What is banking offence?
Banking offence is such unauthorized activities that make losses to the banking system. It is also known as banking fraud. Banking fraud is the use of potentially illegal means to obtain money, assets and other property owned by financial institutions.
This types of offences are carryout by bankers, the board of directors valuators, bank clients in the operation of the banking business. Banking offence activities are outlined as below –
- Misuse of authority
- Misuse of credit
- Unauthorized withdrawal and payment
- Abuse of electronic means
- Wrong valuation
- Violation of banking norms and rules
- Alteration of B&FIs account or making fraud, forgery in account
- Misuse of banking means, property and resources
- Unauthorized act against the interest and right of depositors and shareholders
- Not to repay interest, principles and charges
In many instances, bank fraud is a criminal offence and it is also called white-collar crime [white-collar crime- financially motivated non-violentcrime]. To control these activities Banking Offence and Punishment Act is formulated.
Banking offences are categorized into two
- Act of Internal Fraud
- External Risk Factors
Objectives of Banking Offence and Punishment Act 2064 [Amendment in 2073]
- To clearly define the act of banking offence in the banking system.
- To promote the trust of the general public in the overall banking and financial system of the country.
- Protect and promote the rights and interest of depositors and shareholders.
- Provide quality and reliable banking through healthy and sound banking.
- Minimize risk relating to the banking and finance sector.
- Make necessary legal provisions relating to the punishment on banking offences.
Banking offence full activities based on BOP Act 2064 and amendment 2073
- In sec., 2 more clarity is added as a definition of B&FIs closers person, Banking System, Dhukuti Karobar etc.
- New amendment widens the scope of BOP Act by covering Dhukuti. Securities. Insurance, Financial intermediary, Cooperatives, B&FIs, Commodity market etc.
The BOP Act 2064 outlined the following activities as banking offences
1)Not to open an account of demand cash payment in an unauthorized manner [section 3]
- Opening or knowingly allow opening an account with false documents.
- Opening or knowingly allow opening an account in the name of a fictitious person or an organization.
- Draw cheque to obtain or knowingly make the payment from an account where he/she has an apparent knowledge that the account does not have sufficient balance.
2)Not to make unauthorized withdrawals or payment
3)Not to obtain make payment by way of abuse or unauthorized use of electronic means
4)Not to avail or provide loans in an unauthorized manner
5)Not to misuse credit
6)Not to misuse banking resources, means and assets
7)Not to make a loss by making an alteration in the account or ledger or by committing forgery or fraud
8)Not to make any activities with fraudulent to B&FIs and cooperatives
9)Not to derive a false valuation10)Not to carry out and cause to carry out irregular economic of financial transaction
11)Not to carry out Dhukuti Transaction
12)Not to carry out an illegal economic and financial transaction
13)Not to stop credit facility in the way to loss working project of the borrower [section 11]
Major Provisions Punishments
- Opening an account of demand cash payment in an unauthorized manner
Recover the claim amount, fine as per claim amount and imprisonment up to 3 months
2) Not to stop credit facility in the way to loss working project of the borrower
Recover the claim amount, fine as per claim amount depending upon the offence committed.
3) If anyone commits any offence specified under the section 5,6 or clause (d), (e), (f), (g), or (h) of section 7 or section 8,9,10,12 or section 14, he/she will be punished with the fine and imprisonment as stipulated on the basis of claimed amount and depending upon the degree of offence committed.
| Claim Amount | Imprisonment | Fine | Compensation |
|---|---|---|---|
| Up to 10 lakhs | up to 1 year | As per claim amount | As per claim amount |
| 10- 50 lakhs | 2-3 years | As per claim amount | As per claim amount |
| 50 – 100 lakhs | 3-4 years | As per claim amount | As per claim amount |
| 100 – 1000 lakhs | 4-6 years | As per claim amount | As per claim amount |
| 1000 – 5000 lakhs | 6-8 years | As per claim amount | As per claim amount |
| 5000 – 1 Arab | 8-10 years | As per claim amount | As per claim amount |
| Above 1 Arab | 10-20 years | As per claim amount | As per claim amount |
4) If anyone commits any offence specified under clause (a), (b), (c) of section 7 or section 13 he/she shall be punished with the fine equivalent to claiming amount and imprisonment up to 4 years.
5) If claim amount is not clear – 10 lakhs fine and 2 years imprisonment
6) Section 12(a), 14(a), and 14(b) – up to 50 lakhs 1-3 years, 50 lakhs to 5 crores 3-5 years, 5 crores to 50 crores 5-7 years and above 50 crores 7-9 years imprisonment.
7) For assistant, half the punishment of main convicted
8) If anyone involved only in an attempt of banking offence he/she will also be punished.