Top Financial Scams in India for 2023 – Forbes Advisor INDIA

In the fiscal year 2023, the Reserve Bank of India (RBI) documented bank frauds exceeding 302.5 billion rupees, equivalent to INR 30,000 cr. While this marked a decrease from the 1.3 trillion rupees reported in 2021, signifying a reversal in the trend of escalating bank frauds in India over the past decade, both in terms of the total number of frauds and their monetary value^[1], the current figure is still staggering and citizens need to keep caution to protect their financial interest.

An additional study revealed a notable 69% of online fraud cases among Indian consumers in 2021, as reported in the Microsoft 2021 Global Tech Support Scam Research. The data from the Reserve Bank of India (RBI), while potentially excluding numerous undetected frauds, indicated a total value of scams amounting to 60,414 cr in the fiscal year 2021–2022^[2].

Financial Scams in India

In the landscape of India’s financial sector, 2023 has been marked by a surge in sophisticated scams that exploit evolving technologies and capitalize on unsuspecting individuals. From the pervasive rise of UPI-related frauds to the cunning schemes enticing victims with unrealistic investment returns, the financial realm has witnessed a diverse array of fraudulent activities. QR code scams, part-time job deceptions, and the alarming emergence of courier scams targeting the youth have added new dimensions to the threat landscape.

Additionally, the omnipresence of malware-driven cybercrimes and the persistent challenge posed by tech support scams further underscore the need for heightened vigilance in navigating the intricate landscape of financial transactions. This overview delves into the top financial scams of 2023, shedding light on the methods, trends, and impacts that define the evolving face of financial fraud in the country.

UPI Scam Update

The advent of UPI transactions marked a significant milestone in digital payments in India. However, fraudsters quickly adapted, devising various schemes to exploit unsuspecting consumers. UPI-related frauds pose a substantial threat to the Indian payment ecosystem, with tactics ranging from disguising collect requests as fraudulent cashback offers and QR codes to creating spoofed VPAs for refunds and disaster support.

In the realm of online fraud, perpetrators create deceptive websites enticing victims to invest in stocks or cryptocurrencies. Telegram and WhatsApp groups are utilized to mass-invite individuals for investment purposes, deceiving victims into believing they are making reliable investments in stocks, businesses, or cryptocurrencies.

In the fiscal year 2022–2023, reported UPI fraud cases exceeded 95,000, a notable increase from the 84,000 cases reported in 2021–2022, as per the Ministry of Finance^[3]. A staggering 55% of all digital payment frauds in India are associated with UPI transactions^[4].

An insightful report revealed that 50% of these scams have an average ticket size of less than Rs 10,000. Additionally, 48% of the scams fall within the ticket size range of $10,000 to $1,000,000, with only 2% involving a ticket worth more than INR 10,00,000^[4].

Identity-related frauds, particularly account-related frauds, dominate across industries. In 2021, account-related fraud constituted 65% of all frauds in the financial services industry, encompassing account creation and takeover. The e-commerce sector saw account-related frauds accounting for 54% of all reported frauds^[4].

The cumulative impact of various scams, including UPI fraud, bank frauds, and email scams, resulted in a staggering financial loss exceeding INR 200 cr in 2023. Moreover, the recovery of cheated funds has been dismal, with only 2% to 8% of the lost money being successfully recovered.

Digital Banking and Credit Card Frauds

With the rising popularity of digital transactions, the occurrence of online banking and credit card fraud has become increasingly pervasive. Common tactics employed by fraudsters include phishing attacks, identity theft, and fraudulent transactions utilizing pilfered card details.

In the fiscal year 2023, the banking system recorded a total of 13,530 fraud cases. Notably, in May 2023, the Reserve Bank of India (RBI) reported the highest incidence of digital frauds within the realm of digital payments for the year.

Of the total reported fraud cases, nearly 49%, equivalent to 6,659 cases, fell under the digital payment – card/internet – category^[5]. This underscores the substantial impact and prevalence of digital fraud in the specific domain of card and internet-based transactions.

Bank Frauds’ Overview

Bank frauds encompass a range of deceptive activities, including loan frauds, cheque frauds, forged documents, and unauthorized transactions, all contributing to significant financial losses for both financial institutions and individuals.

In the year 2023, the Reserve Bank of India (RBI) documented bank frauds exceeding 3,500 cr Indian rupees. This marked a decline from the substantial figure of over 1.3 trillion rupees reported in 2021^[6]. The observed decrease reflects a noteworthy shift in the trend of these fraudulent activities.

A broader perspective on the issue reveals that between June 1, 2014, and March 31, 2023, Indian banks detected approximately 65,017 frauds, resulting in a staggering loss of Rs 4.69 lakh cr . This information, reported by the Reserve Bank of India, underscores the prolonged and significant impact of bank frauds on the financial landscape^[7].

QR Code Scam Alert

The prevalence of QR code scams is on the rise in India, with fraudsters employing deceptive tactics to lure victims into scanning fraudulent QR codes, resulting in the direct theft of funds from their bank accounts.

Bengaluru, particularly, has witnessed a concerning surge in QR code-related cybercrime cases. Disturbingly, police statistics reveal that a significant 41% of the more than 50,000 reported cybercrime incidents in the silicon city of India, Bengaluru, were attributed to QR code scams^[8]. This alarming statistic underscores the growing threat and impact of QR code-related fraud in the region.

The period between 2017 and May 31, 2023, saw an escalation in incidents connected to QR code frauds, misleading links, and the unauthorized use of debit/credit card information for illicit transactions^[8]. This timeframe highlights the ongoing and evolving nature of QR code scams as a prevalent form of cybercrime affecting individuals and financial security.

Investment Scam Warning: Unrealistic Returns Ahead

Investment scams continue to lure individuals with enticing opportunities that promise quick and guaranteed returns. These fraudulent schemes prey on people’s aspirations for high returns and often involve fictitious companies or fake investment products.

Various scams, including those related to stocks, personal loans, cryptocurrencies, and other investment avenues, have witnessed a surge since the Covid-19 outbreak, particularly affecting the working class in India.

In a notable incident in July 2023, a massive INR 712 cr Chinese investment fraud was exposed in Hyderabad, revealing a fraudulent scheme that preyed on unsuspecting investors^[9]. Orchestrated by Chinese operators based in Dubai, this scheme is estimated to have siphoned off a staggering INR 712 cr from individuals across the country^[9]. The incident serves as a stark reminder to exercise caution and skepticism when confronted with investment opportunities promising unrealistic returns.

Part-time Job Scam Alert

Online scammers are leveraging direct messages and social media feeds to lure individuals with enticing promises of easy part-time work and extra cash. Exploiting people’s trust, these scammers deceptively persuade victims to invest money, only for them to lose substantial amounts once a significant investment is made.

According to a report from the Delhi police, as of April 30, 2023, they received 467 complaints about internet fraudsters advertising part-time work—an alarming increase from the 32 complaints reported in 2020^[10]. This surge in complaints underscores the escalating prevalence of scams targeting individuals seeking part-time employment.

Online frauds preying on uninformed job seekers are witnessing a rise, exacerbated by the increasing inflation and worsening unemployment situation. India’s unemployment rate, now exceeding 8%, surpasses the global average of 5.8%^[10]. It serves as a stark reminder for individuals to exercise caution and thorough verification when encountering online offers of part-time work to avoid falling victim to these deceptive scams.

Courier Scam Advisory

A concerning trend in the form of a new courier scam is emerging, with cyber fraudsters specifically targeting young individuals, causing both worry and distress. These scammers reach out to victims, claiming that courier parcels, allegedly containing drugs or other illegal items, are being sent in their names to foreign countries.

The Bengaluru Police have recorded 163 instances of such courier scams in 2023, with 48 of them concentrated in the South-East division alone. The cumulative financial loss from these scams has exceeded INR 5 cr . The scam typically initiates with a call from a number posing as a FedEx “customer service executive^“[11].
This deceptive tactic preys on individuals’ concerns and fears, emphasizing the importance of awareness and caution. Residents, particularly young people, are advised to verify any unexpected communication from courier services and to refrain from providing personal information or making any financial transactions without thorough verification.

Malware Warning: Protecting Against Digital Threats

Fraudsters are increasingly employing deceptive tactics, such as fake customer support, cashback links, or emails, to convince unsuspecting consumers to install malware, screen mirroring, or remote access apps. Once installed, these malicious applications compromise the device, allowing unauthorized access to financial information.

Subsequently, fraudsters exploit this access to conduct transactions and dupe consumers by siphoning funds from their accounts or cards.

An insightful survey reveals the alarming impact of economic crimes on digital platforms, constituting approximately 57% of all fraud incidents in India. Furthermore, these cybercrimes have cost more than 26% of Indian businesses more than $1 million^[12]. This underscores the critical need for heightened cybersecurity measures in the digital landscape.
Tech support scams have become particularly pervasive, with 7 out of 10 consumers falling victim to such schemes^[12]. Vigilance and caution are paramount in safeguarding personal and financial information from these evolving digital threats. Individuals are urged to exercise discretion when encountering unexpected communication or requests for installations, verifying the authenticity of sources to mitigate the risk of falling prey to these malicious activities.

How to Protect Yourself Against Financial Frauds in India

Protecting yourself from financial scams in India, or anywhere else, requires vigilance, awareness, and caution. Financial scams can take many forms, from phishing emails and phone calls to Ponzi schemes and fraudulent investment opportunities. Here are some steps you can take to safeguard your finances:

Educate Yourself: Knowledge is your best defense. Stay informed about common scams and fraud tactics. Government agencies and financial institutions often provide information about current scams and how to avoid them.
Verify Identities: Be cautious when sharing personal or financial information. Verify the identity of anyone who asks for sensitive information. Legitimate organizations will not ask for your password or PIN through email or over the phone.
Use Strong Passwords: Create strong and unique passwords for your online accounts, including banking and financial services. Use a combination of letters, numbers, and special characters, and avoid using easily guessable information like birthdays or common words.
Enable Two-Factor Authentication (2FA): Whenever possible, enable 2FA for your online accounts. This adds an extra layer of security by requiring a second verification step, such as a text message or app notification.
Be Cautious with Emails: Be skeptical of unsolicited emails, especially those that ask for personal or financial information. Check the sender’s email address for legitimacy, and avoid clicking on suspicious links or downloading attachments.
Beware of Phone Calls: Scammers often impersonate banks or government agencies over the phone. Do not provide sensitive information to callers who claim to be from such organizations. Instead, call the official number listed on the organization’s website to verify.
Protect Your Devices: Keep your computer, smartphone, and other devices updated with the latest security patches and antivirus software. Regularly update your operating system and applications.
Secure Wi-Fi Connections: Avoid conducting sensitive financial transactions on public Wi-Fi networks. If you must use public Wi-Fi, consider using a VPN to encrypt your internet connection.
Check Your Bank Statements: Regularly review your bank and credit card statements for any unauthorized or suspicious transactions. Report any discrepancies to your bank immediately.
Research Investment Opportunities: Be wary of investment opportunities that promise high returns with little risk. Always research and verify the legitimacy of investment offers and consider consulting with a financial advisor.
Report Suspicious Activity: If you suspect that you’ve encountered a financial scam, report it to the appropriate authorities. In India, you can report financial fraud to the local police, the Cyber Crime Cell, and organizations like the Reserve Bank of India (RBI).
Stay Informed: Keep up-to-date with the latest scams and fraud alerts through news sources, government websites, and consumer protection agencies.
Seek Legal Advice: If you believe you’ve been a victim of a financial scam, consider consulting with a legal professional or financial advisor to explore your options for recovery.

Remember that scammers often employ various tactics to deceive individuals, so it’s essential to remain cautious and skeptical when dealing with financial matters. Always prioritize your financial security and take proactive steps to protect yourself from scams.

What to Do When Stuck in a Fraud

In a recent conversation with Forbes Advisor India, the Director General of Police (DGP) of Uttarakhand Ashok Kumar, spoke about cyber frauds in India and the imperative steps needed to mitigate their impact.

Recognizing the escalating threat landscape, Kumar explained the step-by-step process that one needs to follow on instances of cyber fraud. The discussion encompassed the pivotal role of promptly notifying and collaborating with financial institutions, engaging with the National Cyber Crime Reporting Portal (NCRP), and liaising with local law enforcement, including Cyber Thanas and regular police stations. This collaborative approach, discussed with Kumar, forms the basis of a strategic response to cyber fraud incidents, emphasizing the importance of timely action, thorough documentation, and coordinated efforts to combat this evolving challenge.

In case of being stuck in a cyber fraud, Kumar suggests you must:

Contact Your Bank:

Call your bank: Notify your bank’s customer service immediately. Report the incident and provide details of the fraudulent activity. Request them to freeze or block any compromised accounts or cards to prevent further unauthorized transactions.

Lodge a Complaint with NCRP (National Cyber Crime Reporting Portal):

Visit the NCRP website: Go to the National Cyber Crime Reporting Portal at https://www.cybercrime.gov.in/.
Register an account: If you don’t have an account, register on the portal.
File a complaint: Lodge a detailed complaint, providing as much information as possible about the cyber fraud. Include details such as the nature of the fraud, financial losses, and any relevant communication.

Contact Cyber Thana or Local Police Station:

Visit the nearest Cyber Thana or police station: Report the cyber fraud to the local police, especially if there’s a local jurisdiction involved.
File a First Information Report (FIR): Provide the necessary details to file an FIR. Make sure to get a copy of the FIR, as it is an important legal document.

Provide Documentation:

Gather evidence: Collect all relevant documentation, including transaction records, emails, messages, and any other communication related to the fraud. These will be crucial for the investigation.

Contact Other Relevant Authorities:

Contact regulatory bodies: If the fraud involves specific sectors like securities or insurance, consider reaching out to the respective regulatory authorities.
Contact CERT-In (Indian Computer Emergency Response Team): In case of a significant cybersecurity incident, you can also report the incident to CERT-In.

Monitor Your Accounts:

Regularly check your accounts: Keep a close eye on your bank and other financial accounts for any unusual activity. Report any additional suspicious transactions promptly.

Sources: