Beware Financial Crimes!

Beware Financial Crimes!

  • Reading time:6 mins read

By Parth Gupta

The Covid-19 pandemic has pushed a lot of people into the digital world. A lot of people have had to adapt to using various digital tools to lead their lives—from working, shopping, studying, to getting entertained, paying bills, and carrying out banking transactions.

With the surge in people using online banking, banks have also had to scale up. According to experts, Covid-19 has acted as a catalyst for digital banking services. 

Naturally, this heightened activity has attracted the attention of criminals. 

What are the types of financial crime?

In simplest terms, financial crime is the practice of taking money or property illegally from another person or organization for one’s own benefit. Among the major types of financial crime are: money laundering, terrorist financing, fraud, bribery and corruption, market abuse and insider trading, tax evasion, embezzlement, counterfeiting, identity theft and electronic crime. These crimes can be executed both by external attackers or internal employees, including leaders at the very top of the business

According to a VMWare report from last year, between February and April 2020, attacks targeting the financial sector have grown by 238% globally. No wonder that the Unisys Security Index 2020, released last year, found that one of the top concerns of respondents in India was bank card fraud—unauthorised access to credit and debit card details, and concerns around online banking and shopping.

In general, financial services sector is prone to cyberattacks owing to the wealth of personal and financial data they possess. Also, emerging economies with an evolving regulatory and legal infrastructure become more prone to such attacks. Cyber criminals are not always caught and typically, the victims rarely get compensated and often have to bear the consequences and financial losses associated with a data breach themselves. This is probably the reason why concerns around bank card frauds are high.

Most banking frauds in India are primarily composed of credit card frauds, especially incidents of card cloning, which have seen a significant rise over the years. While India was one of the first countries to adopt the instant payments system, or the QR code-based system, a very secure one for banks and customers, lack of adequate end-point security at the device level is exposing the customers to the fraudulent transactions. Impersonation frauds have also increased over the years, where data thieves obtain KYC credentials through online phishing via social media or e-mail, he adds.

The lack of a multi-layered approach to identify frauds has been one of the reasons that financial institutions are not being able to prevent such frauds. India is a soft target when it comes to cyber fraud such as phishing, ATM PIN-based, or OTP-based frauds.

Fake call Centres primarily target citizens of English-speaking countries. They impersonate as legitimate technical support from reputed tech companies such as Microsoft, Apple, HP, AT&T.

Financial crime: Indian Report 2020

Sixty-two per cent of the cybercrime complaints lodged in 2020 were related to financial frauds, police said in a statement.

Several cases were registered in matters related to tech support, immigration and IRS call centre scams and 125 persons were arrested. These fake call centres were being used to cheat foreign nationals.

The Delhi Police has busted five such fake call centres that were operating at a big level from Moti Nagar, Rajouri Garden and Peeragarhi and arrested 125 persons, including the owners or managers who were operating these.

Reforms required to reduce financial crimes

Even though the Indian government enacted multiple legislations in various fields of financial functions to reduce financial crimes yet the offenders have found loopholes in the system to be exploited until the helm. The 2 basic reforms that are required in the system are :

1. Equal treatment of financial offences as Penal offences

XThe economic offences do not have enough strict provisions as those in the penal offences. There is a sense of relaxation to the financial offenders which has failed to set a precedence for future offenders to not commit such crimes. The purpose of the law is to deter a person from any criminal activity and also to set an example for the society to not get involved in criminal activities.

The financial offenders continue to enjoy luxurious lifestyles without any forced detention in the deplorable state of prisons. There is a lack of seriousness in treating financial offences with a similar degree as a penal offence. The government and its authorities need an immediate response in the following regard to curb the rising rates of financial crimes.

2. Exclusive courts

The courts in India have already been overburdened with the number of pending cases that it is important to organise a system of tribunals to dispense cases in different fields of law. It would benefit the public as the speed of trial would increase with the advantage of specialised courts with adequate knowledge on the issues taking up the cases. 

The delegated legislation concept is the basic requirement as a reform in regard to financial crimes. It is a settled principle that ‘justice delayed is justice denied’ which can be avoided with an exclusive court/tribunal to handle financial crimes cases.

How then does one guard against such frauds? 

Since people new to the banking sphere might not be aware of security protocols, educating customers would be key to avoiding bank frauds. 

The regional rural banks be entrusted with the task of educating the rural population of India. Since they are localised, they have local network strength and they also govern local institutions.

Mobile phone manufacturers too could play a key role in avoiding fraudulent transactions. If the government of India mandates to implement certain security standards on the mobile devices as a bundled feature, it will serve as a great control mechanism for fraud prevention.


The financial offences in India have not been given similar status as other offences and hence, they involve soft punishments which do not prevent the individuals in the society from committing such crimes in future. These financial crimes are sometimes more serious than the penal offences themselves due to their ability to impact the national economy at an instant. The government has enacted legislation to curb the acts of financial crimes but no significant reduction has been observed due to offenders’ ability to search for loopholes. There is no surety that the reforms stated are enough to minimise the crimes but would definitely strengthen the government system in this regard.