FM finds surge in cases of cyber frauds

As many as 11,195 Suspicious Transaction Reports (STRs) have been detected by the Financial Intelligence Unit (FIU) in the Finance Ministry, between 2006-10 in this regard.

The Automatic Teller Machines (ATMs) were found to be the most favourite technology tools used by the rogues for instantly encashing the fraudulent transactions, the maiden report said.

The FIU an elite unit under the Finance Ministry has brought out a latest report on emerging trends in STRs, filed to it by various banks, financial institutions and intermediaries in the country.

The FIU found the number of STRs filed under the category of "nature of transactions" surpassed all other categories of doubtful transactions reported to it.

The "nature of transactions" category of STRs monitor those bank accounts who have had doubtful foreign remittances to non-relatives, suspicious use of ATM/credit card to withdraw money, suspicious off-market transactions in demat accounts and cash deposits in a bank account at multiple locations.

"A number of people are being cheated and duped by these fraudulent schemes including through the internet and the records furnished by banks and financial portals reflect it now. Enforcement agencies like Police, I-T department and Economic Offences Wing are regularly writing to us to obtain such STRs in pursuance of such cases registered by them," a senior Finance Ministry official said.

The analysis of these reports led the FIU to report an "emerging trend of use of bank account for lottery fraud or employment fraud."

The FIU, in its 30-page report submitted to the Finance Ministry recently, said the victims were asked to deposit money in bank accounts which was immediately withdrawn using ATMs.

However, the FIU does not quantify the amount defrauded in this way.

An STR is defined as a record which gives rise to a reasonable ground of suspicion that it "may involve proceeds of an offence or appears to have no economic rationale or bonafide purpose and that it may involve financing of the activities relating to terrorism."

STRs are regulated under the provisions of the Prevention of Money Laundering Act (PMLA).

Another area of the increasing trends was found in "use of bank accounts by multi-level marketing (MLM) companies to lure investors for depositing money with the promise of abnormal returns," the report stated.

In the mutual fund sector, the percentage of STRs containing suspicion relating to `nature of transactions` has increased from 5 per cent to 65 per cent over the period of five years, in insurance sector it has increased from 2 per cent to 49 per cent and in banking sector it has increased from 32 to 85 per cent during the same period, the report said.

The FIU said that the number of STRs has increased at a compound annual growth rate (CAGR) of 131 per cent during the period from 2006 to 2010.

The report, compiled by the FIU for the first time, said that the unit received a total of 817 STRs in 2006-07 and it jumped in next years -- 1,916 (2007-08), 4,409 (2008-09) and 10,067 (2009-10).