By Sagar Mazumdar, a student of Rabindra Shiksha Sammillani Law College, University of Calcutta
Rohit, 19year old, resident of Bhopal, was in urgent need of Rs. 2000. He asked from his parents, friends, relatives but was of no use. While scrolling one of the social media applications he came across an advertisement. The advertisement promised of instant loan up to Rs. 10000 without any paper works. Out of desperation, he downloads the apps, uploads all the information asked for and even gives permission to the application for accessing gallery, camera, and other files and folders in the phone device. He applied for Rs. 5000, the app approved Rs. 3000 but he receives zero amount. After few days, the agents start calling him asking for Rs. 9000 in total. At first, Rohit ignores but then the agents start calling his friends and relatives and even shares his morphed images. Rohit tries to control the situation but it kept on increasing. Rohit faces a social boycott which completely destroyed his mental ability. Finally, Rohit decides of quitting his life.
[Disclaimer: The character and story used is imaginative and fictional. Any resemblance to original character or situation is unintentional and is regretted.]
To The Point
On a reply to a question in the Lok Sabha, the Ministry of Home Affair released a report on the cases of financial cyber frauds in India from 1st January, 2023 to 31st December, 2023. In the report, it stated that more than 11 lakh cases were reported around the country which involved a sum of more than Rs. 7000 crores. A survey report states that more than 30 per cent of the Indians has faced some sort of an online fraud. Till the time the scamsters asked for a processing fee, and after the payment of the processing fee, they disappeared, it may be called the traditional way of fraud. But it took an ugly turn when the agents started calling and threatening the borrowers or applicants to pay off their loan before the due date. This is the point where a fraud case becomes a ‘Scam’. The scarier part about these scams is the number of suicide cases attached to it. This is not about one or two online loan provider app but is of hundreds of applications employing thousands of people to do this unethical and illegal job. This is the case study of the online fake loan providing agencies.
Legal Jargon
The legal provisions which are applicable in case of any online financial frauds are:
Indian Penal Code, 1860
Section 306: In case of the victim/customer commits suicide, the scamsters may be tried for abetment of suicide. For example, on receiving threat calls from the agents, person who has taken loan commits suicide, the scamsters may be tried for the same.
Section 384: The scamsters may be tried for the offence of extortion.
Section 420: The scamsters may be tried for the offence of cheating and dishonestly inducing the person deceived to deliver something.
Section 468: The scamsters may be tried for the offence of forgery. Intentional forgery of a document or electronic record which is used for the purpose of cheating.
Section 471: The scamsters may be tried for the offence of using forged documents or electronic records as genuine which they also know or has to believe to be forged.
Section 506: The scamsters may be tried for the offence of criminal intimidation.
Information Technology Act, 2000
Section 66: The scamsters may be tried for the offence of dishonestly committing any of the act mentioned under Section 43 of the IT Act, 2000. For example, if the scamsters dishonestly extracts any data without the permission of the customer, then the scamsters may be tried for the same.
Section 66D: The scamsters may be tried for the offence of cheating by personation by the use of computer resource or computer device.
Section 67: The scamsters may be tried for the offence of publishing or transmission of obscene material of the victim in an electronic form in case they share morphed images of the victim/customer.
Section 72: The scamsters may be tried for the offence of breach of privacy and confidentiality.
Section 69A: The Central Government may use the power to block any application on the grounds of sovereignty and national security or any other reason as given in the Act.
Reserve Bank of India Guidelines
Fair Practices Code: The scamsters may be tried for not following the Fair Practices Code as released by the RBI to do so.
Consumer Protection Act, 2019
Section 2(47): The scamsters may be tried for unfair trade practices.
Proof
Categories of Fraud
There are mainly three categories which the scamsters usually resort to while committing the fraud. There are as follows:
No Amount Fraud: When asked for loan, these scamsters may show a notification of loan approval and may even send a message regarding their disbursal of the loan. But in reality, no amount has been credited in the bank account of the victim/customer.
Lesser Amount Fraud: These scamsters are said to be in a grey zone. Here they provide a loan of an amount lesser than what was actually asked for. Say suppose, a man applied for a loan of Rs 5000. The loan approval may be of Rs. 3000 and he may receive an amount of Rs. 1000.
Processing Fee Fraud: In this scam, the scamster do not provide loan at all. Neither the amount asked for nor the amount lesser than what was asked for but instead it asks for a processing fee. Once, the processing fee is paid, then the number or the entire system stop working. In many cases, they remain untraceable.
Modus Operandi
The scamsters resort to the following mode to give effect to their fraud. It goes as follows:
Professional Websites and Advertisements: The websites of these scam entities are very professional looking. After having designed the application, they usually get it uploaded on the various webstores using counterfeit or forged documents. Since, they have no affiliation with any bank or any other source of proving themselves authentic, they usually create counterfeit documents for the same. In most of the cases, the websites are well maintained with radiant colors and standard font. An article by Economic Times states that the scamsters even share the APK files of those applications on various social media platforms like Telegram, WhatsApp or Facebook, or may even share them via email or SMS. The victims/customers download and install the apps from the files they receive. In some cases, they create groups or use the broadcast messaging features in order to disseminate the applications to a large number of people. These platforms lack a robust verification process shifting the responsibility of verification of their genuineness on to the users themselves. Another article by The Hindu says that the scamsters even run advertisements on various social media handles such as Facebook, Instagram and YouTube.
Name of the Applications: The scamsters use a name which sounds genuine. It often uses ripped-off names of reputed loan providing agencies. As reported by Al Jazeera, the scamsters used ‘Kreditbe’ as their name which is a ripped-off name of Kreditbee, a legitimate loan providing application. It will more or less look and sound alike which will induce people to fall prey to them. The names may sometime contain words like ‘easy’, ‘instant’, ‘online’. This will make their website easily available if anyone searches using those keywords.
Access the Files: Once the victim downloads the file. The application wants the victim to upload his/her personal documents like AADHAR, PAN or any other document or information depending on the demand of each application. But every application demands few things in common, that is, access to camera, gallery, audio, contact and call list. This is the area which are the main focus point of every scamster. Once they get access to this sensitive area, then they easily get control of the customer. Thus, converting the customers to victims.
Fake Loan Agreement: When a person applies for a loan, within a few minutes, a loan agreement is sent to the victims/customers. The loan agreement being fake has no real value. The interest charged is also absurd. It may vary from one application to another application. Some may charge interest at the rate of 20 per cent while others may charge at the rate of 100 per cent.
Threatening The Victims: Now starts the horrendous part of the scam. They start calling the victim and ask for repayment of the amount they have received. In case of the amount is not received by the victim, still the scamsters go to the extent of asking for an absurd amount. The scamming agencies have hired people for these purposes whom they call recovery agents. They threaten the victims/customers that if they don’t pay the amount demanded, then they will share their morphed photos with all their relatives and friends. They will also publicly shame them. The common tendency of the scamsters here is to use the fear factor of the common people. They use the fear and the self-esteem or reputation of the individuals as weapons of their offence.
It can be assumed that if the victim is a male, the scamsters share the message that he is a fraud, rapist, or he had raped an 8year old kid. In case the victim is female, her face is edited with some sex related content and is shared with all in her contact list. This is the general practice of the scamsters.
As the scamsters have access to the contact list of the victim, they even call the victims as well as their contacts and ask for the repayment of the amount taken by the victim/customer.
Secrecy: The scamsters used servers based in Hongkong, Malaysia and other countries which makes it difficult for the law enforcement agencies to trace them. According to a report by Indian Express, the Delhi Police conducted raid on a fake loan providing app office where they found that the scamsters after receiving information uploads it on servers based in Hong Kong. On a raid conducted by the local police in Gurgaon in the office of a fake loan providing app called FINSARA, it was held that about eight phones and a box full of sim cards were found in the office, as reported by Times of India.
Transfer of the Funds: Whatever amount is received by extorting various victims/customers, the scamsters then send those amounts to safe havens. It is found out that many of the apps are controlled by the Chinese nationals. And the money received is either send through Hawala or crypto-currency to China. In a report by First Post, it said that the money is transferred to many mule accounts in India before laundering them to China. In many cases, there has been a use of Chinese gateways.
This is the basic outline of how the scamsters give effect to the online loan scams.
Abstract
Measures Taken by the Government
Issuing Whitelist: On 22nd October, 2022, the Reserve Bank of India has issued a whitelist of about 442 digital lending applications, with the Ministry of Electronics and Information Technology, which was used by the various regulated entities. The same was shared with Google. An article by Live Mint stated that Google has suspended and removed more than 4000 illegal loan applications up to the month of August, 2023.
Guidelines by RBI: The Reserve Bank of India also issued a detailed set of guidelines for the regulation of the digital money lending apps.
Raids by Law Enforcement Agencies: The various law enforcement agencies like Directorate of Enforcement and the local police officials have been conducting many successful raids on the places these scams are being given effect. On 5th June, 2023, Delhi Police, Special Branch (IFSO) posted on X handle that they have arrested 6 persons involved in an instant loan app called ‘Cash Advance’.
Banning of Apps: An article by Hindustan Times states that the Centre has blocked more than 94 online loan apps out of which many were linked to China.
Awareness Campaigns: The Central Government has launched Indian Cyber Crime Coordination Centre, one of whose parts is the National Cyber Crime Reporting Portal. The purpose is to give public a platform to report cases on any types of cyber-crime. The Government has been successful in blocking more than 32 Lakhs SIM cards and 49,000 IMEIs. It also keeps on sharing contents related to cyber crimes both online as well as offline.
Safety Measures Against Getting Scammed
Double Check: Always double check the application before downloading and installing it on the device. Always check the reviews and the affiliations they are showcasing. Also check the ratings in the stores itself. It is still better to do some research outside the stores from reputed and legitimate sources. Always try to download the applications from reputed and legitimate stores such as Google Play Store or the App Store in case of a Google OS or an Apple IOS respectively. Still, it is advisable to double check as these fraudsters use the latest technologies in bypassing the scan check of the respective stores.
No Clicking on Suspicious Links: Do not click on any suspicious links. Many of the times the fraudsters may send messages in a very professional manner posing as a banker or any other person. Stay away from those links, rather immediately delete those links. The messages may be sent anywhere, SMS, Facebook, Instagram, or even WhatsApp.
No Unnecessary Permission: An application whose purpose is to grant loans if asks for the permission of galleries and chat lists without any necessary reason for the same, then it is advisable not to grant such permission. The main part of the scam begins once the scamsters gets access to the personal information of the victims/customers.
Scrutinize: Always have a thorough scrutinization on the style of message or the type of message especially the spellings. The scamsters generally send enticing message like “Get a loan of Rupees 15,000 without any paper work in 15 minutes. Just click on the link below.” This is common sense that no legitimate institution will do such work. Only a scammer can offer such things.
If Download, then Delete: If any such application is downloaded then immediately uninstall and delete it.
Case Laws
In Dharanidhar Karimojji v. Union of India, the petitioner files a Writ Petition on the regulation of the online loan apps. The Court held that the online loan apps cannot resort to charge exorbitant rate of interest and cannot use unfair methods to harass customers to repay. It has also directed the RBI to frame regulations on this regard.
In Joseph Salvaraj v. State of Gujarat, the Supreme Court held that in order to establish an offence under section 420, the dishonest intention of the accused from the very beginning is a sine qua non.
Conclusion
With increasing technology, the scamsters are also employing innovative ways to scam the people and earn profits. It is always advisable to stay away from these apps which promise shortcut ways to get money. If a person at all falls prey to the scamster then filing a police case is always the best option available. The Government of India has also taken measures in curbing these scams as much as possible. The people should also stay alert as these scamsters mainly use human psychology as their weapon.
FAQs
- What is the Instant Loan App Scam?
Ans. Instant Loan App Scam is the offering of instant loan without any paper works and once the app gets access to the personal information of the victims, they start extorting money from them.
- How to stay safe from these scams?
Ans. Always double check, scrutinize, never click on suspicious links are the ways in which one can stay away from such scams.
- What to do if any person is scammed by them?
Ans. Instantly file an FIR with the local police station and also report to the National Cyber Crime Reporting Portal launched by the Government of India.
Reference:
- https://pib.gov.in/PressReleaseIframePage.aspx?PRID=2003158
- https://www.localcircles.com/a/press/page/financial-fraud-survey-india
- https://www.newslaundry.com/2022/09/24/the-death-trap-thats-indias-illegal-loan-apps
- https://bfsi.economictimes.indiatimes.com/news/financial-services/how-illegal-consumer-loan-apps-trap-gullible-customers/109387486
- https://www.aljazeera.com/economy/2023/12/25/the-dark-world-of-illegal-loan-apps-in-india
- https://timesofindia.indiatimes.com/city/gurgaon/nine-of-loan-app-firm-upload-morphed-pics-of-client-on-social-media-to-recover-money-held/articleshow/109229229.cms
- https://indianexpress.com/article/cities/delhi/delhi-police-bust-gang-extorted-people-fake-loan-apps-22-held-8101694/
- https://www.livemint.com/money/google-removed-over-4-700-illegal-loans-apps-from-playstore-how-to-protect-yourself-from-fake-apps-11707561782224.html
- CloudSEK, Chinese Scammers Launder Money via Fraud Payment Gateways: A New Threat to India’s Digital Payment Ecosystem
- https://www.hindustantimes.com/india-news/instan-loan-apps-trap-torture-harassment-60-deaths-india-china-link-101697013563581.html
- https://www.hindustantimes.com/technology/centre-blocks-138-betting-apps-linked-to-china-101675581180150.html
- https://www.firstpost.com/tech/news-analysis/how-chinese-loan-apps-are-scamming-laundering-crores-by-exploiting-upi-fake-payment-gateways-cloudsek-report-13284302.html
- https://www.deccanherald.com/india/karnataka/bengaluru/harassed-for-3-months-bengaluru-lecturer-pays-rs-569-lakh-for-rs-50k-loan-to-app-agents-2867906
- https://x.com/CellDelhi/status/1665636843868811264
- Information Technology, 2000
- Indian Penal Code, 1860
- Consumer Protection Act, 2019
- Reserve Bank of India Guidelines, Fair Practices Code
- Dharanidhar Karimojji v. Union of India, W.P.(C) 680/2021
- Joseph Salvaraj v. State of Gujarat Criminal Appeal No. 1251 of 2011
- Constitution of India