WEEK 14

READING MATERIAL
INNOVATIONS IN BANKING

Banks are considered as necessary equipment for the Indian economy. This particular
sector has been tremendously growing in the recent years after the nationalisation of Banks in
1969 and the liberalisation of economy in 1991.Due to the nature of their daily activity of
dealing with money, and even after having such a supervised and well-regulated system it is
very tempting for those who are either associated the system or outside to find faults in the
system and to make personal gains by fraud

WHAT IS A FRAUD?

Generally, A dishonest act or behaviour through which one person gains or tries to gain an
advantage over another which results in the loss of the victim, directly or indirectly is called
as fraud. Under the IPC, fraud has not been defined directly under any particular section, but
it provides for punishments for various acts which lead to commission of fraud. However,
sections dealing with cheating, concealment, forgery, counterfeiting, misappropriation and
breach of trust cover the same adequately.

IMPACT OF FRAUDS IN INDIA

“Offences related to banking activities are not only confined to banks but have a harmful
impact on their customers and society at large”

Many recent fraud incidents reported are related to fix deposits, loan disbursements, and
credit and debit card frauds and ATM based frauds. All these frauds show that not only they
undermine the profits, reliability of services and operating efficiencies but can also have an
impact on the society and the organisation itself. With the increase in the gravity of such
instances it is impacting the profitability of the sector and there is an increase in the NPAs.
This rise in the NPA is a serious threat to the Indian Banking Industry as the sturdiness of a
country’s banking and financial sector determines the quality of products and services. It is
also a direct indicator of the living standards and wellbeing of people. Thus, if there is high
level of NPAs in the banking system, then it reflects the distress of borrower and the
inefficiencies in the transmission mechanism. The Indian economy suffers greatly due to
these incidents. Fraud has also hampered the growth of this establishment/ industry. It is a
huge killer for the business sector and underlying factor to all human endeavours. It also
increases the corruption level of a country. Even after there are various measures taken by the
RBI to limit or decrease the frequency of frauds, the amount of money lost is still on the rise.

Some common types of banking fraud include:

1. Identity Theft: This occurs when someone steals another person's personal
information, such as their name, Social Security number, or bank account details, to
carry out unauthorized transactions or open accounts in their name.
2. Account Takeover: In this type of fraud, criminals gain unauthorized access to a
bank account by obtaining the account holder's login credentials or other sensitive
information. Once they have control of the account, they may withdraw funds, make
unauthorized transactions, or manipulate account details.
3. Credit Card Fraud: Criminals may use stolen or counterfeit credit card information
to make unauthorized purchases or cash withdrawals. This can occur through various
methods, including skimming devices, phishing scams, or hacking into payment
systems.
4. Check Fraud: This involves forging or altering checks to withdraw funds from
someone else's account or to make purchases. Criminals may steal checks, intercept
them in the mail, or create counterfeit checks.
5. Phishing and Social Engineering: Fraudsters may use deceptive emails, phone calls,
or text messages to trick individuals into providing their personal or financial
information. They may pose as legitimate organizations, such as banks or government
agencies, to convince victims to disclose sensitive data.
6. Loan Fraud: This occurs when individuals provide false information or
documentation to obtain loans or credit, they are not eligible for. They may
misrepresent their income, assets, or employment status to secure loans with
fraudulent intent.
7. Insider Fraud: In some cases, employees or insiders within a bank may engage in
fraudulent activities, such as embezzlement, unauthorized trading, or manipulating
financial records for personal gain.

Banks employ various security measures and technologies, such as encryption, fraud
detection algorithms, biometric authentication, and transaction monitoring systems, to detect
and prevent fraudulent activities. Additionally, regulatory authorities often impose strict
compliance requirements on banks to mitigate the risk of fraud and ensure the integrity of the
financial system.

CREDIT AND DEBIT CARD FRAUD:

The introduction of plastic money also brought in the frauds as a natural evil fall out. As a
greater number of people using them there is more and more chances of fraud in the related
sector. The case is much worse in foreign countries where the general usage is much higher
than in India.

Types of card related frauds

• Abuse of genuine cards

• Altered Cards

• White Plastics

• Impersonation frauds

• Stolen/lost card

• Counterfeit card

• Card holder not present

1. Abuse of genuine cards

The genuine cards are stolen while in transit from the institution to the user or from the
owners and sometimes the card is stolen, and there is a misuse of the stolen cards. Even in
some cases the cardholders falsely report about their card being stolen and go on a shopping
spree before the acquirer bank suspends the transactions or block the card.

2. Altered Cards

An altered card is an original card only which is altered by the fraudster by giving a new
name and if replaces the signature strip also then he gets genuine account number from a
bunco bankster. It is very abnormal and can damage the security features of the card provided
by the bank.
 3. White Plastics

The duplicate fraudulent cards are called as white plastics. They are the copy of the original
genuine cards. They have pictorial similarities but doesn’t have the safety features

4. Impersonation frauds

These are also called as application frauds. The fraudster assumes the name and address of
some well know personality and collects the card

5. Stolen/lost card

The card will be taken out of your ownership either by theft or because you lost it. It will then
be used by criminals who get their hands on it to make payments. It is hard to do so through
computers because they will need the PIN. Using a found or stolen card to create online
purchases

6. Counterfeit card

It generally occurs by skimming. This means that all your card details are held by a fake
magnetic swipe card. The fake card is exactly the copy of the original one. During
transactions, fraudsters can readily use the fake card

7. Card holder not present

if the card details are known by someone, they can use the card for transacting without being
in the physical possession of it. It occurs primarily when your information is stolen by
different means. It can either be through phone, email or internet

Preventive Measures:

• Speeding up the transmission of information about the stolen or altered card through a
dedicated website.

• Appointing trained operators to recognise and differentiate between genuine and

original cards

• Monitoring the working of the sale terminals periodically to detect unscrupulous

merchants.

Poisoning in Cyber Security Threat

• Poisoning attacks involve attackers intentionally injecting false data into the network
or infrastructure.

• This allows them to steal sensitive data or perform other malicious activities.

Types of Poisoning Attacks

1. Web Cache Poisoning

2. DNS Cache Poisoning

3. ARP Cache Poisoning

4. Model Poisoning

1. Web Cache Poisoning

Caching is a common term that refers to storing commonly requested data to save
time and minimize network traffic. Web cache poisoning involves adding notorious
websites to the cache by making requests from an attacker-controlled system. This
means that when the victim’s system makes a request, the notorious websites may be
served. These websites may contain links to other sites that host malicious software.
When the victim unknowingly accesses the site, the systems are infected with
malicious software.

2. DNS (Domain Name System) Cache Poisoning

This attack aims at exploiting vulnerabilities to direct web traffic to fraudulent

servers, instead of the legitimate ones. The DNS converts human-readable websites to
IP addresses that can be understood and processed by computers. Computers, internet
service providers, and routers have their own DNS caches to refer to. Attackers may
poison the DNS servers with incorrect entries to perform a DNS cache poisoning
attack. This would mean that a legitimate website would be associated with a
malicious IP address, causing the computer to redirect the victim to an attacker-
controlled site. This may also spread to other DNS servers, updating them with the
incorrect information.

3. ARP (Address Resolution Protocol) Cache Poisoning

When an attacker modifies the Media Access Control (MAC) address to update the
system’s ARP cache with false ARP request and response packets, the attack is called
 ARP poisoning. The Address Resolution Protocol (ARP) associates a physical address
of a network interface to an IP address. Sending false ARP response causes a device
to update its cache with it, to be used for transaction routing. This attack can cause
traffic to be routed to attacker-controlled systems allowing the compromise of
sensitive data. Usually, this form of attack remains undetected by the victim.

4. Model Poisoning

This is a type of attack launched on artificial intelligence and machine learning systems.
Attackers influence the training datasets used to manipulate the results according to their
needs. With the rise in AI (Artificial Intelligence) and machine learning globally, notorious
actors will find more opportunities to exploit. Such vulnerabilities must be considered while
designing systems to minimize incidents of model poisoning.

Website Cloning

Website cloning is a method where cyber criminals create nearly identical websites to mirror
original ones out of malicious motives. The cloned websites have a URL which is close to the
original and can fool users by exchanging lookalike characters, doubling certain characters in
the URL, or registering a domain where a single letter is different

How website cloning works?

The cloned websites can be hosted with a bulletproof hosting company which do not honor
takedown requests. These are very popular because they allow the attacker to host content
that violates intellectual property or any other malicious content without the hosting provider
terminating their service when organizations or individuals file a takedown request. Lists of
bulletproof providers are freely available online, and some of them even advertise it as a
feature

Who is a target?

Cyber criminals use this method to target users indiscriminately, along with unsuspecting
victims who are not as likely to notice minor differences in websites and URLs. However,
even if users check the URL, there are techniques the attacker can use to make the URL
appear as showing the correct name.

How to protect from cloning?

1. Use trusted bookmarks

The user should ensure that they are on a legitimate website, especially when planning on
using credentials to log in or perform any sensitive actions such as money transfers or
entering sensitive information. Bookmarking the legitimate website and using this instead
of any links sent via email or text messages is an effective method

2. Verify the SSL Certificate

Inspect the website’s SSL certificate to check the domain’s validity. In most browsers,
this is done by clicking the padlock icon next to the URL. Websites without SSL
certificates should be automatically treated as untrusted, especially if they ask for email
addresses, passwords, or other sensitive data. Check the expiration date of the SSL
certificate and when it was issued; if it is only a couple of days old, it could be evidence
of a newly registered domain with a fresh SSL certificate

3. Find where the webserver is located

Copy the URL of the website and paste it into a hosting checker website to figure out
where it is hosted. If the user sees that the website is hosted in a location where the
company does not normally do business, it should serve as a red flag

4. Utilize search engines

The user can use search engines to navigate to the website they want to visit if they prefer
not to use bookmarks. Official websites are positioned higher in the search results since
they existed longer and have more links from other websites pointing to them (an
important search engine metric).

Merchant frauds
A method used where goods or services are offered at very cheap prices but either
counterfeit products are shipped or actual good/service is never shipped. In these cases,
no-chargeback payment methods are used. Customer will not have access to the helpdesk
to raise concern. This is applicable for both retail and wholesale transactions.

There have been few cases where fake e-commerce marketplaces or customer support
numbers have been setup to lure people into fraudulent business. These sites or contact
details appear in web search results, accept orders from people and then dupe them. Fake
customer care numbers gather sensitive financial details or passwords and dupe the
customers.
Several cases of fake sellers also appear in genuine online retail marketplaces and defraud
customers with fake or non-existing products. Even merchants or sellers also have been
defrauded by criminals by falsely claiming failed delivery of products. The modus
operandi here is to abuse a social platform or a trusted marketplace to sell fake products.
In some of these platforms, the sellers are not sufficiently verified for their authenticity

**********************************************************************