Presidents / Chief Executives
Banks / DFIs
Requirements on Frauds/Forgeries/Dacoities
Risk is gaining importance in the banking industry in the
wake of increasing complexity of operations and the risks
involved therein. The incidents of internal and external
frauds and forgeries are included in list of the operational
risk events that have the potential to result in substantial
losses. Keeping in view the size, sophistication, nature
and complexity of operations of each bank/DFI, adoption
of clear-cut strategies and introduction of strong internal
controls and effective reporting will remain critical factors
in preventing this and other types of operational risk events
and resultant losses.
In view of the importance of frauds prevention/mitigation
strategy in overall operational risk framework and to improve
the mechanism for active supervisory response, the State
Bank has formulated the revised reporting requirement for
banks/DFIs on frauds/forgeries/dacoities cases, which is
attached as Annexes ‘A’ & ‘B’.
Submission of complete and timely information on revised
formats will enable the State Bank to remain apprised of
developments at banks/DFIs and monitor follow-up action
taken by them for all medium and high severity frauds/forgeries
including the emergency reported cases. The information
so collected will also be used to develop a database of
frauds, forgeries, and dacoities events, which will be used
for measuring operational risk and determining capital requirements
thereagainst. Reporting of frauds/forgeries/dacoities cases
by banks/DFIs is to be
done as per the codes list placed at Exhibit ‘1’.
A glossary defining the terms used in the revised reporting
requirements is attached as Exhibit ’2’, which
though is not to be taken with exhaustive detail.
All banks/DFIs are advised to submit a quarterly statement
of frauds/forgeries/dacoities on the revised format attached
as Annex ‘A’ (Forms I to VI), which will replace
the existing Quarterly reporting format, within 15 days
of the close of each calendar quarter alongwith a soft copy
to the Banking Supervision Department. The quarterly report
will include all actual as well as attempted fraud cases
even if the bank may not have sustained any monetary loss.
Therefore, cases where bank recovers the entire amount involved
and does not suffer any loss must also be reported to SBP.
4) Furthermore, banks/DFIs will separately report to this
Department all material incidents of frauds/forgeries/dacoities
etc. of Rs. one million and above on urgent basis as under:-
a) Preliminary report within 2 working days of the occurrence
of such incident by mentioning the date of the incident
and other information about the case as available at the
time of such reporting; and
Detailed report within 15 days of the occurrence of such
incident on the format attached as Annex ‘B’
Failure to comply with these instructions will attract punitive
action under the Banking Companies Ordinance, 1962. The
first quarterly statement for the quarter ending 31st March,
2005 on the revised format shall be submitted by 30th April,
Please acknowledge receipt.