In a rare incident, an unknown person has redeemed Rs.60 lakh from mutual fund folios of Avon Cycle’s owner Onkar Singh Pahwa by creating his fake bank account.
According to a media report published in The Tribune, the fake account was opened with Kotak Mahindra Bank, Pitampura branch, New Delhi. The police has booked unknown person/persons under IPC sections such as fraud, forgery of valuable security and so on.
Cafemutual spoke to industry officials to understand the checks and balances employed by the industry to prevent such transactions.
There are multiple reasons why investors change bank account like change in city or job (in case of salary account). AMFI norms say that investors will have to inform the fund house first about such a change.
Currently, investors can add a new bank account by submitting the prescribed bank mandate form to fund house or the respective RTAs. They will also need to attach cancelled cheque leaf of the new bank account or self-attested copy of the latest bank statement or passbook with 3 months entries or bank’s letter certifying the bank account details, signed by branch manager.
A few AMCs insist on investors to submit copy of bank statement and name and address of the account holder attested by branch manager with his signature, name, employee code, bank seal and contact number.
If an investor wants to close his existing bank account registered with his folio, a signed and stamped original letter from the concerned bank on the official letterhead confirming the closure of the existing account has to be submitted. The rationale for asking for supporting documents in respect of the old bank account is to ascertain the authenticity of the request, with a view to safeguard the interest of the unitholder and prevent any unauthorized transactions.
To add bank account, investor needs to use ‘multiple bank account registration form’ along with cancelled cheque or other documents mentioned above. Currently, investors can add up to 5 bank accounts. However, investors are required to make one bank account as primary or default bank account to receive redemption proceeds. While the redemption proceeds go to the source account if investors give instruction at the time of redemption, it will be credited to the default bank account if no such instruction was given.
Another check that fund houses and RTAs employ is cooling period i.e. whenever investors change bank account and simultaneously give redemption requests, fund houses and RTAs do not execute transaction for 10 days as a matter of precaution against fraudulent transactions.
Typically, RTAs send communication to investors both physically and electronically intimating them that their bank account has changed. Investors can raise a dispute within 10 days of receiving such a communication. If they did not respond within time, RTAs and AMCs assume that investors do not have an issue with the bank account and act on the redemption request.
Industry experts believe that fraudulent transaction in Pahwa’s case is due to negligence. “Though it is rare, we have seen such incidents in the past. A few years back, a relationship manager of a top bank duped crores from an NRI client. It was later found that the client gave blank cheque to the official, a clear case of misplaced trust.” Experts advise investors not to share sensitive bank information with anyone.
