Increased Occurrence of Payment Frauds: RBI’s Initiatives

Ashish M. Shaji

18 Jul, 2020

With the social distancing norms being followed owing to the COVID-19 pandemic, there has been a significant rise in digital banking across the nation. It has become a major source of financial transactions. However, the Reserve Bank of India has warned the citizens about the increase in occurrences of payment frauds. It has enhanced public awareness camps in this regard.

What are payment frauds and how are they executed?

Payment fraud means any form of false or illegal transaction executed by a cybercriminal. The increased volume of electronic transactions has also increased this form of fraud where the victim’s sensitive information is stolen to siphon off a huge amount of money.

The cybercriminals are coming up with an advanced form of modus operandi for inflicting payment fraud. Some of them are as follows:

• Luring digital users to disclose sensitive payment information

In this case, a user is lured into revealing their sensitive payment information like PIN, OTP, passwords, etc. Thereafter the cybercriminals illegally access the user’s account and key in the sensitive information to steal money.

• Swapping Sim cards

Sim swapping is another method of gaining access to the sensitive personal data of an individual. Here, the cybercriminals hijack the phone number and take over your financial accounts. Scammers take advantage of the weakness in the two-factor authentication and verification.

• Opening links received through messages and e-mails (Phishing)

This is a popular form of payment fraud. It comes in the form of messages or e-mails, and the victim would be asked to click on a link or attachment. By clicking in the link, the data is stolen through malware.

• Fake calls

Another modus operandi employed by the fraudsters these days is by calling an account holder, and by claiming to be from a bank, the fraudsters induce the victim to disclose their sensitive information in order to execute payment fraud.

• Spurious Apps

There are also cases where the user is tricked into downloading a spurious app that accesses critical information stored on devices.

Relevant Case Laws

In a case of payment fraud, a person named Salim Khan had uploaded an ad for his sofa on an online web portal. Within 5 minutes of upload, a person named Hitesh contacted him. The cost of the sofa was finalized at 12500 rupees, and the accused promised to pay for it through a popular e-wallet app. He sent a link on his phone, which was accepted by Khan, and 4300 rupees was deducted from his account.  The accused sent more links, but Khan felt something fishy and asked him to return the amount. The accused then turned his phone off.

In another case, an officer of the rank of JCP (Joint Commissioner of Police) was defrauded of 28000 rupees. Someone had dumped him using his credit card credentials. He had received a message where a bonus was offered for his credit card transaction. The fraudster told him that this offer was only for a limited period. JCP provided his mobile to his subordinate to fill the details. A link was sent, and the next day 10000 rupees were debited from his account, and another sum of 18150 rupees was debited from his account on a payment gateway. The officer informed the concerned bank and blocked the credit card. 

Our recommendation: Reasons for implementing the Digital Banking

How can these attacks be prevented?

There are a number of ways to protect yourself against payment frauds. These are as follows:

• Never share confidential details

No one should disclose their confidential details such as card number, PIN, OTP, etc. to anyone. In case, if a person contacts you claiming to be from bank, then conduct an official check to be 100% sure.

• Check for Spam warning

There are a number of payments related apps that warn about spam numbers. In case you spot any suspicious account, then report it to your bank and mark that account as spam.

• Transact only with trusted and certified online merchants

It is highly recommended to buy products from trusted online merchants and marketplaces. It ensures that the payment made by you is safe and secure.

• Maintain awareness of the latest fraud trends

It is essential to be aware of the latest trends employed by cybercriminals to execute payment frauds. Staying aware can prevent unwanted loss and hardship to a person.

• Use reputed anti-virus software

One should install trusted anti-virus software to thwart any attack on your system.

What has the RBI notified regarding the increasing instances of payment frauds?

In view of the increasing instances of payment frauds, the Reserve Bank of India issued a notification asking all authorized payment operators and participants of the payment system to enhance public awareness through multiple channels.

It emphasized the importance of the safety and security of digital transactions. RBI stated that they have been taking measures to improve awareness among the payment operators and those transacting through digital transactions. By way of e-BAAT (electronic Banking Awareness And Training) programs and organizing campaigns on the safe use of digital payment modes, RBI has been raising awareness.

However, RBI issued a warning to all authorized payment operators and participants stating that despite these initiatives, instances of payment related frauds have continued and often using the same modus operandi as mentioned above. It reiterated the need for reinforcing efforts to spread awareness about digital safety.

It advised all authorized payment system operators and participants to undertake targeted multi-lingual campaigns through SMS, advertisements in print and visual media, etc. to educate their users on safe and secure usage of digital payments.

Conclusion

Also, read: Cybersecurity in Digital Banking: Threats, Challenges and Solution