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Government Sets Up Digital Intelligence Unit To Monitor Fraudulent Transactions

The government will set up a new nodal agency called the Digital Intelligence Unit (DIU) aimed at safeguarding digital transactions, it said in a statement. While the Finance Ministry’s Financial Intelligence Unit is a nodal agency that takes care of money laundering activity based on reporting by significant financial services entities, the DIU will be responsible for ensuring that telecom service providers comply with various technology safeguards and coordinate with other entities to curb digital transaction frauds, the government said.

On Monday, Ravi Shankar Prasad, the Union Minister for Electronics and Information Technology, Communications and Law and Justice, chaired a high-level meeting to begin work on the DIU. As more payments and financial transactions take place over the mobile and the cellular networks, the space for cyber-security threats and fraudulent activities has increased in the last few years. These include unsolicited messages on mobile phones, harrasment, fraudulent loan transactions and other activities

The DIU will coordinate between Local Service Area players, financial institutions and telecom service providers to investigate fraudulent activiy that involves telecom resources, the statement said. During the meeting, Prasad directed the officials to take strict action against telemarketers and individuals involved in harassment of telecom subscribers in addition to action to stop fradulent lending operations by unregulated fly-by-the night operators.

“It was decided that for effective handling of Unsolicited Commercial Communication (UCC) and also the financial frauds being done through misuse of telecom resources,a web/ mobile application and SMS based system shall be developed for redressal mechanism. This will enable telecom subscribers to lodge their complaints related to matters involving UCC.” — Ministry of Communications Press Release (February 15, 2021)

Despite customers opting for the Do-Not Disturb (DND) service from their telcos, they continue to receive commercial communications from both registered and unregistered telemarketers. The minister directed officials within the Department of Telecom (DoT) to meet with telcos and telemarketers to apprise them of recent issues that have cropped up across various digital service channels and to ensure there is compliance with its rules and procedures. “In case of any violation, it was proposed to impose Financial penalty against the tele-marketers including disconnection of resources in case of repetitive violations,” the staetment said.

The Ministry of Communication will also create a cell for Telecom Analytics for Fraud Management and Consumer Protection at each Local Service Area, it said. Prasad also directed the DoT  to “devise special strategies including blocking of telecom operations due to rising concern in Jamtara and Mewat region for curbing of fraudulent activities involving usage of telecom resource,” it said.

Payment frauds and fake lending apps

According to the Annual Report of the Reserve Bank of India’s Ombudsman schemes for 2019-20, complaints related to digital transactions have grown by 113% to 137,823 for 2019-20 compared to 64,607 complaints in the previous year. Digital transaction complaints now account for 44.66% of all complaints received by the RBI’s Ombudsman, compared to 33% in the previous year, it said.

In terms of digital transactions, the central bank received 137,823 complaints in 2019-20, up by 113% from 64,607 complaints in the previous year. The RBI received 1,509 complaints related to digital lending mobile applications, of which around 1,019 were against unregulated digital lending apps, Anurag Thakur, Minister of State for Finance told Parliament last week. Around 41,300 complaints in 2019-20 were related to mobile banking or electronic banking compared to 14,794 in 2018-19, while there were 2,481 complaints related to digital payment transactions.

Over the past two months, Google and investigative authorities have been rounding up operators of these illegal apps, most of them unregulated and fly-by-night operators, and their Chinese owners, after several cases of suicide and harassment. The RBI recently set up a working group to recommend regulations for digital lending platforms.

These lending apps, which mushroomed during the pandemic, offer short-term loans as low as Rs 3,000 at exorbitant interests to the tune of 50-100% per annum. While the RBI has strict guidelines on interest rates that can be charged, and practices that need to be followed by collection agents when attempting to recover or collect loan repayments, these apps are known to use predatory tactics. Many borrowers have complained that employees of these apps and companies harassed them over the phone or through blackmail, and even turned to social media to embarrass them.

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