Preventive Vigilance and Fraud Risk Management
This domain tests preventive vigilance and fraud risk management: stopping fraud before loss, and handling it through the prescribed reporting and accountability route when it occurs.
Core rules
- Preventive vigilance uses segregation of duties, rotation in sensitive posts, surprise checks, conflict-of-interest declarations and a whistleblower channel; CVC/CVO oversight applies in public-sector banks.
- RBI's Fraud Risk Management framework requires a board-approved policy, early warning signals (EWS), red-flagging, root-cause analysis, staff accountability and reporting.
- Frauds are reported to RBI within the prescribed timeline; police/CVC/CBI reporting follows threshold rules; records and evidence are preserved.
- Recovery does not erase the reporting obligation.
Worked example
A cashier pays against a forged signature; the daily proof detects it. The branch must preserve the voucher, specimen signature, CCTV and pay-in slip, report the fraud, assess staff accountability and review why EWS or maker-checker failed. Waiting for recovery before reporting is a violation.
Traps
Treating attempted fraud as no fraud; delaying police complaint; not documenting accountability; ignoring EWS; no rotation in cash or credit posts. Vigilance is not only punitive; its value is the control change that follows.