http://economictimes.indiatimes.com/personal-finance/savings-centre/savings-news/scamsters-drain-out-pf-accounts-with-fake-claims-epfo-swings-into-damage-control-mode/articleshow/24313772.cms?curpg=2
Scamsters drain out PF accounts with fake claims, EPFO swings into
damage-control mode
NEW DELHI: Nearly 2.5 crore, or 30 per cent, of all provident fund
accounts have a negative balance, some of which may be due to
fraudsters who faked withdrawal claims to siphon off money by opening
bank accounts using forged identity documents.
The PF department, startled by these two separate findings made over
the last few days, has swung into damage-control mode, issuing strict
instructions to field offices to fix responsibility for these lapses,
correct the spectre of negative balances and ensure that no fake
claims get through the system.
But the 8.15 crore formal sector employees with PF accounts should be
worried, especially if they have switched multiple jobs in recent
years but failed to withdraw or transfer the PF balances, or if an
ex-employer has shut down in recent years.
-
Employees' Provident Fund Organisation (EPFO) chief vigilance officer
Sanjay Kumar has flagged an internal investigation that has found
fraudulent withdrawals, orchestrated in accounts that have not had
fresh inflows for years. Such claims managed to evade all checks and
balances in the system and PF staffers were pressured using 'all
possible means' to clear these fake claims swiftly.
Insiders seem to have colluded with the scamsters in identifying
dormant accounts and actively facilitating their loot. This also
brings into question the Know Your Customer or KYC norms followed by
banks. "The claims were settled by putting pressure on dealing
hands/office by all possible means. In all these cases, the amount
settled had been sent through NEFT (electronic funds transfer) in the
bank accounts opened with forged identity," Kumar has said in a letter
warning EPFO's field offices about the scam. "This has been the modus
operandi that has been used in the EPF office over the years, but we
have said this is unacceptable and initiated action against it," said
a senior official.
He, however, said that all such fraudulent withdrawals may not be
criminal in nature as some employers often create PF accounts for
their relatives showing them as employees.
In April 2011, the EPFO stopped crediting interest on PF accounts that
hadn't seen fresh contributions for three years.
At the time, 3.04 crore such PF accounts with nearly Rs 16,000 crore
in balances were considered inoperative or dormant. The number of
accounts with negative balances is quite close, though officials say
there is likely only a partial overlap between accounts with dormant
PF savings and negative balances. "We have identified around 2.5 crore
PF accounts where the balance is negative, many of which seem to have
occurred because accounts weren't updated in a timely manner and
claims were often settled even if there wasn't an adequate balance
accrued in these accounts," said a senior PF official.
The discovery was made thanks to EPFO's recent drive to clean up its
books and bring all members' accounts up to date. The annual interest
credited to PF accounts was worsening the hole in accounts with
negative balances, he explained. While the cumulative negative balance
in these 2.5 crore PF accounts couldn't be ascertained, Central PF
Commissioner KK Jalan is learnt to have issued strict directions to
rectify the problem at a meeting last week "At least 25 per cent
negative balances are to be cleared by this month and a further 25 per
cent by December 2013," said a senior official who was present at the
meeting. "If these targets are not met, regional PF bosses have been
told to treat such accounts as cases of "overpayment" and initiate
action against those responsible to recover these 'overpaid' amounts,"
he said.
A clear message has gone out that a large financial organisation
managing Rs 6.5 lakh crore of workers' savings must have credible
accounts, said another official. The EPFO is the country's largest
retirement fund and the second-largest non-banking financial
institution after the Life Insurance Corporation of India. "Recently,
this office has come across cases of fraud wherein the PF money has
been withdrawn through fictitious claims. Investigation has revealed
that the fraudsters submitted fabricated returns and specimen
signature cards, and thereafter submitted fictitious claims in the
name of original members," said Kumar's missive, sent a day before the
meeting to resolve negative balances.
"The fraud was committed in inoperative accounts... mainly in respect
of establishments where (PF) remittances had not been received for
many years, records not updated and firms had not submitted statutory
returns... No claims were received or settled since long," Kumar said,
urging field offices to keep 'special watch and remain alert' while
processing claims from closed establishments and inoperative accounts.
-
CS A Rengarajan
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