KARACHI, Jan 19: The State Bank, with an objective to developing a database on bank frauds, forgeries and dacoities, has instructed all banks and development finance institutions or DFIs to send to it an initial report of such incidents involving Rs1 million and above within two working days.

The central bank, through a circular (BSD 1) issued on Wednesday, asked all banks and DFIs that the preliminary report must mention the date of the incident and other information about the case as available at the time of reporting.

The circular has advised them to send a detailed report within 15 days of the occurrence of the incident. It has also provided them a new format for reporting and made it clear to them that non-compliance would attract penal action.

The central bank has also asked banks and DFIs to submit a quarterly statement of frauds, forgeries or dacoities on a revised format, which requires them to disclose more information, within 15 days of the close of each calendar year quarter along with a soft copy.

"The quarterly report will include all actual as well as attempted fraud cases even if the bank may not have sustained any monetary loss. Therefore, cases where bank recovers the entire amount involved and does not suffer any loss must also be reported to the SBP."

The circular says the information will also be used to develop a database of frauds, forgeries and dacoities, which will be utilized for measuring operational risk and determining capital requirements against the same.

"Operational risk is gaining importance in the banking industry in the wake of increasing complexity of operations and the risks involved therein," the circular says. Frauds, forgeries and dacoities pose one particular type of operational risk.

"Keeping in view the size, sophistication, nature and complexity of operations of each bank/DFI, adoption of clear-cut strategies and introduction of strong internal controls and effective reporting will remain critical factors in preventing this and other types of operational risk events and resultant losses."