Banks are conducting sting operations on their own employees. Here’s why

Prime Minister Narendra Modi rolled out demonetisation to clean up the black money in the nation and in order to make their money white, black money hoarders have been opting for different ways. Recently, many cases of bank employees helping them has surfaced and to stop them banks have started conducting clean up exercises.

Private sector banks, including multinationals, are seeking to prevent wrongdoing by employees and keeping them under scrutiny after multiple reports of alleged fraud by employees following the November 8 demonetisation announcement that cancelled Rs 500 and Rs 1,000 notes.

Many are conducting exercises, in which forensic experts pose as customers and seek services that violate rules. Banks are also checking backgrounds for any criminal records besides other verification exercises.

According to a forensic expert, banks are cracking down after the Reserve Bank of India and tax department began raiding branches and uncovering large-scale unauthorised exchange of currency notes. Many bank employees have been arrested and dismissed as a result.

"They are laying traps and doing sting operations on their own employees," he told ET.

Bankers and forensic experts are silent on how many employees have been caught and what action was taken against them.

"Increasing the rigour of vulnerability tests as part of ongoing monitoring procedures in financial institutions is vital and one of the best ways to address this for banks is to be innovative in leveraging the large volume of data that they already have to eliminate and/or reduce fraud," Dhruv Phophalia, managing director of consultant Alvarez & Marsal, told ET.

"Background verification checks are part of the established employee on-boarding process at Axis Bank, as with other large employers. We have established parameters and processes on which we seek information and confirmation,” Axis Bank spokesperson wrote in response to an emailed query by ET.