BackAccounts opened under Jan Dhan Yojana prone to frauds: S.S. Mundra
Reserve Bank of India deputy governor S.S. Mundra says banks should have a proper mechanism to monitor transactions in such accounts
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Mumbai: The Reserve Bank of India (RBI) on Monday said accounts opened under the Pradhan Mantri Jan Dhan Yojana (PMJDY) were “very vulnerable" to frauds and asked banks to be on guard against such activities.
RBI deputy governor S.S. Mundra said banks should have a proper mechanism to monitor transactions in these accounts.
“The newly-opened accounts under the PMJDY could be very vulnerable to fraud practices. Banks need to clearly guard against misuse of these accounts," Mundra said at an event on Monday.
He said third parties can be used to launder the proceeds of fraud schemes, such as phishing and identity theft, by criminals who gain illegal access to deposit accounts by recruiting them as “money mules".
Mundra cited a recent case where an idle account was used for receiving and transferring large funds without the knowledge of the account holder.
“It was the account of a daily labourer in Punjab and the account was opened as a basic one where there is limitation on number of transactions. This amount of transaction was of ₹ 1 crore," he said.
The case came to light when income tax authorities served a notice to the account holder. “This episode highlights the failure of the banks system and processes for monitoring of newly opened accounts," he said.
“What we are observing of late is that while the standard and the vigour of know-your-customer norms have become quite good at the time of opening of the account, but the same is not observed in the continuous surveillance or continuous watch over the transactions in these accounts," he said.
He said currently banks have some alerts and exception transaction mechanism, but it is mostly primitive and generally ineffective. Banks should have a robust system to monitor such accounts and the transactions being made therein for taking proactive actions which entails a better customer protection, he said.
Mundra said if banks fail to take proactively take measures to stop such transactions, they could face action from the RBI as well as other enforcement agencies.
“Failure to guard against misuse of customer accounts might result in banks incurring supervisory sanctions and enforcement action from the RBI. It can have money laundering angles and there could be action from the various enforcement agencies as well," he added.
The RBI is also examining limiting a customer’s liability in banking frauds and will soon put in place a framework for the same, Mundra said. “The RBI is already examining whether to issue regulatory direction with regard to limiting the liability of customers on fraudulent transactions arising out of frauds and electronic banking transactions."
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