Types of KYC Frauds and How to Avoid Them

Digitisation in the banking system has made a lot of procedures easy and time-saving for people. However, scammers and fraudsters always try to find loopholes to get into the banking system and steal valuable information. Cybercrimes have increased considerably over the years.

We will discuss some of the common KYC frauds in banks and the precautionary steps that will protect your information and your hard-earned money.

KYC or Know Your Customer is one compulsory procedure for every financial procedure to follow. Through this process, they authenticate the identity of a customer and their financial status. 

Customers have to share some of their most personal and sensitive information through this procedure and these stay secure and confidential with their financial institution. RBI has strictly mandated all registered financial establishments not to go forward withapplications without going through the KYC process.

You will need the following documents to go through the KYC process: 

• Identity proof (Voter ID/ Aadhaar ID/ Passport/ Driving License)
• Address proof (Aadhaar ID/ Passport)
• NREGA card (Job card)
• PAN card
• UIDAI issued Aadhaar letter

You must be aware of the KYC process, where you have to share your confidential information in order to complete your identification with the financial institution. Unfortunately, some of you might also be familiar with KYC frauds over calls. These scammers pretend to be bank officials and ask you to update your KYC details. They also pose threats, such as unless you update your KYC, your account will get blocked. 

These digital methods have prominently omitted the complications of paperwork but have also made the information prone to vulnerability in the hands of conmen.

As India is swiftly revolving towards a digital economy, more people are getting to know the digital means of performing financial functions online, such as money transfers, loan applications, EMI payments, etc. 

Bluffers have been anchoring this opportunity and coming up with innovative ideas to deceive people and rob them. Here are some of the common ways of tricksters for KYC scams:

• Fake duplicate KYC: This is one of the most common means of KYC fraud. Scammers call a customer pretending to be banking officials and ask them to share their details to update KYC, or their accounts will be blocked.
• Phishing: The fraudster collects the contact information of a customer from social media or any other online database. He then calls the customer, pretending to be a registered representative of their bank. He asks them to update their KYC, usually via an SMS with a link to some fraudulent app or site. There they have to share the OTP while staying on the call.Scammers do not let the customer disconnect the call, as this will bring this illegal transaction to the bank’s notice. By the time the scammer disconnects the call, a significant amount has already been lost.
• Identity theft: Identity theft is when someone else uses your identity to perform a crime. They can use your identity for crimes, such as applying for credit and filing taxes. This can lead to great financial loss and even hamper credit scores.
  
• Smishing: Smishing is performed through messages with malicious links or attachments. These claims are to be sent from registered trustworthy sources and ask the customer to click on the link. Once the customer does the same, the scammer gets into their phone and steals their data.

If you ever be in any of the above situations, you can take the given steps for KYC fraud: 

• You need to alert the respective bank and your local police station about the scam as soon as possible. 
• You need to submit all the details right from the beginning till the end. 
• Take screenshots and printouts of all the documents, such as messages, call details, and emails, whichever is applicable. 
• Provide this evidence to the bank. 
• File a complaint at the local police station with the same evidence and a bank statement.

While there have been safety measures being taken by RBI, it is also important to raise awareness among the people about the do’s and don’ts to prevent KYC scams. Ninety per cent of these scams can be prevented if customers are aware of their actions and do not cooperate with the scammers. 

Here are some safety measures you should follow to prevent yourself from KYC scams: 

• Stay away from giving away information to unknown calls and messages. Someone can pretend to be your friend or relative or state that there is a family emergency asking for a money transfer. Verify such calls. Make calls to the person mentioned and if you find this to be fake, report that number immediately. 
• Do not provide your sensitive financial information to anyone claiming to be the bank’s representative.
  
• Do not put your credit card information in a form or online application forms without verifying its authenticity.
  
• Avoid downloading third-party apps, especially from links received through unidentified messages or emails.
• Do not open any links received through SMS from unsolicited sources. 

Since the pandemic, India has seen a rise in KYC fraud and other related cybercrimes. Therefore, the State Bank of India observes KYC Compliance and Fraud Prevention Day on 1st August to create more awareness about cyber frauds taking place. Make sure you follow the preventive measures discussed in this article to safeguard yourself and also pass on such information regarding KYC fraud.