Digital Arrests: Strengthening Banking Safeguards

Context

The Supreme Court gave out 13 directions across the country, making the Reserve Bank of India (RBI) to put in place an SOP on mule accounts within four weeks, operationalising cyber-coordination centres by states, and the inter-departmental committee to look into a mechanism to compensate the victims of such scams. 

Context and Modus Operandi

• What is Digital Arrest Scam? They pretend to be police, customs or CBI officers, creating a fake video with them and intimidating them, and they claim that the victim is involved in illegal activities such as parcels or money laundering, and then they have him/her put down in a video call until they pay up. 
• Scale of Threat: Thousands of crores of monetary losses, disproportionately affecting the elderly people because of high social engineering and psychological coercion. 

Key Supreme Court Directions

• Banking Sector Accountability: RBI needs to have a Standard Operating Procedure (SOP) within four weeks to identify, block and control “mule accounts” (unlawful accounts used for cyber-fraud money laundering). 
• Institutional Coordination: All States and UTs to operationalize State Cyber Crime Coordination Centres and implementing e-Zero FIR mechanism with the Indian Cyber Crime Coordination Centre (I4C). 
• Grievance and Restoration: Implementation of Grievance Redressal and Money Restoration modules under the Ministry of Home Affairs (MHA) framework in a fast-track manner. High Courts have to instruct the local adjudicating courts to refer the victims to these specialised administrative redressal mechanisms first. 
• Investigation Mandate: Strengthening the powers of investigative units such as CBI to coordinate trans-state and international networks with INTERPOL. 

Policy and Structural Challenges.

• Inter-state and international jurisdiction: Cyber syndicates are located in multiple states and countries and this makes it difficult for local police to respond.
• Complicity and Laxity: Proliferation of illegal bank accounts highlight institutional know your customer (KYC) non-compliance and telecom loopholes (rogue SIM boxes), etc. 

Way Forward

• Shared Liability: To establish a strong victim compensation and liability system with telecom operators and banks for systemic negligence by them. 
• Technological Defense: Using Artificial Intelligence (AI) and Machine Learning (ML) tools at the tier of the bank in real-time to detect anomalies. 

Source: HT

UPSC Mains Practice Question 

Q. How can digital arrest scams and mule accounts be effectively curbed in India?

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