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An epidemic of digital financial scams

Staying one step ahead of increasingly sophisticated scamsters

Protecting against digital financial scams: A must-readAnand Kumar

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4:20
dhanak हिंदी में भी पढ़ें read-in-hindi

Although I typically focus on investment topics, I'm shifting gears to discuss a different aspect of finance: digital financial security. Hearing about numerous instances where senior citizens are primarily targeted in digital thefts is becoming increasingly common. Are we going through a spate of attempted financial fraud? You know, the kind where someone calls you with some story or the other, which, if you are gullible, will end in you giving away money digitally to someone.

Based on what one hears, we have had crores of attempted frauds in the last few months. I believe this because I don't know anyone, family, friends or colleagues, who hasn't faced such an attempt in recent months. If we really have wall-to-wall coverage of such frauds, if practically every person with a phone is facing such attempts, then there must surely be crores-maybe tens of crores of such attempts in the last few months. There's no real data anywhere, but this is the impression I've had of everyone I've spoken to.

There are some other clues to the mass-targeting nature of these frauds. Some people have reported getting recorded messages which seek an automated response. The voice says something like, "There is a legal problem with a courier package that you have sent. Please press 1 to know more details." This is a clever way for the criminals to increase their footprint. Those who have heard of this so-called Fedex scam will hang up, while those susceptible victims will press 1. The automated system appears to function as a pre-filter to increase the success rate. This shows that the people running these scams are highly organised and use the same technologies as legitimate businesses that use IVR systems.

There are countless other methods that the scamsters use. The 'classic' method is of an older person getting a few calls asking for OTPs they just got and then finding that there were net banking transactions from their accounts. The transactions are generally for something that is easily encashable or sellable. In recent times, fear has been used as a trigger by many scamsters. You are told that a child has been arrested or that drugs have been found in a courier addressed to you or sent by you. These things make it hard for people to react calmly and with equanimity. The scamsters on the phone have had huge experience manipulating victims, but the victims have no such equivalent experience.

How can these things be stopped? The obvious choke point is the banking system. Digital fraud, by its very nature, has to route the loot through digital transfers between bank accounts. This is what enables this kind of crime; if dealt with properly, this is also its weak point. While one sees some news about banks proposing to link with MHA's cybercrime system or something like that, it's clear that a lot more needs to be done, and in fact, it can be done.

In an all-electronic, fully KYC-ed system, there should be no way for funds to become untraceable. Even if a scamster quickly distributes the loot into a large number of bank accounts and then withdraws cash, there is no reason for this to be untraceable. What stands in the way is old, slow systems that simply can't handle this kind of crime. I see some moves that a new system will eventually be built, but I'm not holding my breath.

While a better system evolves, we must protect ourselves and the older people in our families from falling prey to these scams. Educating ourselves about common tactics used by scamsters, never sharing sensitive information over the phone or email, hanging up on suspicious calls, setting up two-factor authentication, and regularly monitoring our financial statements can go a long way in preventing these crimes. Until systemic changes are implemented, vigilance and caution remain our best defences against these increasingly sophisticated scams. All these sound like obvious things to do, but the interesting thing is that this is all it takes. If you think of anyone you know to whom such a scam happened, these simple and obvious measures would have saved them.

Also read: Scamsters scamming themselves


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