What Is KYC Fraud: Types, Complaints & Prevention

Posted on: Jul 2, 2024 | 3 mins | Written by: HDFC ERGO Team

What Is KYC Fraud: Types, Complaints & Prevention

The alarming rise in digital scams is really threatening. You can ensure protection to a certain extent, by investing in befitting cyber insurance. You can also invest in cyber insurance for family, or as a working professional, specifically in cyber insurance for working professional.

You must note that these digital scams are usually categorised into 2 variants:

1. Payment-related scams

2. Identity-related scams

In this article, we will specifically focus on identity-related scams, also termed KYC fraud.

What is a KYC fraud?

As per financial experts, the rise of financial fraud can be addressed by closely monitoring suspicious banking activities and anonymous bank accounts. This can be done by regularly updating the KYC details of all the customers at regular intervals. The regulatory landscape of India is closely dependent on KYC or Know-Your-Customer details.

KYC is the standard financial and banking industry process to ensure authentic verification of the customers. This aids in assessing potential risks associated with those customers, including terrorist financing.

KYC frauds are those scam activities that exploit the loopholes and frauds in the entire KYC procedure. Considering the current trends, KYC frauds are often undertaken using several digital channels, penetrating the confidential details of potential victims and eventually infiltrating the financial system.

The scamsters often seek personal details like OTP, passwords, account details, DOB, registered phone number, Aadhaar details, etc. This helps in gaining them unauthorised access and control of your financial database.

KYC fraud usually occurs through fake SMS or calls received threatening KYC non-compliance. The scamsters also try to contact you by posing as representatives of the concerned bank/financial organisation/UPI platform. They often send you unauthorised fraud links to facilitate the KYC procedure. These links are often equipped with either of these remote access apps like TeamViewer or QuickViewer. This aids them to access your phone or laptop remotely. Once this is done, they can easily access your vulnerable banking details and siphon off your funds.

Types of KYC frauds

KYC scams are significantly on the rise and have spread their branches into several directions due to their varied nature:

1. Fake re-KYC:

The scamsters often cleverly pose as representatives of the concerned financial organisation. They request you update the KYC details and share these confidential details with them to terminate the risk of account suspension. You can always avoid them by emphasising updating the KYC details offline or by visiting the nearest branch.

2. Phishing:

The scamsters are always on the lookout for customer details, especially your contact number. They often tend to pose as bank representatives and send SMS with fraudulent links. These links often lead to fraudulent websites or apps. The targeted victims are pressured to share the OTP while continuing the call. Once this is shared, they gain full access to your bank account and can make it a clean sheet in a matter of seconds.

3. Vishing:

In this case, scammers tend to collect as much information as possible about their targeted victims from various social network sites. They pose as a representative of any financial organisation to initiate a fraud call and convince their targets to share their intimate KYC details or download any particular app, which is often unauthorised and allows remote access to your phone/laptop/computer. Once this is done, siphoning off the funds is no big deal.

4. Smishing:

When the targeted victims receive an SMS that asks them to call any particular number to update the KYC details is termed as smishing. This is a very common technique.

5. Identity theft:

This is very serious. This means any individual stealing your intimate personal information to commit illegal activities that eventually lead to your financial loss, loss of credit scores in the market and even creating any criminal record if the circumstances are more severe.

How to complain in the case of KYC fraud?

In case, you become an unfortunate victim of any KYC fraud in India, you have to take the following measures to lodge an official complaint:

1. Contact the financial information:

As soon as you become aware of the fraud, inform the concerned bank or financial organisation regarding the development. They will guide you regarding the future proceedings depending on the circumstances.

2. Lodge police complaint:

When you are rest assured regarding the crime, be it identity theft or financial loss, complain to the local PS by providing all the necessary available details.

3. Report all the regulatory authorities:

Depending on the circumstances and the nature of the fraud, you can even complain to regulatory bodies like SEBI or RBI, especially in the case of KYC fraud.

4. Lodge complaint at Consumer Forum:

IF your bank or the concerned financial organisation fail to satisfactorily satisfy your issue, you may raise the matter to the consumer forums like the Banking Ombudsman or NCRDC.

5. Contact cybercrime cells:

If the nature of the fraud is related to cybercrime or online transactions, you have to report it to the National Cybercrime Cell as well as the cybercrime cell of the concerned state police. You can log in to their official website at https://cybercrime.gov.in.

6. Seek legal advice:

Depending on the nature of the concerned fraud, you can even seek professional legal guidance, specialising in consumer protection laws and financial frauds. They can guide your future proceedings according to the situation.

What are the safety measures to prevent KYC scams?

Request for updating KYC details using fraud links is one of the most common practices nowadays. Some of the most simple yet effective measures that you can exercise consciously to protect yourself from such heinous frauds include:

1. Directly contacting the bank:

If you need any sort of guidance or assistance, you must directly reach out to your bank or concerned financial institution. This holds true for KYC updation too. You must never entertain any SMS link or call to complete this task.

2. Use only the official website for the bank’s contact details:

If you need the contact details of your bank, you must use only the official website of the concerned bank. This ensures its authenticity and credibility.

3. Immediate reporting:

If you are affected by any financial fraud, you must inform your concerned financial organisation immediately. This may mitigate the potential risks involved.

4. Enquiring KYC updating options:

You can contact your bank directly to know the regulations regarding KYC updation. You can follow those rules directly without diverting to any other trap.

5. Never sharing login credentials:

Under any circumstances, you must always refrain from sharing intimate personal details like login credentials, credit/debit card numbers, CVV, passwords, PINs, OTPs, etc. with any third party. Authentic sources never ask for such personal details.

6. Avoid sharing KYC details:

To prevent identity theft, avoid sharing your KYC details with any unauthorised sources.

7. Avoiding unverified websites and apps:

Refrain from installing and using any unverified apps or websites. Use standard security measures to receive alerts while using or installing such malicious sites and apps.

8. Avoiding clicking on any unverified links:

Never ever click on any unverified links, however simple, easy or alluring it may seem.

FAQs

1. Does KYC prevent money laundering?

KYC is a standard procedure used by financial organisations to ensure authentic monetary transactions and prevent illegal financial activities including money laundering.

2. How can KYC be misused?

Scamsters often create phoney websites and portals that may seem authentic, but they are not. They often trick their targets into submitting confidential information and credentials, which are later used for fraud.

Conclusion

According to the results of a survey of a prominent digital identity verification organisation, Bangladesh, India, and Pakistan are among the leading countries that are affected by KYC and identity fraud, especially using deep fake techniques. If you exercise the preventive measures mentioned above and keep yourself informed, you may avert falling for such frauds.

Disclaimer The above information is for illustrative purposes only. For more details, please refer to policy wordings and prospectus before concluding the sales.

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