In transactions which involves huge quantities (monetary as well as physical instruments), the basic systems and control should be in place. Solution which I would recomend is:
A) System and control: - along with the cheque details, there should be a column in the software to update the bank's deposit slip number. As the bank's deposit slip number is an internal but serialised document, the same cannot be tampered with. - In the evening all the cheques along with the summary which is updated in the bank's deposit slip should be handed over to the bank's colletion agent. - The bank's collection agent should match the entries in the deposit slip number with the physical instruments handed to him and give an acknowledgement. - The acknowlegement should be faxed to RMS the same evening. - This procedure kills the chance of making entries in the system without the physical instrument in hand - This process also gives a check on the materialiazation of cheques. As the bank gives credit deposit slip number wise. The internal audit can immediately pin point the transaction showing variance between the banks credit vs the credit shown in RMS
I think this process not only provides a day-to-day control but also saves time to track variances on occurence.
In order to prevent the default or delay in receipt we must ask the client to open an account with us and to deposit a sum of amount into our bank account as an advance and by producing the deposit receipt get thier account updated into our system and whenever there is a transaction they amount is to be deducted from that deposited money (client account) and the remaining amount is left for future transaction and so on........
Speculation itself is a risky business.The Indian stock market has grown by leaps and bounds in the last decade.The long term investors were always there.The markets today are rage bound not because of such long term investors but the speculative ones, Intraday trading,the Financial Institutions, Mutual funds etc.Positions are changed everyday to make a Quick profit.Its only when a scrip falls below acceptable limits,one is forced to HOLD. Brokerage houses are like Bookies.As long as you insure your bets, you are safe but the moment you start gambling yourself, you are sure to be doomed. All options suggested may or may not help but will surely consume a lot of man hours to implement and will surely shorten your client list. Investment & Financial service consultants are found in every nook and corner these days and they may never come back to you. Most often problems which appear to be a headache, have quite simple soloutions.I should be able to sort this out.
First of all, the norm should KYC (Know your customer). Next would be the fixation of his credit limit (where the customer is new, we may advise him to have cash balances, before we convert them into credit). Who shall open these accounts should be clearly defined. We should get deposit amount from franchisees. We should have an insurance cover for any defalcation. We should be monitoring daily sales made through all channels. Fourth would be collections made through all channels. Here the system should be autoscanning of cheques into the system so that no false cheques are entered into the system without a physical cheque being receipt. In case of direct bank debits it should not be a problem. Assign authority for deposition of cheques. Review of any cheque returns in the system. If cheque returns are high blacklist those customers. Ascertain the time delays between the date of collection (as per the system) and the date of realisation. Nowa days we have Internet banking. So the data as per Bank should be easily accessible so that cheques deposited but not credited (or returned) could be easily accessed at regular intervals. I would suggest that the reconciliation should be carried out on a weekly basis. ageing of outstanding balances should be obtained and reviewed by each branch manager The chief of finance/marketing should review the ageing of these balances at a consolidated level. Ensure that own cheques (i.e trustworthy's cheques are not used as cheques deposited under collections). We should ensure that no one is authorised to post transfer entries (i.e. money received from A but accounted under B").
Any such transfer entries should be eliminated at the beginning itself, i.e cheque scanning would ensure that the cheque is posted to the correct client account number. It should be possible to take out pending entries of cheque realisation along with the printouts of these instruments and the clients for whom this is outstanding.
I feel the above would ensure that there is no leakage in the system. One could review the same for all three segments.
I personally feel that this is a process weakness which has (or could ) result in the fraudulent activity in future.
RE:RE:Investigation in trustworthy securities
by on Mar 07, 2007 06:03 PM Permalink
sorry,
I missed out the following points in my earlier message.
There should be a contract entered into between the customer and the client. The contract should stipulate the penalty/interest clauses should there be any default. The system should generate an autodebit note should there be any delay in the receipt of the funds from the client. Any waiver of this interest should be authorised by designated authority.
RE:RE:RE:Investigation in trustworthy securities
by on Mar 07, 2007 06:06 PM Permalink
Sorry again.
All employees' should disclose their interest in the transactions. There should be a clear policy with regard to their trading mechanisms (e.g branch manager could be buying the stocks under dummy name). since the stock exchange automatically debits our account the client should reconcile the autodebits with credits. It should not so happen that the stock exchange debits our account more than once.
In order to prevent the defaults or delay of reciept we must ask the client to open an Account with company and ask them to deposit a sum of amount into our bank account and by producing that deposit reciept get thier account updated into our system and whenever there is a transaction the amount should dedecuted from that deposit amount and balance should be left for future transaction and so on.......
1. Few Dealers and managers trade themselves on behalf of the clients to favour them in turn getting huge benifits. This should be stopped strictly. Internaly they may be culprits too. 2. Proper Software and the hardware (Firewalls) Should be used to protect confidencial matters of the company such as the internal entry sheets and trade details. 3.T2 Structure should be continued as it is and cheque entry should happen on day to day basis in accordance with the branch trade statistics. 4. Cheque number entry should be attested with the scanned copy of the cheque and comments. 5.There should be proper guidelines and prerequisites to the public to become a client.
RE:SOLUTION
by praveen mishra on Mar 07, 2007 06:02 PM Permalink
There are many loopholes in the system as mentioned in the case study. so its important to i) update the software where all these cheque details are entered to avoid insufficient enteries. ii) The appraisal of the branch managers should not be only on business generated, they should be given some target for cheque collections also. iii)The credit for a client should not given until cheque image is uploaded along with the details like cheque no.(in full), date, bank name and amount.
RE:SOLUTION
by praveen mishra on Mar 07, 2007 06:03 PM Permalink
There are many loopholes in the system as mentioned in the case study. so its important to i) update the software where all these cheque details are entered to avoid insufficient enteries. ii) The appraisal of the branch managers should not be only on business generated, they should be given some target for cheque collections also. iii)The credit for a client should not given until cheque image is uploaded along with the details like cheque no.(in full), date, bank name and amount.
