Editorial: Address loopholes in banking system

In the absence of clear oversight, scammers exploit both the opacity and the hype associated with digital assets

The alarming rise in cybercrimes in India poses a serious threat to security and economy. Two recent cases of digital heist—the Rs 20-crore crypto con in Ludhiana and the Rs 22.9-crore digital arrest scam in Delhi—highlight the seriousness of the modern menace and the urgent need to reform cyber laws to check such frauds. They also expose lapses in the banking system and its surveillance mechanism. From celebrities, industrialists and politicians to retired professionals and homemakers, every section has become vulnerable to scams being perpetrated by online fraudsters using sophisticated technology tools. According to one estimate, people in India are losing nearly Rs 1.5 lakh to cyber criminals every minute. Strengthening critical infrastructure, fortifying technology, skills, regulations and increasing public awareness hold the key to preventing cybercrimes. Cyber fraud refers to deceptive activities carried out through digital platforms such as unauthorised access, data theft, or online scams, which are often intended to cause financial loss to victims. The modus operandi of the fraudsters indicates that India’s cybercrime is becoming increasingly sophisticated, systemic and scalable, making it difficult for the authorities to keep pace with them. In the Ludhiana case, an industrialist was lured through a fake crypto ecosystem and drained of Rs 19.84 crore, routed through 76 forged accounts across 15 banks. In the digital arrest case in the national capital, fraudsters impersonating law enforcement officials weaponised fear, isolating the victim, coercing compliance and extracting Rs 22.9 crore through staged urgency and intimidation.

In an extraordinary intervention, the Reserve Bank of India ombudsman directed five banks to pay Rs 1.3 crore for lapses in due diligence in the digital arrest case. In both cases, a common feature was that the banking channels failed to detect the abnormal activity and raised a red flag. This raises uncomfortable questions, given the scale of the fraud and the swiftness with which it was carried out. One wonders why so many fraudulent accounts slip through multiple banks, and what is the use of KYC (Know Your Customer) filters when they cannot act as guardrails to prevent financial crimes. Unusually large and rapid money transfers going unnoticed are also intriguing. The victims of online financial fraud face difficulty in getting compensation. Even when they come after long delays, these compensations are only partial. It is hardly a deterrent in a high-reward fraud economy. Victims are not just deceived; they are managed, monitored and manipulated over time. Coercion-based frauds lack clear response protocols. Inter-bank coordination is weak. Enforcement chases money already dispersed across layered accounts. These cases underscore the reality that cyber fraud in India has evolved into an organised enterprise. In the absence of clear oversight, scammers exploit both the opacity and the hype associated with digital assets. Tackling it requires tighter banking scrutiny, real-time transaction monitoring and a coherent regulatory framework for digital assets.

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