High risk of fraud in Indian financial sector-survey

INDIA: Banking, insurance, mutual funds, asset management companies and BPOs are most vulnerable to fraud in India, a survey said on Thursday.

"Twenty-three percent of the respondents believe them (these sectors) to be the most vulnerable to malfeasance," the survey, conducted by KPMG, a global network of firms providing audit, tax and advisory services, said.

"The survey also brought forth the increasing occurrence of frauds and its many forms within the IT world, specifically in the BPO (business process outsourcing) sector," it added.

Called "India Fraud Survey 2006", the report said 36 percent of the respondents felt "employees posed the maximum threat to an organisation in the BPO sector".

India has become a flourishing hub of outsourcing with many western firms moving some of their work to India to save costs.

But cases of alleged fraud have also surfaced. Last year 16 people were arrested in a probe into fraudulent transfer of more than $400,000 from Citibank C.N. customer accounts in the United States to bogus accounts in India.

Investigators said employees of a BPO persuaded customers to disclose information that would make their accounts accessible.

"Over the last few years frauds within the BPO sector have not only increased in occurrence but also managed to change its forms," Deepankar Sanwalka, executive director of KPMG India, said at a news conference.

"The developments of new threats has been faster than what the BPO world could ever imagine...," he added.

The survey results are based on responses from 200 companies, a majority of which have a turnover of between 5 and 10 billion rupees ($112-224 million), company officials said.

According to 2003 official Indian government figures, seven economic crimes are committed in India every hour.

NEW DELHI, Friday Reuters