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Combatting Organised Financial Crimes in India's Digital Economy: Challenges, Initiatives, and the Path Forward

This legal article aims to bring to light the emerging issue of organized financial crimes on the internet, both in India and globally In the past decade, India has embarked on its digital financial journey, achieving new milestones every day. Banknotes are now being substituted with smartphones and QR code machines. Crores of Indians, both in the formal and informal economy, are making payments and transferring funds across the country with just a few taps on a screen. This transformation has not only improved access to financial services but also increased the efficiency and transparency of financial transactions.

Additionally, the COVID-19 pandemic accelerated the acceptance and usage of digital financial tools in India and further emphasized the importance of digital payment systems in today's global economy. Local merchants and companies have also onboarded UPI and other digital payment services like RuPay cards, NACH, IMPS, CTS, AePS, FASTag, and more, to make transactions completely contactless. The adoption of digital financial tools has brought exceptional changes to the Indian economy, leading it to become one of the fastest-growing digital economies.

The digital financial transactions network has spread substantially in India recently, owing to a number of factors such as a push by the government, increased accessibility to the internet and smartphones, and the unprecedented growth in online shopping. One major reason is the adoption of the Unified Payments Interface (UPI), which ensures transactions from one bank to another in real-time, and the Bharat Interface for Money (BHIM) app, which facilitates digital financial transactions using smartphones. Digital financial tools are continuously evolving to their best form, leading people to prefer the digital system over the traditional one.

Along with the benefits, this shift has also introduced new risks and forms of risk. The negative side of the cyber world is both inevitable and unavoidable in the financial sector. As digital financial tools evolve, hackers and cybercriminals are constantly devising new methods to defraud unsuspecting individuals and organizations of their hard-earned money, evade detection, and exploit vulnerabilities in computer systems. Some of the most common emerging threats include phishing, worms, malicious software, ransomware attacks, social engineering attacks, and supply chain attacks.

To combat these threats, state police, the Indian Cyber Crime Coordination Centre (I4C), NPCI, and other stakeholders ensure that they remain vigilant and stay up to date on the latest security measures. The National Payments Corporation of India (NPCI), an umbrella organization, was incorporated for operating retail payments and settlement systems in 2008, under the provisions of the Payment and Settlement Systems Act, 2007, to create a sturdy payment and settlement infrastructure in India. (India N. P., n.d.)

What Is Organized Financial Crimes?

The term cybercrime is coined by William Gibson in 1082 referring to the widespread online world of computer networks, was made to make the lives of people better, but it showed its dark side when it became the hub for people to exploit this unguarded space. (Gulpham, 2022) Merriam-Webster dictionary defines cybercrimes as "criminal activity (such as fraud, theft, or distribution of child pornography) committed using a computer especially to illegally access, transmit, or manipulate data" (Merrium-Webster Dictionary).

The criminal of economic offences has a motive of greed, materialistic avarice, or rapaciousness and operation mode of these offences is fraud, not force, deliberate, and wilful. (Gulpham, 2022) Cyber criminals are mostly unemployed youngsters and the purpose of cyber criminals or organised financial criminals is monetary gain. Organised Cybercrime is severe threat to society. Extreme form of cybercrime is cyberextortion, cyberwarfare, cybersex trafficking and cyberterrorism. Money earned through cybercrime may be used for terror funding.

Types Of Organized Financial Crimes Rampant Nowadays:

UPI Fraud:
With the use of the Unified Payment Interface (UPI), there has been a sharp rise in organized UPI-related frauds. There were over 95,000 cases of UPI fraud reported in the 2022-2023 financial year, according to the finance ministry. UPI fraud is committed with the aim of tricking people into revealing confidential information regarding their UPI accounts. Funds are siphoned off through fake UPI payments, phishing, fake UPI QR codes, impersonation, and frauds using screen monitoring apps.

Demat/Depository Fraud:
Demat account fraud involves fraudulent, unauthorized transactions with another's demat account, leading to financial loss, misappropriation of shares, and theft of personal information.

Fraud Call/Vishing:
In fraud calls or vishing, fraudsters pose as bank or insurance firm representatives, asking questions on behalf of the bank or insurance firm. These fraudsters weave a web of lies and ask for personal information and bank details to extract PINs or passwords.

Internet/online Banking fraud:
In online banking fraud, the perpetrator gains access to a bank account through the respective bank's internet banking app or web-based internet banking and transfers funds to a mule bank account. Internet banking frauds are rampant and include e-transfer interception fraud, opening an account in the victim's name (application fraud), SIM swap, automatic transfer system (ATS), and employee-initiated fraud.

The World Economic Forum's (WEF) Global Risks Report 2020 established the risk of organized cyber-attacks on critical infrastructure such as energy, healthcare, and transport, and the involvement of cybercrime groups in committing criminal activities online. It estimated the likelihood of their detection and prosecution to be less than 1 percent in the United States. "Cyberattacks on critical infrastructure´┐Ż rated the fifth top risk in 2020 by our expert network´┐Żhave become the new normal across sectors such as energy, healthcare, and transportation.

Such attacks have even affected entire cities. Public and private sectors alike are at risk of being held hostage. Organized cybercrime entities are joining forces, and their likelihood of detection and prosecution is estimated to be as low as 0.05% in the United States. Cybercrime as-a-service is also a growing business model, as the increasing sophistication of tools on the Darknet makes malicious services more affordable and easily accessible for anyone" (Group w. E., 2020)

Case Studt of Jamtara:
Jamtara is a city and eponymous district in the state of Jharkhand, established on 26 April 2001. This small district consists of only four blocks and has earned the nickname 'the phishing capital of India,' emerging as a hotspot for organized cybercrime activities. Numerous youngsters from this district are involved in organized cybercrimes, particularly diverting funds through phishing across the country. Scammers often impersonate employees of banks, insurance firms, and representatives of large companies.

Under this guise, they deceive unsuspecting individuals into disclosing their personal and financial details, such as bank account numbers, IFSC codes, passwords, and credit/debit card information. Subsequently, these scammers utilize these details to conduct fraudulent transactions, including unauthorized purchases or money transfers from the victim's bank account or UPI wallet. Financial crime hubs in Jharkhand, West Bengal, and Rajasthan are still active and proliferating to some extent (Sharma, 2023).

Threat from Southeast Asia:
Southeast Asian countries especially Myanmar, Cambodia, and Laos (Lao Peoples Democratic Republic). These three countries are becoming the next Jamtara. Nearly half of the fraud targeting Indians are originating from these three countries. Unemployed Indian youth are being recruited on false job promises to execute these cyber frauds, on their fellow Indians back here. Illegal recruiters, mostly from Andra Pradesh, Delhi, Odisha, and Tamil Nadu have been sending these unemployed youth between 21 to 35 years to cybercrime hubs. Some of the web applications, software, and apps used to cheat Indians in these countries are worded in Chinese language which indicates involvement. (India, 2024)

Government of India Initiatives:
The government of India has taken multiple initiatives to tackle and curb cybercrimes in India one such Initiative is, the Indian Cybercrime Coordination Centre (I4C) which deals with cybercrime in the country in a coordinated and comprehensive manner. I4C focuses on tackling all the issues related to Cybercrime for the citizens, which includes improving coordination between various Law Enforcement Agencies and the stakeholders, driving change in India's overall capability to tackle Cybercrime, and improving citizen satisfaction levels.

Indian Cybercrime Coordination Centre (I4C) is a nodal agency to curb cybercrime in the country specifically focusing on strengthening the fight against Cybercrime committed against women and children. Indian Cybercrime Coordination Centre (I4C) facilitated the filing of Cybercrime complaints and identifying cybercrime trends and patterns. Indian Cybercrime Coordination Centre (I4C) act as an early warning system for Law Enforcement Agencies for proactive Cybercrime prevention and detection. Assists States/Union Territories in capacity building of Police Officers, Public Prosecutors, and Judicial officers in the area of cyber forensics, investigation, cyber hygiene, cyber-criminology, etc. (Indian Cybercrime coordination centre (I4C), n.d.)

Verticals of Cybercrime Coordination Centre (I4C):

  1. The National Cybercrime Reporting Portal (NCRP): - The National Cybercrime Reporting Portal (NCRP) was launched for reporting cybercrime pertaining to women and children related crime, financial fraud and any other cybercrimes on 30.08.2019. Citizens can report cybercrime 24X7 on www.cybercrime.gov.in or report by national helpline 1930.
     
  2. National Cybercrime Threat Analytics Unit (NCTAU): - This vertical of Indian Cybercrime Coordination Centre (I4C) was launched for working collaboratively amongst the Law enforcement Agencies, stakeholders from private sectors, academia and research organisations. Unit analyses all pieces of information relating to cybercrime and collects cybercrime feed from open sources, National Cybercrime Reporting Portal, CERT-in and other agencies working in this field.
     
  3. National Cybercrime Ecosystem Management Unit (NCEMU): - National Cybercrime Ecosystem Management Unit (NCEMU) has been established for development of an ecosystem conducive for effective neutralization of threats from cyber criminals by bringing together stakeholders like academia, industry and Government to combat Cybercrime through multi-pronged and multi-stakeholder efforts.
     
  4. Joint Cybercrime Coordination Team (JCCT): - Joint Cybercrime Coordination Team (JCCT) has been constituted for inter-States/UTs coordination, sharing of information like name, residence, mobile number of cyber criminals, case details, etc. among Law Enforcement Authorities of States/UTs. The idea behind JCCT is to foster a close cooperation among LEAs during interstate cybercrime investigations. JCCT focuses on operational cooperation in parallel investigations in various States/UTs. It works on an integrated platform based on the suitability of the individual/multistate cases. Moreover 7 Joint cybercrime coordination teams (JCCTs) have been constituted for better coordination among states and Union territories.
     
  5. National Cyber Forensic Laboratory (NCFL): - National Cyber Forensic Laboratory (NCFL) has been setup in New Delhi as a facility for forensic analysis and investigation of Cybercrime by use of the latest digital technology to support investigations undertaken by Law Enforcement Agencies (LEAs). NCFL engages in analysis and investigation activities to keep up with new technical developments, used in committing new kinds of Cybercrimes.
     
  6. National Cybercrime Training Centre (NCTC): - National Cybercrime Training Centre (NCTC) has been setup to focus on standardization of course curriculum for prevention of Cybercrime, impact containment and investigation, imparting practical Cybercrime detection, containment and reporting trainings on simulated cyber environment. NCTC also focuses on establishing Cyber Range for advanced simulation and training on investigation of such Cybercrime. NCTC focuses on Capacity Building of Law Enforcement Agencies, Public Prosecutors and Judges in the field of Cybercrime.

Penal Provisions For Organized Financial Crimes:

The new Penal Code, Bharatiya Nyaya Sanhita 2023 has been penalised for organised financial crimes. Provisions regarding Organised financial crimes were adequate in the previous Indian Penal Code (IPC), 1860. Section 109 Bharatiya Nyaya Sanhita 2023 penalizes organized cyber crimes and economic offenses having severe consequences with other organized offenses.

Organized crimes constitute Any continuing unlawful activity including kidnapping, robbery, vehicle theft, extortion, land grabbing, contract killing, economic offenses, cyber-crimes having severe consequences, trafficking in people, drugs, illicit goods or services and weapons, human trafficking racket for prostitution or ransom by the effort of groups of individuals acting in concert, singly or jointly, either as a member of an organized crime syndicate or on behalf of such syndicate, by use of violence, threat of violence, intimidation, coercion, corruption or related activities or other unlawful means to obtain direct or indirect, material benefit including a financial benefit, shall constitute organised crime. Punishment for different kind of organised offences ranges between 3 years to life Imprisonment and fine up to five lakhs. (Section 109 of Bharatiya Nyaya Sanhita 2023, 2023)

Conclusion:
As India progresses heading toward becoming a trillion-dollar digital economy, the prevalence of cybercrimes, particularly organized financial crimes, poses a significant challenge to its growth trajectory. The rapid adoption of digital financial tools, while improving access and efficiency, has also opened new avenues for cybercriminals to exploit vulnerabilities and defraud individuals and organizations.

Initiatives such as the Indian Cybercrime Coordination Centre (I4C) and the National Cyber Forensic Laboratory (NCFL) play a crucial role in combating these threats by enhancing coordination among law enforcement agencies, providing training, and leveraging advanced technology for forensic analysis. With the enactment of the Bharatiya Nyaya Sanhita 2023, provisions specifically targeting organized financial crimes have been strengthened, reflecting the government's commitment to curbing cybercrimes and ensuring a secure digital environment.

However, the Information Technology Act, 2000 is seems adequate for the majority of cybercrimes it addresses, as most offenses under the act are bailable. The Act primarily focuses on enhancing the quantum of civil liability while reducing the quantum of punishment, which has contributed to the low number of cybercrime convictions in the country.

Additionally, while the IT Act is effective in metropolitan cities like Mumbai, Delhi, Hyderabad, Bhopal, and Bangalore, it faces challenges in tier-two level cities where awareness of the law among enforcement agencies remains a significant hurdle. Moreover, the IT Act does not adequately cover many crimes committed through mobile devices, highlighting the need for reforms in this regard.

As we strive for economic growth and digital empowerment, safeguarding the integrity and security of the internet is paramount. It requires a collective effort from government agencies, law enforcement, businesses, and individuals to enhance cybersecurity measures, promote awareness, and foster a culture of cyber hygiene. By prioritizing cybersecurity and investing in robust frameworks, India can harness the full potential of its digital economy while mitigating the risks posed by organized financial crimes on the internet.

References:
  1. asd. (n.d.).
  2. Group, W. E. (2020). The Global Risks Reports 2020. Zurich: World Economic Forum.
  3. Group, W. i. (2020). The Global Risk Report 2020. World Economic Forum.
  4. Gulpham, S. (2022). Financial Fraud, Economic Offence In India: Crime Prevention Through Heuristic Method. Innovare Journal of Innovative Sciences, 3.
  5. URL: https://www.thehindu.com/sci-tech/technology/digital-financial-frauds-in-india-a-call-for-improved-investigation-strategies/article67988607.ece. (n.d.).
  6. India, T. o. (2024, May 24). timesofindia.com. Retrieved from https://economictimes.indiatimes.com/news/india/90000-scams-in-4-months-how-southeast-asia-is-becoming-the-next-jamtara-fraudsters-recruiting-from-andhra-tn-odisha/articleshow/110393371.cms
  7. Indian Cybercrime Coordination Centre (I4C). (n.d.). Retrieved from i4c.mha.gov.in: https://i4c.mha.gov.in/about.aspx
  8. Merrium-Webster Dictionary. (n.d.).
  9. Section 109 of Bharatiya Nyaya Sanhita 2023. (2023, July). Bharatiya Nyaya Sanhita 2023. Delhi, India: Government of India.
  10. Sharma, H. (2023). wionews.com. Retrieved from https://www.wionews.com/india-news/what-is-jamtara-fraud-in-indian-state-of-jharkhand-cybercrooks-con-2500-more-584265

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