Financial Crime World

Financial Crime Prevention Strategies in India: A Growing Concern

Cybercrime has become a significant threat in India, with millions of individuals and organizations falling prey to digital financial frauds. The National Crime Records Bureau (NCRB) reported a staggering loss of ₹66.66 crore in 2023, with 4,850 cases.

The Scale of the Problem

  • According to the Indian Cybercrime Coordination Centre (I4C), digital financial frauds accounted for a staggering ₹1.25 lakh crore over the last three years.
  • The Parliamentary standing committee on Finance reported that domestic fraud as reported by Supervising Entities (SE) in FY'23 was ₹2537.35 crore.

The Modus Operandi of Digital Fraudsters

Digital fraudsters use various tactics to convince victims to send money, including:

  • Impersonation
  • False promises of greater returns
  • Stealing credentials such as:
    • Unified Payments Interface ID (UPI)
    • Personal Identification Number (PIN)
    • One-Time Password (OTP)
    • Internet banking ID/password

Technological Interventions

Experts recommend several technological interventions to prevent digital frauds, including:

  • Mandating financial institutions to replicate Google’s feature of requiring permission to log in from new devices
  • Disabling screen sharing facilities
  • Providing comprehensible data in bank statements

Challenges for Law Enforcement Agencies

Law enforcement agencies face significant challenges in following the money trail due to the speed at which siphoned-off money is transferred across accounts and wallets. To address this issue, banks/NBFCs/SEs must provide data in a predetermined format with all terms explained.

Solutions

To prevent digital financial frauds, fintech and telecom industries can take preventive steps by:

  • Recording International Mobile Equipment Identity (IMEI) details of devices used for banking and financial transactions
  • Providing data that enables speedier investigation

New Legislation

The Bharatiya Nagarik Suraksha Sanhita 2023 recognizes “organised crime” as a “continuous unlawful activity.” Digital financial frauds are covered under this definition. Law enforcement agencies face difficulties in conducting interstate raids and arrests, and bail restrictions may be necessary for digital fraud networks.

Conclusion

Cybercrime can be dealt with using conventional tools, but fintech and telecom industries must take preventive steps to provide data that enables speedier investigation. Faster availability of data will make it easier to identify and convict pan-Indian gangs.