Circulars/Notifications - Banking Supervision Department  
 BSD Circular No. 1 of 2005
January 19, 2005  

The Presidents / Chief Executives
All Banks / DFIs

Dear Sirs/Madam,


Reporting Requirements on Frauds/Forgeries/Dacoities

Operational 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.

2) 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.

3) 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

b) Detailed report within 15 days of the occurrence of such incident on the format attached as Annex ‘B’ (Form-VII).

5) 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, 2005.

Please acknowledge receipt.


1. Annex Form - A-I

2. Annex Form - A-II

3. Annex Form - A-III

4. Annex Form - A-IV

5. Annex Form - A-V

6. Annex Form - A-VI

7. Annex Form - B-VII

8. EXHIBITS 1 & 2

Yours faithfully,


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