Guidelines on Reporting and Monitoring of Frauds in Housing Finance Companies
To facilitate the reporting and monitoring system relating to fraudulent transactions reported by HFCs, NHB issued “Guidelines on Monitoring of Frauds in Housing Finance Companies, 2018” (“Guidelines”) effective from February 05, 2019. The Guidelines shall apply to all Housing Finance Companies registered with the NHB.
Key responsibilities of HFCs
- Place a reporting system for recording frauds without any delay
- Fix staff accountability in respect of delays in reporting of fraud cases to the NHB.
- Adhere to the timeframe fixed for reporting frauds
- Nominate an official of the rank of General Manager or equivalent who will be responsible for submitting all the returns and reports to the NHB
- Take precautions to ensure that the cases reported by them are duly received by the NHB.
- Disclose the amount related to fraud, reported in the company for the year in their balance sheets.
- Quarterly Review of Fraud:
- Information relating to frauds for the quarters ending March, June, September and December shall be placed before the Board of Directors during the quarter following the quarter to which it pertains.
- Audit Committee of the Board of HFCs shall review and monitor the frauds involving an amount of Rs. 50 lakh and above
- Annual Review: HFCs should conduct an annual review of the frauds and place a note before the Board of Directors for information
- Make provisions, in case of accounts classified as ‘fraud’, to the full extent irrespective of the value of security.
Classification of fraud
In order to have uniformity in reporting, frauds have been classified as follows:
|Fraud only when fraudulent intention is suspected / proved
|Deemed to be treated as fraud (irrespective of the fraudulent intention)|
b) Cases of cash shortages of less than Rs. 10,000/-
c) Irregularities in foreign exchange transactions
|a) Misappropriation and criminal breach of trust
b) Fraudulent encashment through forged instruments, manipulation of books of account or through fictitious accounts and conversion of property
c) Unauthorized credit facilities extended for reward or for illegal gratification.
d) Cheating and forgery
e) Cases of cash shortages more than Rs. 10,000/-
f) Cases of cash shortages more than Rs. 5000/- if detected by management / auditor/inspecting officer and not reported on the occurrence by the persons handling cash.
g) Any other type of fraud not coming under the specific heads as above
Reporting of Frauds
Reporting of fraud shall be done by referring to the following heads of frauds:
- Frauds involving – 1 lakh and above
- Frauds committed by unscrupulous borrowers
- Frauds involving t 1 crore and above
- Cases of attempted fraud
Following forms have been introduced for the purpose of reporting frauds:
FMR-1: Report on Actual or Suspected Frauds in HFCs
FMR-2: Report on Frauds Outstanding
FMR-3: Progress Report on Frauds of Rs. 1 lakhs and above