Do you leave the keys to your door hanging outside your house or for the similar reason leaving your car unlocked in the car park with the car keys inside the car. Or do you create a bonfire at a petrol pump ? Do you let your child play with sharp objects or give them a cigarette to smoke ? Most probably the answers to all of these queries will be a NO. Some of you might even think that the writer of this article is crazy ! These things are so obvious that a person of sound mind will never do it. Exactly ! That is the point I am trying to make. You find all these things so obviously incorrect that you won’t do them. However, when it comes to financial matters why don’t people give a thought to such items. There are many such financial suicide bombs being created by individuals as a part of their daily life and are just waiting to explode to uproot financial foundation of the person. I would try to bring to your attention THE TOP 10 which comes to my mind and would hope that you are not amongst the list of people who are doing such a blunder.
1. Blank Signed Cheques
This is the fastest way to become a millionaire – just get hold of someone’s signed blank cheques and know how much you could fill in that cheque. This practise is even more common amongst the NRI community who would provide an entire chequebook signed by them with no details filled to their dependents / parents in India so that they can draw the amount when needed. I am not sure why can’t they add such dependents or their parents as signing authority in the bank account rather than giving blank signed cheques. I don’t need to explain you how much risk you are sitting on by following this practise. Never provide blank signed cheques ! If you are not sure of the amount then atleast make sure that you fill the payee name, date the cheque, make it account payable and put a note on the face of the cheque ‘Not over xxxx amount’ so that you can atleast minimise your risk.
2. Account Payee
Often ignored – people don’t understand the value of marking a cheque as ‘Account Payee’. These are two parallel lines drawn diagonally on top left hand corner of the cheque with the words ‘Account Payee’ written between the parallel lines. This denotes that the bank shall credit the funds only in the bank account of the person named as a payee on the cheque. It prevents a person to encash the cheque by taking cash from the bank and hence reduces the chances of fraud.
3. Signed DP transfer booklets;
I would categorise blank signed Demat (DP) transfer booklet as a big brother of a blank cheque. This is being practised on a massive scale amongst stock brokers and their customers where the customers want to avoid frequent trips to their broker’s office and want to enjoy the convenience of dealing in shares over a phone call. Just like blank cheques any person in possession of a signed DP slip can transfer or sell the shares in a demat account. You are just pushing your luck and waiting for a very bad day when your broker may run away with your entire investments lying in your demat account. Or even if your broker is trust worthy, you can’t prevent some one stealing your DP slips and using to their advantage.
4. Poor quality signatures
Forging of signatures has been practised since ages. Why do you want to make it easier for a perpetrator by having an extremely simple signature ? I chuckle at times to see people signing in block letters. If you are one of them, you are giving an open invitation to fraudsters.
In other instances, also avoid having multiple signatures in multiple bank accounts, mutual funds, brokerage accounts, etc. It is much easier than you think to confuse with the right signature which can result in big inconvenience when you need to withdraw or transfer funds on an urgent basis. Try to rationalise your signatures and avoid multiple versions.
5. Power of Attorney (POA) Holders
POAs are a blessing on earth to ease the documentary process of getting deals done in absence of the party to the deal. A POA is issued by a person in favour of a trusted person to give such person an authority to sign on behalf of the giver. The scope of POA can be very specific to an extremely broad General POA. While it eases the procedures but it adds unacceptable levels of risks if the POA holder acts fraudulently and then the POA becomes an instrument of mass destruction. It is extremely important that while issuing a POA you must consider the reliability of the person in whose favour you are giving your POA. Further make sure that your POA is having an expiry date and is specifically tailored for the objective you want it to be drafted for. I have often seen POAs being drafted to allow the holder to do everything possible under the sun (e.g. buy/sell securities, properties, take borrowings, issue bonds, discharge debts, etc.) , when the objective of the POA granter was just to sell a specific real estate. It won’t be difficult for a POA holder in such a case to open a company, take on massive debt on behalf of the POA granter and run away with the funds !
6. Storing Gold in your Wardrobe or at Home
Do you belong to the class of people who find storing their physical gold in a bank locker risky and find it safer to store it in your wardrobe or any other place in your home ? You are perhaps taking extreme amount of risks in light with the current prices of gold. Irrespective of where you live (India or outside), Asians are famous for their love of gold. And every burglar can be rest assured that if he breaks into an Asian house, he is bound to get some gold safely stacked in not so difficult areas to spot. And bless his luck – he has now technology to his side – ‘Metal Detectors’ which can spot metals safely hidden even behind the walls. I would hence strongly recommend to stack away your slow moving gold items into a bank locker (also called as safe custody) and to give yourself some more peace of mind – in multiple lockers of different banks. The cost is just around Rs. 1,000-1,500 per year for hiring a locker. Looking into the value of assets it is protecting, the cost is immaterial.
7. Poor quality Passwords
Your user name is ‘aman’ and your password is ‘password’ or ‘aman’ or ‘aman123’ ? People cry of being hacked – but they never look into the root cause which got them hacked. Passwords are protecting your financial wealth locked in your bank accounts and confidential data on your computers and emails. Having an easy to guess password is like providing your locker key to every person on the street. These days we are lucky that the online portals of banks enforce the requirements of having strong passwords with minimum number of digits, having alpanumeric characters, etc. However, we are intelligent enough to write the difficult password and store it in our wallets. And if the wallet is stolen, imagine how much time should an intelligent thief take to rip off your bank account ?
Hence, have a strong password. You may check how strong your password is by testing it at Microsoft’s website.
8. Sharing of ATM password and Debit Card
Banking is no more the same limited to teller’s queue in a bank. You carry your access to bank in your wallet via a ATM or Debit card. Similar to the password of your online bank account, email accounts, etc., you need to be extremely careful with the password of your ATM card. Users of ATM cards know that all you need is an ATM card and it’s password to access your bank account, withdraw and transfer funds. Hence make the ATM pin hard to guess and DO NOT write it on the card itself or on a slip kept along with the card. If your friend needs some money, don’t give him your card and it’s PIN. If you really need to do it, make sure that you change the PIN at the first opportunity.
On another note, you don’t need a debit card pin in order to shop around in India. In foreign countries even for shopping you need to enter the card pin. But unfortunately this has not been implemented in India. So if your debit card is stolen, any one can go around and do some shopping using your card subject to its maximum daily cap. And if you don’t realise it for a couple of days, you may be in for a nice shock ! Don’t under estimate the power of your debit card. Keep it as safe as you would keep your cash.
9. Safety of your Credit or Debit Card number
If you have some one’s debit or credit card number, it is not difficult to go online and do some shopping. Card companies get frequent calls from the card owners where by their card has been fraudulently used by some one without their knowledge. It may sound impolite to say no to your friend who needs your credit card number to order some stuffs from the internet. If you really want to help, just type the card details without disclosing it to your friend. Unlike your ATM pin, the card details are static and once known, any one with the knowledge of your card number can misutilise it. The only option to get out of that risk is to get a new card issued. But hey, you may be charged for getting a new card issued and the logistic issues of getting a new PIN and linking it with your online account, etc. Why don’t you keep it safe in the first place.
10. Accessing online banking and emails on public PCs
Its going technical now ! You would have realised that most of the time I have been talking regarding the security of your card, passwords, PINs, etc. Now another step in the same direction – Avoid checking your account online in a cyber cafe / public PCs / friend’s laptop, unless you are really in dire need to do so. It is very easy for such PCs to record your user name and password which you have typed using special hacking softwares. These malicious softwares transmit the keys you have typed into a file which can be later read by the fraudster. So you may be completely unaware of it and your account details may be fully exposed.
You might be wondering why did you get that card in your pocket and perhaps it is better to surrender it. Or stop using online banking. Well if that is what you have concluded, the motive of my article has not been achieved. I do not intend to scare you off from using such technologies. They are a blessing and add convenience to our banking need. I just want my readers to know the features and inherent risks of current banking instruments & technologies so that you do not end up in a pitfall later on.