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RBI
Banking fraud Cyber Crime Loan Scam online frauds RBI

Online Banking Frauds: The Silent Threat to India’s Financial Stability

Online Banking Frauds: The Silent Threat to India’s Financial Stability

Bank frauds in India: A soaring trend

According to an analysis of frauds recorded across banks, the number of fraud cases filed in FY24 increased by approximately 300 percent from 9,046 in FY22. However, the sum involved has decreased from Rs 45,358 crore to Rs 13,930 crore, according to the central bank's annual report for fiscal year 24 released on Thursday.

Every year, the amount involved in total frauds reported decreased by 46.7% during fiscal year 24.

The numbers speak

The RBI stated that, while private sector banks reported the most frauds in the recent three years, public sector banks contributed the most to the fraud total. According to the RBI, digital payments (card payments and internet) were the most common source of fraud. 

According to the RBI, digital payments (card payments and internet) were the most common source of fraud. However, in terms of value, the frauds were concentrated in the loan portfolio.

While small value card/internet frauds accounted for the majority of frauds recorded by private sector banks, RBI investigation revealed that frauds in public sector banks were primarily in loan portfolios.

The number of scams involving card and internet payments jumped from 3,596 in FY22 to 29,082 in FY24. In terms of value, it rose from Rs 155 crore in FY22 to Rs 1,457 crore.

Observing the time lag

In an assessment of cases reported in FY23 and FY24, the RBI discovered a significant time lag between the date a fraud occurred and its identification.

According to the RBI, the amount engaged in frauds from prior fiscal years accounted for 94.0 percent of the frauds reported in FY23 in terms of value. Approximately 89% of the frauds recorded in FY24 by value occurred in previous fiscal years.

Factors contributing to the surge

  • Technological advancements: The digital revolution has transformed banking, making transactions faster and more accessible. However, it has also exposed vulnerabilities. Cybercriminals exploit weak security measures, phishing attacks, and identity theft to siphon off funds.
  • Lax oversight: Despite regulatory frameworks, some banks struggle to implement robust risk management practices. Inadequate internal controls and complacency contribute to the rising fraud numbers.
  • Insider threats: Employees with access to sensitive information can be both an asset and a liability. Insider fraud—whether intentional or due to negligence—poses a significant risk.
  • Complex financial products: As financial products become more intricate, so do the opportunities for fraud. From complex derivatives to shadow banking, the landscape is ripe for exploitation.

Mitigating the risk

  • Enhanced security measures: Banks must invest in cutting-edge cybersecurity tools. Multi-factor authentication, real-time monitoring, and AI-driven anomaly detection can help thwart fraud attempts.
  • Training and awareness: Educating bank staff and customers about fraud risks is crucial. Regular workshops, simulated phishing exercises, and awareness campaigns can empower everyone to stay vigilant.
  • Collaboration: Banks, regulators, and law enforcement agencies must collaborate closely. Sharing threat intelligence and best practices can strengthen the collective defense against fraud.
  • Strengthening legal frameworks: Stricter penalties and faster legal proceedings can act as deterrents. Swift action against fraudsters sends a strong message.

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online frauds
Arrests Cyber Fraud Cyberattacks Cybersecurity Precautions Data Safety digital safety Information Security online frauds

Government Struggles with Low Arrest Rate Amidst 31 Lakh Cyber Fraud Complaints

 

From the high-profile AIIMS cyber attack to widespread data leaks like that of the ICMR, the National Cyber Crime Portal (NCRP) has seen an alarming rise in cyber fraud complaints. Since 2020, the portal has received 31 lakh complaints as of February 2024. 

However, the most concerning issue, as highlighted by the Central government's official communication, is the staggeringly low number of arrests in these cases. Despite over 66,000 cases being registered by various law enforcement agencies, the total number of arrests stands at just 500, amounting to less than 1% of the reported cases. 

This discrepancy has been a recurring topic in meetings within the Ministry of Home Affairs and the Ministry of Finance. During a recent Financial Stability and Development Council (FSDC) meeting, several stakeholders voiced their frustration over the minimal progress in arrests. A significant part of the problem lies in the increasing prevalence of fraudulent loan lending apps, which have severely impacted India's financial infrastructure. 

These apps disproportionately affect low-income groups, leading to significant financial losses as money is often funneled out of the country. According to a senior official present at the FSDC meeting, many of these apps operate from China, posing a dual threat to both financial institutions and the economic stability of vulnerable populations. The official noted that some Indian nationals involved in these crimes inadvertently aid China-based operators, thereby becoming victims themselves. 

In response to these growing concerns, the central government has urged tech giants like Google and Meta to deploy experts to combat the menace. There is a heightened alarm over advertisements run by organized threat actors, many of whom operate internationally. A central cyber agency's analysis revealed that numerous mobile applications were conducting ad campaigns on Meta platforms, leading to a slew of suicides linked to harassment and extortion by illegal app operators and loan recovery agents. 

The misuse of app permissions for harvesting credentials and data adds another layer of risk, potentially enabling future cybercrimes. The FSDC meeting underscored the urgency of addressing these issues, with multiple stakeholders pushing for the Ministry of Home Affairs to take immediate action. Sources indicate that the Ministry is now expected to convene a meeting with various agencies to expedite investigations and increase the number of arrests. 

This coordinated effort aims to enhance the pace and effectiveness of law enforcement responses to cyber fraud, thereby protecting India's financial ecosystem and its most vulnerable citizens.
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online frauds
Cyber Attacks Flutterwave money theft online frauds

Flutterwave Hit by Unknow Hackers Lost Millions of Dollars

Flutterwave, Africa's largest startup, suffered a cyberattack resulting in the disappearance of over ₦2.9 billion (~$4.2 million) from its accounts last month. According to the reports, the missing funds were transferred across 28 accounts in 63 transactions in early February by unknown threat actors.
 
Flutterwave is currently investigating the attack with law enforcement agencies to freeze accounts across 27 financial institutions that were involved in the transactions. Following the news about the case, several tweets surfaced regarding the alleged hack, some providing information while others complained about frozen accounts possibly linked to the incident. 

Meanwhile, Flutterwave has denied hacking by saying that “at Flutterwave, we understand that our customer’s personal and financial information is of the utmost importance. We take this responsibility seriously and understand that any potential security breach can cause anxiety and concern among our customers. We want to reassure you that Flutterwave has not been hacked”. 

Following the investigation, a legal request has been made to freeze 107 accounts, including the fifth beneficiary of those accounts, which has been placed on lien/Post-No-Debit (PND) to prevent the account owners from withdrawing any funds. 

These measures have been taken to ensure that the money remains in those accounts until the investigation into the hack is completed and the issue is resolved. The term "fifth beneficiaries" refers to the individuals who received the funds from those 107 accounts. 

“As a financial institution, we monitor transactions through our transaction monitoring systems and 24-hour fraud desk and review any suspicious activity. We collaborate with other financial institutions and law enforcement agencies to keep our ecosystem safe and secure...” 

“…During a routine check of our transaction monitoring system, we identified an unusual trend of transactions on some users’ profiles. Our team immediately launched a review (in line with our standard operating procedure), which revealed that some users who had not activated some of our recommended security settings might have been susceptible", Flutterwave further added to the statement. 

However, as of now, it is unclear how the threat actors were able to carry out the attack, but some people online are suggesting that the hackers might have tricked the merchants into giving away their security keys. This could have given the threat actors access to the money in the merchants' Flutterwave accounts.
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