24/06/2015 11:45 AM IST | Updated 15/07/2016 8:25 AM IST

5 Ways To Avoid Falling Prey To Financial Fraud

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Indian customers at a foreign exchange outlet pose for a photo as they exchange Indian rupees (L) for US dollars in Bangalore on August 24, 2013. The rupee, staged a sharp recovery against the dollar as state-run banks, at the behest of the Reserve Bank of India (RBI), reportedly sold dollars to take the pressure off the rupee. The rupee had, on August 22, slumped to its all time low of 65.56 intraday against the greenback. AFP PHOTO/ Manjunath KIRAN (Photo credit should read Manjunath Kiran/AFP/Getty Images)

Imagine getting a call from your bank from a senior relationship manager. The relationship manager says that there has been fraudulent activity happening on your account, and as a result, needs to verify your details to ensure that it was indeed you who conducted the transactions.

He asks for your basic information, such as your date of birth, billing address, and the last transaction(s) you made with your credit/debit card. After giving the information, the relationship manager says that there seem to be some inaccuracies and that your card needs to be put on hold.

What would you do in such a situation? Many end up getting frustrated and start pleading with the relationship manager that it was indeed them who conducted those purchases and that there is no need to place the card on hold.

At that point, the relationship manager asks you to fulfill basic due diligence by asking you to verify the card information: the card number, CVV code, and the password. If all were not provided, the relationship manger would have no choice but to suspend the card.

You go ahead and give the information. The relationship manager confirms that the card the belongs to you, and apologizes for having taken up your time.

Within 5 minutes, your entire bank account has been wiped out. Welcome to the world of financial fraud.

A problem on the rise

In January 2015, a comprehensive study by the Assocham-Mahindra SSG was conducted to see the trends in online financial fraud in India.

The results were nothing short of staggering.

Let's take the case of the number of cases of financial fraud reported from 2011 through 2014. In 2011, 13 thousand cases were reported. This figure rose to 22 thousand in 2012. In 2013, a surge in financial frauds occurred, with 70,000+ cases reported. One would figure that at that point, the figure would surely begin to slow down, but 2014 witnessed a 100% increase in financial frauds: an incredible 1.5 lakh financial frauds were reported during the calendar year.

The rampant rise in financial fraud is only now starting to come to light. In the same study, it was found that, just like 2014 compared to 2013, a 100% increase of fraudulent cases is expected in 2015. That pins the number of expected fraudulent cases at 3 lakh by the end of the year.

What can one do to prevent financial frauds?

There are many simple, yet highly effective steps one can take to protect themselves from financial frauds. We'll take you through FIVE of them to ensure that you're protected from all angles.

1. We tend to take our banks for granted, assuming that all transactions that go through a bank are safe-proof. By nature, we associate a bank with the word "safety". We take the association to such an extent that we rarely think twice when someone from our bank gives us a phone call, rarely bothering to check whether the banker is actually employed by the bank.

Fraudsters take full advantage of this natural tendency of ours by calling us and pretending to be calling on behalf of the bank. Customers get tricked into revealing sensitive information such as the CVV numbers on the bank of their credit and debit cards, PIN authorization codes, email addresses, and other highly sensitive information.

To mitigate this problem, one simply needs to ensure that the individual calling them is actually an employee of the bank in question. In short, the bank should have all available information of you. Therefore, there should rarely be an occasion for the bank to ask for any sort of sensitive information about your banking details over a phone call. With the example from above, you should never need to disclose any information about your card over the phone.

2. The RBI, nor any bank, will never contact you and ask for sensitive information that can compromise your account without you, first, confirming your identity through secondary authentication, such as a one-time password of a TPIN. Similarly, any type of call from a bank that is soliciting information from you is unwarranted and a cause for alarm.

3. When it comes to online transactions, where financial frauds are on the rise the fastest, make sure that you register your number with the card issuer. Additionally, a quick and dirty way to ensure that the website you are dealing with is secure is to look for websites starting with "https". Finally, always ensure that if you are using a public wifi zone, your password is not visible to the public and is not one that is relatively easy to crack such as a family member's name, birthdays, etc.

4. Never reply to emails asking for "customer verification". Perhaps the easiest trick in the book, fraudsters send emails from fake ID's that highly resemble official ID's from banks that you would likely bank with. The second you provide the information that the emails requests, the fraudster can immediately make purchases on your behalf and withdraw funds. Beware of such emails and never respond to them! Mark them as spam right away.

5. Smartphone usage is on a rampant rise; and, as you might have guessed, financial fraud involving smartphones is also on the rise. We use our smartphones for just about anything related to the internet; so it comes to no surprise that we make many online purchases/payments through our smartphones.

However, when we use our smartphones, a minority of users check vigilantly for security certificates when they download applications (apps). If the phone gets hacked or stolen, the information gets immediately compromised since many mobile banking apps store highly sensitive data such as account numbers, PIN numbers, and other personalized information that can be taken advantage of. To mitigate this risk, ensure that you download your apps from trusted sources. Third party and unsecured websites should be avoided.

Financial fraud is not going to go away. It is going to take years for the mass public to get a firm understanding of how online financial fraud occurs. It's your responsibility to stay one step ahead of the game.

After all, with such a large population, a fraudster is unlikely to target you if he/she knows that you are being vigilant. And ultimately, that's what matters.

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