The Most Common Financial Frauds In India In The Year 2024

Financial frauds have devastating consequences for individuals as well as on the economy. Although digital payments have lead to a more convenient life as they are easy to use in India, they also have made us prone to all types of financial frauds.

As per the data released by the RBI, fraud cases up to an amount of ₹60,414 crore were reported in the year 2021-22, such frauds have cost India a huge amount of ₹100 crore daily over the past 7 years.

These financial frauds have been further divided by the central bank into various categories, including the cases of misappropriation, forged instrument encashment, criminal breach of trust, manipulation of accounts, unauthorised credit facilities, fictitious accounts, negligence, cheating, forgery, irregularities in foreign exchange transactions, cash shortages, and other types of fraud which has not been specifically mentioned.

In the discussion below, we would explore most common financial frauds in India as well as providing insights on to how could protect oneself from falling victim to such schemes-

1. Ponzi Schemes: False Promises

Ponzi schemes are a way to lure investors with false promises of unusually high returns in a short period of time. Fraudsters may use these funds from their new investors in so as to pay off the earlier investors, creating a false illusion of gains.
An example of these ponzi schemes is the Saradha chit fund scam, which caused millions of investors their hard-earned money. A group of over 200 private companies falsely portrayed an investment scheme as chit funds.

2. Investment Scams: Unrealistic Returns

Investment scams will often entice the individuals with such fraudulent opportunities promising quick as well as guaranteed returns. Such schemes exploit a person’s desire for instant gains or huge profits and may often involve fake companies or fake investment products.
An example of such scam was the SpeakAsia Online scam, where investors were duped by promising them huge returns for completing online surveys.

3. Digital Banking and Credit Card Fraud

The instances of online banking and credit card fraud are quite common nowadays. Acts such as phishing attacks, identity theft, and fraudulent transactions by using stolen card details will be prevalent.
One of the examples of these frauds is 2016 debit card data breach, where data of millions of debit cardholders was compromised, which lead to unauthorised transactions and financial losses.

4. Money Laundering

Money laundering is referred to disguising the origins of illegally obtained funds by making them appear legitimate. For this procedure, financially vulnerable people will be used, who sometimes get trapped.

5. Stock Market Manipulation

Manipulation of the stock market shall include activities such as price rigging, spreading false information, insider trading, or pump-and-dump schemes. These fraudsters would manipulate stock prices, deceive their investors, hence leading to significant financial losses.
The Satyam Computer Services scandal is a prime example of stock market manipulation

6. Bank Frauds

These frauds include various fraudulent activities, such as loan frauds, frauds related to cheques, forged documents, as well as unauthorised transactions, etc. leading to substantial financial losses for banks and individuals such as the Nirav Modi-PNB scam

How may one protect him or herself against financial frauds in India?

1. Protect your personal information:

Safeguarding the sensitive information such as bank account details, Social Security number as well as passwords is most important.
It is advised to avoid sharing these details with others unless it is necessary. It is advised to be extra careful about anyone asking about your personal details through calls, messages or by any other means.

2. To monitor financial activities:

It is important to review bank statements, credit reports, as well as online accounts regularly, so as to detect any unauthorised transactions or any suspicious activity.

3. Be cautious online:

It is important to stay vigilant against the phishing emails, fake websites, or unsolicited calls or messages which enquire about personal information. It is advised to avoid clicking suspicious links or providing sensitive details without having to verify the source.

4. Use strong passwords and enable two-factor authentication:

It will be helpful to create strong and unique passwords for financial accounts.

5. Stay informed about scams:

It would be favourable to educate oneself about different kinds of scams, like phishing, identity theft, or investment fraud. It is advised to be aware of the common warning signs and techniques which are used by fraudsters.

8. Verify before sharing information:

Before you provide personal information or make financial transactions, it is advised that you ensure that you deal with reputable and trusted sources.

Conclusion-

In case an investment opportunity seems too good to be true, probably that is the case and excessive caution will always be better than unnecessary recklessness.

Thus, it is advised to be vigilant, safeguard your finances, and report suspicious activities to the appropriate authorities.

Lead India Law is a team of experienced advocates who have been successfully dealing with similar issues of fraud involving finances. Thus, if you wish to talk to a lawyer or seek free legal advice online, you may contact