Online Fraud Prevention - Recover Money from Online Fraud

• Indians particularly susceptible to online frauds

Since Internet penetration in India has grown faster than other nations, it is only natural to expect online frauds to follow suit.

A 2017 report by Asia Pacific Fraud Insights covering 10 countries reveals that 48% of Indians have witnessed retail fraud, making it the most susceptible nation in the report.

The more widely reported cases involve identity theft and other fraud in telecommunication, retail and financial services (banking, insurance).

• Anatomy of an online or credit card fraud

Most online frauds have two points in common:

1. A clever fraudster

2. A gullible victim - often a senior citizen or a new adopter of the internet

The fraudsters preys on many individuals before he lands the perfect victim.

This is how a fraud can play out:

• The fraudster calls the victim.
• He makes a clever excuse for soliciting some confidential information like four-digit debit card PIN, three-digit CVV. One pretext used by the fraudster could be that the victim must share these details if he/ she wants to avail of some additional facilities or something on these lines where the victim is shown to be a beneficiary of an offer.
• The victim shares the details thinking it is the bank executive at the other end.
• The fraudster armed with the details transfers the money from the victim’s account/ card to his own.
• It all looks simple because, the fraudster (hacker) has likely taken some preliminary steps like hacking into the bank’s records and selecting victims that fit a certain profile or pattern. Since the fraudster has the victim’s bank account or card details, he easily gains his/ her confidence and the victim feels nothing untoward in sharing confidential details like PIN, CVV.

• RBI steps in

The RBI (Reserve Bank of India) has finally stepped in to protect the consumer’s interests in the face of growing online frauds.

The aim is clearly to limit the consumer’s liability in online fraud.

RBI Rules Regarding Online Fraud

The key features of RBI’s new rules regarding online fraud:

• Customers will not suffer any loss if the fraud is due to negligence or deficiency on the part of the bank.
• Customers will not suffer any loss if the deficiency lies neither with the customer nor the bank but lies elsewhere in the system and the customer notifies the bank within three working days of receiving the communication from the bank regarding unauthorized transaction.
• Customers will suffer a maximum loss of Rs 25,000 if they notify the bank within four to seven working days from the incidence of third-party fraud.
• If customers delay in notifying the bank beyond seven days, their loss will be determined by the bank’s internal policy. This is to be circulated at the time of opening the account.
• If the customer suffers a loss due to negligence such as sharing payment credentials, he will bear the entire loss. Any further loss by the customer after informing the bank of the breach will be borne by the bank.
• The reversal timeline for customers who have zero liability in third-party fraud is within 10 working days of reporting the fraud.
• Banks must ask their customers to mandatorily register for SMS alerts and wherever available for email alerts.

 RBI’s rules for mitigating online fraud are helpful, even if belated. Customers are assured of reimbursement of losses in third party fraud. However, they cannot afford to lower their guard when it comes to protecting their banking credentials (PIN, CVV) as the RBI’s rules do not offer protection in case of the customer’s negligence. So as always - it’s customer beware!