Banking Operation Assgnment 2 Teha

8/3/2019 Banking Operation Assgnment 2 Teha

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BANKING OPERATIONS

263NAME : NUR FATIHAH BINTI SAFRI

MATRIX NO. : 2008719689

PROGRAMME CODE : BM112

GROUP : BMD4Ab

LECTURER NAME’S : MADAM NORAINI BINTI AMINUDIN



Credit Reference Information

System (CCRIS)

One of the tools used by banks to evaluate the credit worthiness of acustomer is to refer to the CCRIS report obtained (and maintained) byBank Negara Malaysia (BNM).

Beginning August 2001, CCRIS has become a crucial tool to thedecision-making of the bank to approve the customer‟s application.

The report provides for real-time and on-line functions for banks to queryfor computerized customer credit reports as well as reporting relevant

credit information to BNM.

CCRIS gives valuable details to the bank such as:

Details of all existing personal credit facilities of a customer, suchas type of facility, and ownership of the credit facilities.

Details on the total financial commitment, which includes thebalance outstanding and the total limit for each of the creditfacilities.

Conduct of each credit facility for the past 12 months, includinglegal status.

Other relevant information such as Date of Information Update,Frequency of Payment and Type of Collateral.

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However, before you get worried about your credit information beingabused, please note that the information can only be accessed byauthorized persons in the bank, and is not available to the public ingeneral.

The credit report must have :

Can only be obtained by the bank IF a formal CREDIT

application is made by you to that particular bank.

Cannot be viewed by other banks, at any time.

Does not show your deposit / investment accounts.

Does not show from which financial institution you borrowed

from.

Does not show the tenure of the credit facility enjoyed by you.

Does not show the conduct of facilities for periods above one

year.

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Generally, when a Bank extracts CCRIS report, it will have access to

various credit reports such as :

Summary Credit Report

– Information on the total credit exposure and conduct ofaccount of the customer.

Detailed Credit Report

– Information on the specific outstanding credit facilitiesand new credit applications of a borrower.

Motor Vehicle Report

– Information of motor vehicles which are used ascollateral for credit facilities.

Customer Supplementary Information Report

– Information on the addresses, telephone numbers,employers names and occupation of the customer forthe last 3 years.

As a consumer requesting the credit report directly from BNM, aconsumer will only be able to obtain the Summary Credit Report, as areference to the total exposure and conduct of the account.

The report will list down all outstanding loans and applications underthe borrower‟s name, joint borrowings, sole proprietorships as well asassociations and partnership borrowings.

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CCRIS is used by the bank as a tool for loan decision making as theexisting track records indicates the potential risks a bank may face in thefuture if they approve the new application.

It is not the only tool used by banks to evaluate our credit worthiness,as there are many other risk-mitigation criteria the banks can adopt, such

as :

Reduced Margin of Financing.

Higher Financing Rates.

Good Potential for Higher Capital Appreciation for theProperty.

Strong Debt Servicing Ratio (Repayment Capability).

Additional Collaterals / Guarantee / Joint Applicant.

Good Conduct of Other Existing Credit Facilities with ownbank. For example are Credit Cards and other loans.

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CTOS

CTOS information does not attempt to show the „currentstatuses of legal cases and searches but it is solely meant as asource of „first‟ or „lead‟ information to aid decision making. It mustbe read intelligently and skillfully.

The type, nature of information, date and times are thuscrucial factors to consider, if users feel the case may have asignificant impact on the matter under consideration they shouldconduct further probe on these „first‟ information to find out more.

CTOS however does not rank, rate or give opinions as to thecredit worthiness, integrity, character of the subject inquired. Itmerely provides information that are historical that credit grantorswant in their bid to know more about their customers better, pasttrack and record.

When we apply for loans, credit cards, hire purchase orleasing facilities, in Malaysia, the chances are the credit grantorwill make an enquiry in the CTOS system for information leads.

Information collated is not based on hearsay or speculationbut upon some publication or advertisement or based uponsearches normally deemed reliable.

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They follow up on these either with the subject concerned or withother relevant parties to find out more.

Credit evaluations are made not based on a single factor but uponhow an applicant matches up to a set of lending criteria laid down by thecredit grantor.

These lending criteria inherently reflect the risk attitudes and risktolerance levels of the credit grantor concerned. In short, these criteriareflect how the credit grantors want to do business, their business policies,strategies and risks propensity.

The risk attitudes, tolerance, business philosophy, policies andstrategies however vary from one credit grantor to the next. What onecredit grantor find unacceptable may well be within tolerable limits ofanother.

Ultimately, credit grantors will only assume risks that they find itcomfortable and acceptable within the limits set by their organization.CTOS plays no part in defining these criteria or the factors considered bythem.

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Three Basics In Credit Risk Management

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Evaluate

i. Verify information about the customer.

ii. Know if risk is within your acceptance levels.

Monitor

i. Customer's risk profile can change anytime.

ii. Be aware of changing risks.iii. Track all customers and sponsors for adverse changesdaily.

Recover

i. You are in business for profits not losses.ii. Turn Losses Back To Profits.iii. Successful recovery improves profits & cash flow.iv. Lower debt recovery costs.v. Enhance debt recovery effectiveness.

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Objectives CTOS

There are three main objectives of the CTOS Service Centre:

1. Customer Training

People should manage information and not be managed byinformation. To manage information, one must be skilled inreading and interpretation The CTOS Service Centre conductstraining to its customers. The training aims to guide users in avariety of topics including:

i. Maximizing Benefits of CTOS System.ii. Reading & Interpreting CTOS Reports.iii. Following Up & Probing Further On Lead Information.iv. Overview Of The Debt Recovery Process.

2. Removal Of Records Resulting From Fraud or Mistake

Records resulting from 'fraud or mistakes' can be removedfrom the CTOS system. Proper documentation must beprovided for this to happen.

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3. Recording Case Settlement / Conclusion

CTOS is essentially an electronic „archive‟ of informationcollated from gazettes, newspapers, court notices, and

searches at the relevant statutory bodies. A 'credit lead'information system.

Among of the factors that involves in CTOS are:

i. Risk Attitude Profile

The credit grantors own business strategies,business & credit policies, which reflect his riskattitudes and tolerance levels.

ii. Purpose Of Advance. iii. Source Of Repayment. iv. Collateral / Security.v. Financial Health as indicated by financial statements.vi. Management Experience and Capability.

vii. Bank and Trade Checking. iii. Business Environment for the trade and general business

conditions.ix. Lending Regulation of industry and government.

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The difference between a blacklist and a

lead information system

SALIENT

FEATURES BLACKLISTING SYSTEM LEAD INFORMATION

1.

PURPOSE Exist primarily for the enforcement of certain prohibitions, removal of rights

of subject in default. COPS (your outstanding traffic

summonses), Official Assignee's list of bankrupts, blacklists maintained bysome industry are examples of

blacklists.

To provide 'information lead' forthe purpose of discovery and

insight to past record to aid in

process of decision making. For example, Banks beingcustodians of public funds mustbe prudent in lending. They need

to 'know their customers'. They need information. In

Malaysia, they rely on the CTOSfor 'lead' information.

SALIENT


2. CASE STATUS The appearance of thesubject on a blacklist meansthe subject IS STILL in a

default. The case status isalways CURRENT.

As an electronic archive, theinformation is only a collation of historical facts. The information

does not indicate the cases 'currentstatus' and does not mean thatcases are pending, unsettled, etc. Further probes have to conducted

by users to ascertain the currentstatus of cases.

3.

PROHIBITIONS

& RIGHTS

Subject is normally

subjected to someprohibitions and some right

suspended until default isrectified

Does not remove any rights from

the subject nor place anyprohibitions upon the subject.

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SALIENT


4. DELISTING & RIGHTS

RESTORATIONS

Upon rectification of thedefault, the subject is

'delisted' and all right that

were suspended are restoredand any prohibitions are

uplifted

The questions of 'rights restoration& reinstatement or cessation of

prohibitions' does not arise as NO

rights were removed nor anyprohibitions enforced in the first

instance by such lead information

system.

5. HISTORY A subsequent check afterdelisting the name will not

reveal the subject's pastdefault.

Past history is revealed as thedatabase is essentially an electronic

archive.

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Dangers and pitfalls

Here are some precautions to take:

a) Report lost identify documents immediately

Many important documents are lost daily through carelessness, fraudand theft. Lots of credit cards, passport, identity card, birth certificate,driving license or any other identification papers maybe used in afraud

Lodge a report with the relevant authorities immediatelyfor your own protection and safeguard.

Keep a list of contact numbers and photocopies ofimportant documents. They are often very helpful whenyou lodge reports to the authorities. Some credit grantorslike banks and credit card issuers have 24 hours toll freenumbers specifically for such purpose.

b) When Using Credit Cards

Check your statement as soon as it arrives to ensure thecharges are correct.

Your credit card statements, bank statements containsensitive information, keep them in a safe place.

Do not sign blank charge slips and draw a line above the total

line to prevent unauthorized additions to the bill.

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Destroy all carbons copies.

Do not just leave our copy of the charge slips anywhere.

They have all the needed particulars like our card number,expiry date and needed to facilitate a fraud transaction. If ourstatement does not arrive, call our credit card issuer.

c) When using our ATM & PINS

Choose a PIN that is unique; try not to use birthday, identity cardnumber, or other obvious numbers.

Do not write our PIN on the card.

Do not let anyone know our PIN. If we feel or know that our PINhas been compromised, change it.

d) When we discover our identity is fraudulently used

You must report to the Police.

We may then also check with CTOS to see if there are anyrecords on the database.

If we suspect that any of the records on the database is aresult of fraud, do let us know so that we can carry out dueinvestigations and tell you what to do to get the record removedfrom the database.

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Cheque Information

A cheque or check is a piece of paper usually that orders a paymentof money. The person writing the cheque, the drawer, usually has achequing account where their money is deposited.

The drawer writes the various details including the money amount,date, and a payee on the cheque, and signs it, ordering their bank, knownas the drawer, to pay this person or company the amount of money stated.

Cheques are a type of bill of exchange and were developed as a way

to make payments without the need to carry around large amounts of goldand silver. Paper money also evolved from bills of exchange, and is similarto cheques in that they are a written order to pay the given amount towhoever had it in their possession (the "bearer").

Technically, a cheque is a negotiable instrument instructing afinancial institution to pay a specific amount of a specific currency from aspecified demand account held in the drawer/depositor's name with thatinstitution. Both the drawer and payee may be natural persons or legal

entities.

Although cheques have been around since at least 9th century, it wasduring the 20th century that cheques became a highly popular non-cashmethod for making payments and the usage of cheques peaked.

Cheque processing became automated, billions were issued eachyear with volumes peaking in or around the early 1990s.

Since that time cheque usage has seen significant decline aselectronic payment systems started to replace physical cheques. In anumber of countries cheques have become a marginal payment system orhave been phased out completely.

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http://en.wikipedia.org/wiki/Transactional_account

http://en.wikipedia.org/wiki/Negotiable_instrument#Bill_of_exchange

http://en.wikipedia.org/wiki/Gold

http://en.wikipedia.org/wiki/Silver

http://en.wikipedia.org/wiki/Banknote

http://en.wikipedia.org/wiki/Bearer_instrument

http://en.wikipedia.org/wiki/Negotiable_instrument

http://en.wikipedia.org/wiki/Financial_institution

http://en.wikipedia.org/wiki/Currency


http://en.wikipedia.org/wiki/Natural_person

http://en.wikipedia.org/wiki/Juristic_person


http://en.wikipedia.org/wiki/Cash

http://en.wikipedia.org/wiki/Payment

http://en.wikipedia.org/wiki/Payment_system


http://en.wikipedia.org/wiki/Payment




http://en.wikipedia.org/wiki/Natural_person


http://en.wikipedia.org/wiki/Currency

http://en.wikipedia.org/wiki/Financial_institution

http://en.wikipedia.org/wiki/Negotiable_instrument

http://en.wikipedia.org/wiki/Bearer_instrument

http://en.wikipedia.org/wiki/Banknote

http://en.wikipedia.org/wiki/Silver

http://en.wikipedia.org/wiki/Gold

http://en.wikipedia.org/wiki/Negotiable_instrument#Bill_of_exchange




The four main items on a cheque are:

i. Drawer, the person or entity that makes the cheque.

ii. Payee, the recipient of the money.

iii. Drawer, the bank or other financial institution where the chequecan be presented for payment.

iv. Amount, the currency amount.

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Usage

Parties to regular cheques generally include a ' drawer, the depositorwriting a cheque; a drawee, the financial institution where the cheque can

be presented for payment; and a payee, the entity to whom the drawerissues the cheque.

The drawer drafts or draws a cheque, which is also called cutting acheck. There may also be a beneficiary for example, in depositing acheque with a custodian of a brokerage account, the payee will be thecustodian, but the cheque may be marked "F/B/O" ("for the benefit of") thebeneficiary.

Ultimately, there is also at least oneendorsee

which would typicallybe the financial institution servicing the payee's account, or in somecircumstances may be a third party to whom the payee owes or wishes togive money.

Cheques may be valid regardless of denomination and are usedwithin numerous scenarios in place of cash.

A payee that accepts a cheque will typically deposit it in an account at

the payee's bank, and have the bank process the cheque. In some cases,the payee will take the cheque to a branch of the drawee bank, and cashthe cheque there.

If a cheque is refused at the drawee bank (or the drawee bankreturns the cheque to the bank that it was deposited at) because there areinsufficient funds for the cheque to clear, it is said that the cheque hasbounced.

Once a cheque is approved and all appropriate accounts involvedhave been credited, the cheque is stamped with some kind of cancellationmark, such as a "paid" stamp.

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http://en.wikipedia.org/wiki/Custodian

http://en.wikipedia.org/wiki/Deposit_account

http://en.wikipedia.org/wiki/Non-sufficient_funds


http://en.wikipedia.org/wiki/Deposit_account

http://en.wikipedia.org/wiki/Custodian



Cancelled cheques are placed in the account holder's file. Theaccount holder can request a copy of a cancelled cheque as proof of apayment. This is known as the cheque clearing cycle.

Cheques can be lost or go astray within the cycle, or be delayed iffurther verification is needed in the case of suspected fraud. A chequemay thus bounce some time after it has been deposited.

An advantage to the drawer of using cheques instead of debit cardtransactions in that they know the drawer's bank will not release themoney until several days later.

Paying with a cheque and making a deposit before it clears thedrawer's bank is called "kiting" or "floating" and is generally illegal in theUnited States, but rarely enforced unless the drawer uses multiplechequing accounts with multiple institutions to increase the delay or tosteal the funds.

Declining Use

Cheques have been in decline for many years, both for point of saletransactions (for which credit cards and debit cards are increasinglypreferred) and for third party payments (e.g. bill payments), where thedecline has been accelerated by the emergence of telephone banking andonline banking.

Being paper-based, cheques are costly for banks to process incomparison to electronic payments, so banks in many countries nowdiscourage the use of cheques, either by charging for cheques or bymaking the alternatives more attractive to customers.

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http://en.wikipedia.org/wiki/Debit_card

http://en.wikipedia.org/wiki/Check_kiting

http://en.wikipedia.org/wiki/United_States

http://en.wikipedia.org/wiki/Point_of_sale

http://en.wikipedia.org/wiki/Credit_card


http://en.wikipedia.org/wiki/Online_banking

http://en.wikipedia.org/wiki/Online_banking


http://en.wikipedia.org/wiki/Credit_card

http://en.wikipedia.org/wiki/Point_of_sale

http://en.wikipedia.org/wiki/United_States

http://en.wikipedia.org/wiki/Check_kiting




Cheques are also more costly for the issuer and receiver of a cheque.In particular the handling of money transfer requires more effort and istime consuming.

The cheque has to be handed over on a personal meeting or has tobe sent by mail. The rise of automated teller machines (ATMs) has led toan era of easy access to cash, which make the necessity of writing acheque to someone because the banks were closed a thing of the past.

Alternatives to cheques

In addition to Cash there are number of other payment systems that haveemerged to compete against cheques;

Debit Card payments. Credit Card payments. Direct debit (initiated by payee). Direct credit (initiated by payer), ACH in US, Giro in Europe. Wire transfer (local and international). Electronic bill payments using Internet banking.

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http://en.wikipedia.org/wiki/Automated_teller_machine



http://en.wikipedia.org/wiki/Debit_Card

http://en.wikipedia.org/wiki/Credit_Card

http://en.wikipedia.org/wiki/Direct_debit

http://en.wikipedia.org/wiki/Direct_deposit

http://en.wikipedia.org/wiki/Automated_Clearing_House

http://en.wikipedia.org/wiki/Giro

http://en.wikipedia.org/wiki/Wire_transfer

http://en.wikipedia.org/wiki/Electronic_bill_payment

http://en.wikipedia.org/wiki/Internet_banking

http://en.wikipedia.org/wiki/Internet_banking

http://en.wikipedia.org/wiki/Electronic_bill_payment

http://en.wikipedia.org/wiki/Wire_transfer

http://en.wikipedia.org/wiki/Giro

http://en.wikipedia.org/wiki/Automated_Clearing_House

http://en.wikipedia.org/wiki/Direct_deposit

http://en.wikipedia.org/wiki/Direct_debit

http://en.wikipedia.org/wiki/Credit_Card

http://en.wikipedia.org/wiki/Debit_Card



http://en.wikipedia.org/wiki/Automated_teller_machine



Variations on regular cheques

In addition to regular cheques, a number of variations were developed to address

specific needs or to address issues when using a regular cheque.

Cashier‟s cheques and Bank drafts Certified cheque Payroll cheque Warrants Travellers cheque Money or Postal order Oversized cheques Payment vouchers

Cheque Fraud

Cheques have been a tempting target for criminals to steal money orgoods from the drawer, payee or the banks. A number of measures havebeen introduced to combat fraud over the years.

These range from things like writing a cheque so it‟s hard for to be

altered after it is drawn to mechanisms like crossing a cheque so that itcan only be paid into another banks account providing some traceability.

However, the inherent security weaknesses of cheques as a paymentmethod, such as having only the signature as the main authenticationmethod and not knowing if funds will be received until the clearing cycle tocomplete, have made them vulnerable to a number of different types offraud;

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http://en.wikipedia.org/wiki/Authentication

http://en.wikipedia.org/wiki/Authentication



i. Embezzlement Taking advantage of the float period (cheque kiting) to delay the

notice of non-existent funds. This often involves trying to convince amerchant or other recipient, hoping the recipient will not suspect thatthe cheque will not clear, giving time for the fraudster to disappear.

ii. Forgery Sometimes, forgery is the method of choice in defrauding a bank.

One form of forgery involves the use of a victim's legitimate cheques,that have either been stolen and then cashed, or altering a chequethat has been legitimately written to the perpetrator, by adding wordsand/or digits in order to inflate the amount.

iii. Identity theft Since cheques include significant personal information (name,

account number, signature and in some countries driver's licensenumber, the address and/or phone number of the account holder),they can be used for fraud, specifically identity theft.

23

http://en.wikipedia.org/wiki/Cheque_kiting

http://en.wikipedia.org/wiki/Forgery

http://en.wikipedia.org/wiki/Fraud

http://en.wikipedia.org/wiki/Identity_theft

http://en.wikipedia.org/wiki/Identity_theft

http://en.wikipedia.org/wiki/Fraud

http://en.wikipedia.org/wiki/Forgery

http://en.wikipedia.org/wiki/Cheque_kiting



iv. Dishonored cheques A dishonoured cheque cannot be redeemed for its value and is

worthless; they are also known as an RDI (returned deposit item), orNSF (non-sufficient funds) cheque.

Cheques are usually dishonoured because the drawer's account hasbeen frozen or limited, or because there are insufficient funds in thedrawer's account when the cheque was redeemed.

A cheque drawn on an account with insufficient funds is said to havebounced and may be called a rubber cheque.

Banks will typically charge customers for issuing a dishonouredcheque, and in some jurisdictions such an act is a criminal action. Adrawer may also issue a stop on a cheque, instructing the financialinstitution not to honour a particular cheque.

v. Lock box Typically when customers pay bills with cheques (like gas or water

bills), the mail will go to a 'lock box' at the post office. There a bank will pick up all the mail, sort it, open it, take the cheques

and remittance advice out, process it all through electronic

machinery, and post the funds to the proper accounts.

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http://en.wikipedia.org/wiki/Lock_box

http://en.wikipedia.org/wiki/Remittance_advice

http://en.wikipedia.org/wiki/Remittance_advice

http://en.wikipedia.org/wiki/Lock_box




Parts of a cheque

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http://en.wikipedia.org/wiki/File:BritishChequeAnnotated.png

http://en.wikipedia.org/wiki/File:BritishChequeAnnotated.png



Anti-money laundering

Anti-money laundering (AML) is a term mainly used in the financialand legal industries to describe the legal controls that require financialinstitutions and other regulated entities to prevent or report moneylaundering activities.

Anti-money laundering guidelines came into prominence globally afterthe September 11, 2001 attacks and the subsequent enactment of the USAPATRIOT Act.

Today, most financial institutions globally, and many non-financialinstitutions, are required to identify and report transactions of a suspiciousnature to the financial intelligence unit in the respective country.

For example, a bank must perform due diligence by verifying acustomer's identity and monitor transactions for suspicious activity. To dothis, many financial institutions utilize the services of special software, anduse the services of companies such as C6 to gather information about

high risk individuals and organization.

Money Laundering deprives Governments of tax revenues therebyraising the relative burden of honest citizens. Because of rapid movementsof large amounts of money there occurs destabilization of financialinstitutions which in turn jeopardizes funds of innocent citizens.

26

http://en.wikipedia.org/wiki/Financial

http://en.wikipedia.org/wiki/Legal

http://en.wikipedia.org/wiki/Financial_institutions


http://en.wikipedia.org/wiki/Money_laundering


http://en.wikipedia.org/wiki/September_11,_2001_attacks

http://en.wikipedia.org/wiki/USA_PATRIOT_Act


http://en.wikipedia.org/wiki/Due_diligence

http://launderingmoney.com/

http://launderingmoney.com/

http://en.wikipedia.org/wiki/Due_diligence



http://en.wikipedia.org/wiki/September_11,_2001_attacks





http://en.wikipedia.org/wiki/Legal

http://en.wikipedia.org/wiki/Financial



Anti-Money Laundering Policy

The Anti-Money Laundering Policy follows the standards of the Anti-

Money Laundering and Combating Terrorism Financing (hereinaftercollectively referred to as “AML”) procedures within the Alfa Banking

Group.

In any country/jurisdiction where the requirements of applicable anti-

money laundering laws and regulations act to establish higher standards,

the Group‟s companies must meet those standards.

Adherence to this policy is absolutely essential for ensuring that all

Group companies, regardless of geographic location, fully comply with

applicable anti-money laundering legislation.

The Group is committed to examining its anti-money laundering

strategies, goals and objectives on an ongoing basis and to maintaining

an effective AML Policy for the Group‟s business.

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Malaysia

Anti Money Laundering Act 2001 The Act criminalizes money

laundering stating that any person who engages in a transaction

that involves proceeds of any specified unlawful activity commits

an offence. It also provides for an investigation, freezing, seizure

and forfeiture of the proceeds of money laundering and terrorist

financing offences, suspicious transactions reporting, record

keeping and the establishment and functions of the Financial

Intelligence Unit.

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References

Rosli Mahmood 1994 Konsep buku perbankan

Wikipedia, the free encyclopedia

www.creaditbureau.bnm.gov.my

www.ctos.bnm.gov.my

http://www.creaditbureau.bnm.gov.my/


http://www.ctos.bnm.gov.my/




Documents

Banking Operation Assgnment 2 Teha