Public Sector Banks (PSBs) to link SWIFT with their Core Banking Solutions

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Following the Punjab National Bank (PNB) fraud by Nirav Modi, his uncle Mehul Choksi, and a few PNB bank employees which has rocked the banking world, all Public Sector Banks have been ordered to link their SWIFT (Society for Worldwide Interbank Financial Telecommunications) messaging systems to their Core Banking solutions for banks to detect frauds that have gone unnoticed by banks. As per the mandate, Public Sector Banks will have to link their SWIFT (Society for Worldwide Interbank Financial Telecommunications) to their Core Banking solutions by 30 April, 2018. The SWIFT (Society for Worldwide Interbank Financial Telecommunications) is basically a electronic message service used by banks for overseas fund transfers.
According to a source, the Rs.13 Crore plus fraud that was carried out by Nirav Modi and which has tainted the reputation of Punjab National Bank, went unnoticed by bank officials as bank employees used Letters of Undertaking (LOUs) in favour of Nirav Modi through the SWIFT (Society for Worldwide Interbank Financial Telecommunications) and none of the messages were detected by the Core Banking system of Punjab National Bank – resulting in the fraud being undetected for such a long period. LOUs are issued by bank officials as a guarantee for a customer to avail a short-credit loan from a foreign branch of the bank.
To counter such frauds, banks across the country are taking protective measures to ensure that a case such as the PNB fraud does not occur again. Firstly, according to State Bank of India Deputy MD and Risk Officer M.S. Shastri, SWIFT transactions from now on can be done only between 9am to 8pm and in addition, guarantees such as LOUs and Letters of Comfort will be replaced by Bank Guarantees and Letters of Credit – to ensure that the bank is aware of every transaction. Next, all State-run banks are in the process of availing cyber insurance as well as educating their employees on risk management. Lastly, banks across the country are in the process of setting up their own Cyber Security Operations – to monitor all transactions and ensure that such frauds do not occur in the future.

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