In the cyber frauds report published by the National Crime Records Bureau in 2020, India stood at an average of 10,000 online financial frauds per year. These financial fraud crimes include banking frauds, insurance fraud, investment frauds, and credit card scams, among others.
The methods used for these fraud crimes include phishing, card-cloning, and false-calling. These financial frauds may cause life-savings to be wiped off within a few seconds, resulting in debt, and a ruined credit health. Hence, to avoid this from happening to you, it is important to understand the types of financial frauds that exist, their warning signs, precautionary measures, and their aftermath.
Read on to know about the different types of frauds you must know.
UPI Frauds
Unified Payments Interface (UPI) transactions have become increasingly commonplace over the past few years. You will find a majority of the Indian population using mobile applications such as Google Pay and Paytm to make payments in a matter of seconds.
While this is a very environmentally friendly and time-efficient mode of payment, these payments are predominantly carried out through an online interface. This invites the risk of online financial scams. These scams may be carried out through illegal activities like phishing, vishing, screen-monitoring, SIM-cloning, cold-calling, etc.
Here’s how hackers usually execute UPI frauds:
Hackers usually use the disguise of bank officials or company executives
You could be asked for your birthdate, age, address, full name, etc.
They will ask request you to explain your UPI or bank-related queries or grievances as a part of hygiene checks
If you confide in them about those problems, they will proceed to ask you for information about your UPI and bank accounts
They could ask you to download an app which allows them to scan and duplicate all the data on your mobile phone
If you download this app, you will receive a code which, once sent to them, will give them full access to your data and financial information, including your UPI and banking apps
This could result in a hacked credit card, bank account, UPI account, and debit card
If you identify a pattern suspiciously similar to this, avoid transacting and/or communicating with that scammer immediately. Additionally, here are some steps you can take to stay protected against financial fraud:
Do not share your bank details over a phone call, SMS, and other unreliable means
If you wish to speak with a customer services representative from a bank or UPI platform, always reach out to them through channels explicitly mentioned on their official website or apps
Should you come across any spam links or shortcuts via email or SMS scams, do not click on them
Read all RBI and UPI-related guidelines carefully to stay informed
If you notice any unauthorised debit, report it immediately
Always accept payment requests after careful consideration and verification
Do not upload any bank and UPI details on unauthorised shopping portals or apps
There’s a high possibility of falling prey to such scams and it can happen to anyone. Should it happen to you, you need to make sure that you are prepared for such unforeseen circumstances. You can keep your finances protected against scams like these with the help of financial protection insurance plans like the UPI Protection Program. Such plans can cover UPI wallet losses, bank account scams, and more.
Financial Identity Theft
Financial identity theft is another such financial fraud that has resulted in many losing their life’s savings. In such cases, scammers and fraudsters fish out credit cards, bank accounts, and other financial details through hacking, phishing, cold calling, screen-monitoring, etc. Scammers may go as far as trying to sieve through garbage to acquire bank receipts and statements.
This information is then used to gain access to your funds, credit, and savings. This information may help scammers go about with loan fraud, investment fraud, and credit card scam all at once. Once they’re in, fraudsters can drain your credit, empty your bank account, and ruin your credit score. They can acquire false loans in your name, utilise your investment returns, and exhaust your credit card limits, thereby resulting in a debt or loss.
Here’s a possibility of how the turn of events could look like.
The process begins with the fraudster acquiring your personal and financial data via hacking, phishing, screen-monitoring, fraudulent calls, etc.
They use the acquired data for obtaining loans, card cloning, or accessing your savings and investments.
Once a scammer starts to use your data and finances, you may start to find your passwords and codes being reset without your knowledge
You could also start to receive messages that confirm purchases you never made or loans you never applied for
While this scenario may sound frightening, there are the precautions you can take as a part of financial fraud prevention:
Information like your Aadhaar Card number and PAN Card number is the master-key to gaining access to your finances, and hence, you should keep such data secure
Keep an eye and ear out for scam text messages, calls, emails, etc.
Assign strong passwords to your accounts and always use an authenticator app to tighten the security
Keep tabs on your accounts and financial tools by keeping alerts and notifications on
Check your bank or savings account, and read your statement thoroughly to ensure timely bank account, debit card, and credit card fraud detection
Make sure to shred all your receipts and unwanted financial paper properly before disposal
Financial Statement Frauds
A financial statement fraud refers to an organisation, company, or individual presenting false statistics and reports of their finances. This could be to inflate the image or impression of their profits, performance, and cash flow.
This often happens when it comes to investment frauds where interest rates and potential returns are falsely exaggerated to make a company, scheme, or fund pool seem more attractive. This applies for online loan frauds as well, where individuals or companies lie about their financial and credit conditions to acquire the loan amount they need. Individuals and organisations could also falsify financial records in order to justify certain budget inconsistencies.
Frauds like these could be carried out in the following ways.
An overstated or inflated revenue
Undercounting or overcounting sales
Exaggerating an asset’s value
Concealing unfavourable conditions, liabilities, or obligations
Here are the warning signs of financial statement frauds that you can find at different levels.
Missing and/or altered documents
Discrepancies in expenditure and transaction record
Individuals trying to settle payments without the need to record that transaction
Rising revenues without any subsequent growth in cash flow
Unexplained changes in liabilities and/or assets
Insurance Scams
The world is actively and rapidly heading towards the digitisation of insurance. This could ensure safe and trustworthy transactions in the world of insurance, gradually eliminating insurance frauds. These scams can exist on various financial planes and levels of the insurance industry. However, financial frauds like these occur majorly at the hands of a false insurance agent.
In such cases, the top 10 insurance frauds include over-selling policies, life insurance fraud, false policies, over-selling coverage, car insurance fraud, premium diversions, health insurance fraud, etc. Fraudsters come to you with false support and sympathy to convincingly sell you non-existent products and promise you substantial coverage which may not even exist. This deceit entirely depends on whether or not they can convince you into believing them.
Hence, here are the warning signs of an insurance scam, which you can identify at the right time.
If you have lost a loved one recently, scammers can approach you with the news of you being a beneficiary in that loved one’s life insurance
Through this life insurance scam, they can extract all your financial and personal details with the lie of requiring this data to transfer the insurance money to you
Scammers can call you as insurance agents who need you to pay a renewal premium for your lapsing policy
You could get a call from an insurance agent who is selling you an insurance policy that has an unbelievably high coverage cap and low premium amount
Certified insurance agents could over-sell insurance rider or add-on covers to you that you might not need, in order to pocket the extra commission
Here’s how you can avoid falling prey to such insurance frauds.
Once you identify any warning sign that hints towards a potential fraud, cut the conversation or exchange short and contact your insurance provider through the official contact details
Do not provide any personal and financial information to anyone over a call, SMS, email, or other means of communication
Carry out thorough research and analysis at your end before purchasing any insurance policy to avoid call, email, or SMS frauds
Use online premium calculators to acquire premium quotes to avoid overpaying for any policy
Carefully contemplate if a particular insurance rider or add-on cover is needed
Choose to buy your insurance plans online from a trustworthy insurance company or distributor
Conclusion
Financial fraud awareness is crucial in safeguarding individuals and organisations against economic losses and reputational damage. By understanding the various forms of fraud, you can adopt preventive measures to protect your personal and financial information. Organisations, on the other hand, can implement robust internal controls and train their employees to identify red flags and report suspicious activities.
Enhanced awareness helps mitigate the devastating consequences of financial fraud, including financial ruin, damaged credit, and compromised confidential data. Moreover, a vigilant society promotes trust, stability, and integrity within the financial system, fostering economic growth and preserving public confidence.
