Impact of financial fraud can be long lasting and can act as a dampener for the reputation and brand name of any organization. It can be anybody’s guess that the impact of such frauds in the BFSI segment can be devastating as it has far-reaching consequence across different strata of our society. As per Secretary General ASSOCHAM, financial fraud results in estimated at 20billion USD in direct losses annually1.
Service Industry contributes 53.66% to the country’s GVA (Gross Value Added)2 and is potentially considered to be a major contributor to the next trillion dollars of our economy. Now in this journey towards the next trillion dollars, a small investment towards verifying the integrity of personnel can address one of the impediments to growth.
Framing the Challenge:
In a retail set up, the majority of the customer grievances pertain to wrong selling / mis-selling of products, coupled with delayed corrective action. Even in the case of financial frauds in the banking system, more often than not there is an insider’s hand. Most of the BFSI organizations at present follow a system of background verification. However, practically speaking it is more of a tick box exercise.
Typically, the flow is as follows:
- Organization ties up with a third party background verification agency.
- New recruits fill up a form where they themselves provide details of reporting authority and relevant HR authority of their previous organization.
- Reference section in the form is usually filled with details of friends and colleagues of the recruit’s previous organization.
- Background verification agencies are inundated with numerous such forms and mandates. Hence, in many cases, they just make the customary phone call to the phone numbers provided by the candidate themselves.
- On successful tele-verification, the agency provides feedback to the organization on the candidate.
Of course, there are certain checks and balances in terms of sending mail and taking confirmation from registered email IDs of the references/reporting authorities.
- Source: Current Fraud Trends in the Financial Sector – Paper by ASSOCHAM along with PWC India, June 2015 issue
- Source: Ministry of Statistics and Program Implementation Planning Commission, Government of India, Last updated 21 March 2017
However, loopholes are as follows:
- If a candidate has committed a fraud or was terminated/asked to go from his previous organization, the same can be managed by omitting the history of that particular employment from the CV itself. (The gap between jobs commonly in most cases is explained as an attempt to start something on his / her own as an entrepreneur).
- Friends/sympathizers/ colleagues from the previous organization can play along by giving positive feedback during the background check.
- In case the reporting authority / HR personnel has also left the organization the step of taking confirmation from official email ID of the past organization is mostly overlooked.
- Third Party agencies are loaded with background checks considering the huge volume and hence getting in details of every case might not be feasible.
The Proposed Approach:
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