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.
