Breaking silence on its supervisory role in the PNB fraud, the RBI finally decided to address the displeasure surrounding its inaction, saying it has warned banks at least thrice since August 2016 of possible misuse of the SWIFT Infrastructure. Society for Worldwide Interbank Financial Telecommunications (SWIFT) is a messaging platform used to send secure instructions on transfer of funds, guarantees, and payments.
The regulator said despite its early warning, banks are at various stages of implementation of the prescribed safeguards. RBI also announced the appointment of chartered accountant YH Malegam, to head a panel that will look into the causes of fraud at lenders and the reason for their failure in identifying defaulters. According to the RBI, its inspection of banks have shown that there are major differences in the default accounts identified by it and those classified by banks.
“The risks arising from the potential malicious use of the SWIFT infrastructure, created by banks for their genuine business needs, has always been a component of their operational risk profile,” the RBI said in a statement. It said it had therefore, confidentially cautioned and alerted banks of such possible misuse at least on three occasions since August 2016, advising them to implement the safeguards detailed by it for pre-empting such occurrences.
In the wake of SWIFT-related fraud involving significant amounts, the RBI reiterated its confidential instructions, and mandated lenders to implement within the stipulated deadlines, prescribed measures for strengthening the SWIFT-operating environment in banks.
