Frauds on rise: How bank scams from Maharashtra to Punjab are a wake-up call for every customer
Chandigarh, November 3
“Fraud doesn’t start in files, it starts in trust. The moment we stop questioning, we start losing.”
A chilling pattern is spreading across India’s banking landscape from Maharashtra’s financial hubs to Punjab’s heartland. Crores of rupees, quietly deposited into newly opened accounts, have disappeared within days. Officers are arrested, branches under scrutiny, and ordinary account holders are left wondering: Could my savings be next?
It can, and it already has.
The NAMCO Bank scams in Maharashtra, involving unexplained deposits of more than Rs 100 crore, and the Bank of Maharashtra’s indirect link to the money flow, have found parallels in Punjab’s cooperative banks.
In Ropar and Jalandhar, vigilance teams have uncovered manipulated ledgers, missing funds, and insider collusion, exposing cracks in institutions trusted by thousands of farmers and small traders.
From Nashik to North India – the Money Trail: It began innocently: a few dozen new accounts at NAMCO Bank received huge deposits, each just under the mandatory reporting threshold. Within hours, the money was transferred and withdrawn elsewhere. The Enforcement Directorate (ED), acting under Section 5 of the Prevention of Money Laundering Act (PMLA), 2002, froze the suspected assets and seized Rs 13.5 crore in cash. Investigators discovered that portions of the funds had travelled through larger scheduled banks, including the Bank of Maharashtra, before being routed back through smaller cooperative institutions to conceal their source : A classic case of “layering,” recognised globally as the second stage of money laundering under FATF Recommendation 3 (Financial Action Task Force, OECD standard-setter).In other words, criminals were using banks like mirrors bouncing money from one to another until its reflection became untraceable.
Punjab’s Turn in the Mirror: That same pattern appeared in Central Cooperative Bank, Ropar, where the Punjab Vigilance Bureau arrested two officers in 2022 for allegedly embezzling Rs 1.24 crore by altering account data. In Jalandhar Central Cooperative Bank, multiple cases of misappropriation surfaced insiders manipulating records, delaying reconciliations, and concealing audit trails.
Under Section 12 of the PMLA, every bank, including cooperative ones, must maintain proper records and report all suspicious transactions to the Financial Intelligence Unit (FIU-IND).Failure to comply can attract prosecution under Section 13 of the Act, which authorises monetary penalties and disciplinary action.Yet many smaller banks in Punjab and Haryana still rely on manual bookkeeping and outdated technology. “Fraud detection happens late , sometimes years later,” admits a district-level auditor. “By then, the trail is cold.”
The Law Is Watching and So Should You: India’s anti-money-laundering regime is among the strongest in Asia, aligned with FATF 40 Recommendations and monitored by global peers. Under Sections 3 and 4 of the PMLA, anyone who directly or indirectly attempts to launder money faces rigorous imprisonment of three to seven years, extendable to ten years for offences linked to narcotics or organised crime. The Reserve Bank of India (RBI), exercising powers under Sections 35A and 45L of the RBI Act, 1934, issued the Master Direction – KYC, 2016, making it compulsory for all banks and NBFCs to: Verify every customer’s identity before account opening, continuously monitor large or unusual transactions, and file a Suspicious Transaction Report (STR) with FIU-IND within seven days of detection. This legal structure Prevention, Detection, Enforcement ensures that banks act as the first line of defence, intelligence units the second, and the ED and judiciary the final gatekeepers.
Global Perspective : Lessons From Abroad: The problem is not uniquely Indian. The FinCEN Files (U.S., 2020) exposed how top American banks processed trillions in suspicious transfers despite red flags. Europe’s Danske Bank scandal (Estonia, 2017) revealed $230 billion laundered through small branches exploiting gaps in compliance.Both cases prompted stricter U.S. Patriot Act Section 311 measures and the EU Anti-Money Laundering Directive (6AMLD, 2021) , laws remarkably similar in spirit to India’s PMLA. India’s adherence to FATF’s mutual evaluation standards places it among nations actively combating financial crime on a global scale.
Why the North Must Wake Up and What Every Customer Should Do
Authorities urge the public to become active participants in prevention:
Check every SMS or alert. Even a ₹1 test debit can indicate attempted misuse.
Never share OTPs, PINs or KYC documents because genuine bank officers will never ask.
Use only official apps and links. RBI and the Indian Computer Emergency Response Team (CERT-In) have flagged multiple fake banking portals.
Update contact details regularly. Under RBI Master Circular DBR.AML.BC.No.18/14.01.001/2016-17, outdated details may delay fraud notifications.
Report suspicious credits or debits immediately. Under Rule 8 of the PML (Record Keeping) Rules 2005, banks must preserve transaction records for ten years and act upon customer alerts.
We extend our heartfelt thanks to Dr. Sakshi Bathla for her constant reviewing, invaluable support, and encouragement throughout the preparation of this article. Her guidance has been a great source of motivation and learning for us.
Legal references:
PMLA (2002): Secs 3–5, 12–13 | RBI KYC Directions 2016 | PML (Record Keeping) Rules 2005 | RBI Act 1934 Secs 35A & 45L | FATF 40 Recommendations | 6AMLD (EU) 2021 | USA Patriot Act Sec 311.
(This article is written by LMTSM Students -Paavni , Mehak , Manavi ,Prerna , Nandini)