoginPage.htm
28 https://www.icicilombard.com/tag-your-policy ICICI Lombard
29 https://www.icegate.gov.in/EnqMod/ IEC CHECK
30 https://smartapps.iifl.com/ IIFL Repayment
PaymentsCollectionUI/IIFLQuickPay.aspx
31 https://garvi.gujarat.gov.in/frmIndex2.aspx Index 2
32 https://indiankanoon.org/ Indian Kanoon
33 https://tin.tin.nsdl.com/oltas/servlet/ IT Tax Challan
QueryTaxpayer
34 e-Filing Home Page, Income Tax Department, ITR V Status
Government of India
35 https://kmplcustomerportal.kotak.com/kmpl- KOTAK CAR LOAN
customer/customer/login.htm
36 https://payments.billdesk.com/MercOnline/ Kotak Prime
kotakemi/
kotakEMITermsAndConditions.jsp?
type=bank
37 https://vehicleloan.mahindrafinance.com/UI/ Mahindra Finance
UnRegisterUser.aspx SOA check
38 https://mpay.guvnl.in/paytm/QuickPay.php? MGVCL

82
 &company=MGVCL
39 https://nationalinsuranceindia.nic.co.in/ National Insurance
portal/page/portal/Corporate/Home/ Policy
RenewPolicyPage
40 https://portal1.passportindia.gov.in/ New Passport
AppOnlineProject/statusTracker/
trackStatusInpNew
41 https://onlineservices.tin.egov-nsdl.com/ Pan Name Details
etaxnew/tdsnontds.jsp
42 http://pgvcl.com/consumer/ PGVCL
consumer_details.php
43 https://gujrera.gujarat.gov.in/ PROPERTY
PROJECT DETAILS
CHECK
44 https://dcs-dof.gujarat.gov.in/live-info.htm Ration Card
45 http://mca.gov.in/mcafoportal/ Register Company
viewCompanyMasterData.do Search
46 https://www.reliancegeneral.co.in/Insurance/ Reliance Policy
Self-Help/Print-Policy-Online.aspx?
Source=Hm
47 https://onlinepayment.nrfsi.com/paymentgw/ Renault Finance loan
renault/PaymentDetails.php statement check
48 https://eshramseva.gujarat.gov.in/FW/ SAFETY AND
FWMaster/frmFWUploadCertSearch.aspx? HEALTH LABOUR
MI=D435800000 CERTY
49 https://saras.cbse.gov.in/cbse_aff/ School Affiliation
schdir_Report/userview.aspx
50 https://rte.orpgujarat.com/Common/ School List
SchoolList?district_master_id=6abb41b5-
bd67-4598-8ea5-
4c7edd6d47b8&block_master_id=60cde24a-
278c-4768-a81e-
b1c6272f0844&ward_master_id=&keyword=

83
 &page=3
51 https://www.shriramgi.com/ Shriram General
Motor_Policy_Pdf.html Policy
52 https://www.suratmunicipal.gov.in/ SMC Employee Details
Information/EmployeeDetails
53 https://udhyog.gujarat.gov.in/ SSI CHECK
54 https://www.suratmunicipal.gov.in/ Surat SMC
OnlineServices/ (PROPERTY TAX,
PROFESSIONAL
TAX, DEATH AND
BIRTH CERTY,
SHOP
ESTABLISHMENT)
55 https://www.tmf.co.in/tmfuniverse/ Tata Motors
tatamotorfinance/quick_pay.jsp
56 https://connect.torrentpower.com/tplcp/ Torrent Power
index.php/CrCustmast/quickpay
57 https://udyamregistration.gov.in/ Udyam Certy
Udyam_Verify.aspx
58 https://udyamregistration.gov.in/UA/ Udyog Aadhar
UA_VerifyUAM.aspx
59 http://ugvcl.info/UGBILL/index.php UGVCL
60 https://dnhctdonline.gov.in/dadraereg/ Vat Certy Dadra &
DealerSearch.aspx/ silvassa
61 https://www.tinxsys.com/ Vat Licence search
TinxsysInternetWeb/searchByTin_Inter.jsp
62 http://ceodnh.nic.in/Search.aspx Voter ID Dadra and
Silvassa
63 https://erms.gujarat.gov.in/ceo-gujarat/ VOTER ID
master/Elector-Search-Dist-AC-Serial.aspx GUJARAT
64 https://electoralsearch.in/ Voter ID Search

84
Table: 6.1 All the case verification websites used by 'Simran Management Pvt.
Ltd.'

Appendix

85
 List of Online websites for documents verification at Simran
Managed Services Pvt. Ltd. in Excel sheet:-

 Online Search Link

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86
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