Citibank Fraud...Who else is at fault

The recent Rs 400 crore citibank fraud in the gurgaon branch is no surprise. Whether it is an international bank with top class risk controls or a cooperative bank with poor internal controls, the one thing common is the customer.

The best of risk management and internal controls will fail to be fully effective if risk management is not taken outside of the company. This means that the customer also needs to support the efforts for fraud to be minimised.

In the above instance, customer were offered high return schemes. Now, any prudent customer will evalaute and thing twice when he is offered a scheme that offers nearly twice the general market returns. In a world of 7-8% risk free returns, I would thing again before investing large moneys that promise to pay18-20% return.

So, why did the customers not do their homework when the ponzy scheme was offered by Citibank. Was it because they believed that a SEBI circular was genuine, or did they believe that the high returns are possible because the market is reviving..... Or did they take the scheme because it was offered by Citibank, the Bank that would never dupe a customer.

So, as you can see, their is a link between fraud and companies with strong reputation. The better a bank's reputation, the easier it is to sell a ponzy scheme. In this case, Citibank has a perfect reputation and customers invest in their products blindly. It is now time to change this stance.
No bank is too big to fail... No bank is perfect to offer only the nost genuine products. Anything can go wrong with any bank, any company.

In any case, if a customer is duped,he should also be responsible for it somewhat. He should have cross verified the details with the Bank Branch. No fraud is perfectly possible without faulty acts by Customers, whether it is ponzy scheme or Nigerian emails, phishing emails etc.

Risk management is not within the Corporates. It should be within all of us, in professional or personal capacity.

Have a Happy and Risk Free New Year

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