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Mahesh

25/03/24 12:19 PM IST

Digital financial frauds in India

In News
  • Cybercrime poses a burgeoning threat in India, impacting millions of individuals and organisations.
  • According to the National Crime Records Bureau (NCRB), cybercrimes in India in 2023 resulted in a staggering loss of ₹66.66 crore, with 4,850 reported cases.
Digital fraud
  • While various names have been given to diverse types of frauds, the general modus operandi of a fraudster is any one of the following: 
  • convincing the victim to send money, either by impersonation (fake WhatsApp/FB/Insta, social media profiles) or by giving them a false promise of greater return (investment, crypto, held up custom package etc.)
  • by taking credentials such as Unified Payments Interface ID (UPI), Personal Identification Number (PIN), One-Time Password (OTP) or Internet banking ID/password from the victim and then using the same on other apps/websites and transferring money without the knowledge of the victim.
  • For this the customer will either be given a fake link which looks exactly like a UPI app screen/banking website or the victim will be conned into installing a screen sharing app.
  • The scammers can also convince the victims over phone to give out those details.
  • When these details are used on official banking apps this gives the fraudsters access to even the Fixed Deposits/Recurring Deposits which are also siphoned out in most cases.
  • by taking card details and convincing the victim to share OTP.
After the scam
  • After a fraudster empties a victim’s bank account, the money undergoes a series of circulations in broadly three stages.
  • The first stage is a temporary account into which the fraudsters transfer victims’ money.
  • This account will be used to receive money from various other victims as well. From here, the money is then transferred into a second stage account.
  • The second category of accounts are a group of accounts among which money is circulated.
  • There are a lot of middlemen who are money circulators. Their task is only to receive money from first level bank accounts for a nominal cut.
  • The victim’s money is then split into small parts and then circulated within these accounts, by a person who is sitting in a different corner of the country.
  • After sufficient churning, the money is then transferred into a third stage account which is a sink account.
  • This can be a bank account, an e-wallet etc. Here, the total defrauded amount from a group of victims is re-collected.
  • The money is then withdrawn in a large chunk through conventional methods of either ATMs/cheques or e-wallet cash outlets such as an e-wallet payments bank.
Prevention
  • As a first, just as how Google accounts do not allow logging in from a new device unless permission is granted by the former, financial institutions must be mandated to replicate this feature in their apps.
  • As soon as a UPI ID, password or OTP is entered in a different device, an alert must be generated in a previous device with no further action being allowed until it is approved by the person. Secondly, the screen share facility must be disabled.
  • Banking and financial apps must disable screen-sharing to run on top of them.
  • And finally, in the bank statement, all banks/NBFCs/SEs must be mandated to provide comprehensible data. Currently only partly printed numbers are shown which even knowledgable customers are unable to understand.
  • The transaction description must contain the receiver’s account/mobile or any other identifying number irrespective of it being within the same bank or to an outside bank.
  • One of the biggest hindrances law enforcement agencies face is in following the money trail.
  • The siphoned off money hops across bank accounts and wallets within minutes but supervised entities/banks/NBFCs/wallets are not able to give the required details to agencies with the same speed.
  • Most of the crime is reported after 24 hours of the commission. Due to stress and trauma most victims end up deleting much of the evidence from their devices/phones.
  • By the time a money trail is established the money is already withdrawn from the system and there is no way to either identify the person or recover the money.
Minimising Delays
  • Banks/NBFCs/SEs must be mandated to provide data in a predetermined format with all the terms explained.
  • The data must be given in a CSV or XLSX file. For example, the CDR (Call Data Record) shared to enforcement agencies has a fixed format and fixed file types, such as .CSV or .XLSX. Currently the banks give the statement either in a printed hardcopy or in PDF format. This causes huge inconveniences to the investigating officers.
  • Most tech-savvy officers are often held back only because they do not get the data in a usable format. 
  • The International Mobile Equipment Identity (IMEI) must be recorded. All banking and financial apps must be mandated to save IMEI details of the device being used.
  • Fraudsters use fake mobile numbers and fake bank accounts which span across different States with the goal of adding layers to increase anonymity and preventing agencies from prosecuting them.
  • Thus, the IMEI becomes crucial evidence in determining the device and its location. Recording IMEI will make for stronger evidence in establishing a device and its connection to fraudsters in a court of law.
Way forward
  • The Bharatiya Nagarik Suraksha Sanhita 2023 which is set to replace the Indian Penal Code of 1861, recognises ‘organised crime’ as a “continuous unlawful activity”.
  • Digital financial frauds are very much covered in this definition. Law enforcement agencies face a lot of difficulties in conducting interstate raids and arrests.
  • It requires a large team and coordinated effort. Interstate digital financial fraud networks must be recognised as a serious crime and bail may be restricted by the Courts.
  • Additionally, digital frauds create a considerable amount of black money when seen from a macro-economic perspective.
  • In conclusion, cybercrime being a subset of crime in general can be dealt like conventional offences, albeit with a different set of tools.
  • Instead of a specialised unit, if the fintech and telecom industries are mandated to take certain preventive steps in their technology and provide data in a manner which enables speedier investigation, the prevention, detection, recovery and conviction will be much more effective. Faster availability of data will make it easier to identify and convict pan-Indian gangs.
Source- The Hindu

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