Financial Frauds in Cyber Space - The Associated Chambers of ...

Financial Frauds in Cyber 

Space 

N. S. Nappinai 

Advocate 

Nappinai & Co., 

Founder Member – Technology Law Forum 

nappinai@nappinai.com 

N S Nappinai©

What’s the New Face of 

Crime? 

• Changing profile of the perpetrator; 

• Farther reach / larger victim base; 

• Assumed Anonymity; 

• Comity of Nations; 

• International Enforcement; 

• Practicalities – crimes against Persons Vs. Crimes 

against Nations; 

• Legal Black holes – procedures; 


What has India to offer as 

protection? 

• Indian Penal Code (IPC); 

• Information Technology Act, 2000 (as 

amended) (IT Act); 

• Special Enactments – i.e., Prevention of 

Money Laundering Act, 2002; Prize Chits 

& Money Circulation Schemes (Banning 

Act, 1978); 

• Indian Contract Act, 1872 


Cyber Security – An 

Oxymoron? 

• Is “Cyber Security” as tenuous as the domain it applies to? 

• Where is the emphasis? – in prevention or cure? 

• Broad Classifications: 

• Security of Nations – Cyber Terrorism; 

• Economy Driven – Financial Frauds; Bank Frauds / thefts 

online; Phishing; Hacking; Credit Card Frauds; Nigerian 

Frauds; Protection of Confidential and proprietary data and 

information; 

• Privacy / Personal Data Protection – against dissemination; 

use & misuse without permission (spamming; mapping; 

targeted marketing etc.,); 


Venture Global Engineering Vs. Satyam 

Computer Services Ltd (11.08.2010) 

• S.17 Indian Contract Act, 1872: `Fraud’ includes 

acts committed by a party to a contract, or with 

his connivance, or by his agent, with intent to 

deceive another party thereto or his agent, or to 

induce him to enter into the contract:- (1) the 

suggestion, as a fact, of that which is not true, by 

one who does not believe it to be true; (2) the 

active concealment of a fact by one having 

knowledge or belief of the fact; 


Contd., - “Fraud Defined” 

• (3) a promise made without any intention of 

performing it; (4) any other act fitted to deceive; (5) 

any such act or omission as the law specially 

declares to be fraudulent. 

• Explanation.-Mere silence as to facts likely to affect 

the willingness of a person to enter into a contract is 

not fraud, unless the circumstances of the case are 

such that, regard being had to them, it is the duty of 

the person keeping silence to speak, or unless his 

silence, is, in itself, equivalent to speech. 


Criminal Law & Fraud 

• No definition in IPC. Most acts done with “dishonest” 

or “fraudulent” intent however classified as criminal 

offences, like: 

• Cheating (417 – 420 IPC); 

• Misappropriation and criminal breach of trust. 

(403; 405); 

• Forgery including of electronic records including 

with intention to cheat; harm persons’ reputation; 

by employee etc.,; (463 – 471 IPC); 

• IT Act – S.43 r/w S.66; S.66C; 66D; 


Old Wine in a New Bottle 

– Boon or Bane? 

• S.66: Transposing S.43 to S.66 – offence when 

same actions done with dishonest / fraudulent 

intent (3 yrs & fine up to Rs.5 Lacs): 

• securing unauthorized access; 

• downloading / copying of data stored in a 

computer / computer system; 

• introducing computer viruses; 

• damaging computers and / or data stored 

therein;

S.66 Contd., 

• Section 66 Contd.,: 

• disrupting computers; 

• denial of access; 

• illegal charging for services onto account of 

another. 

• Destroys, deletes or alters any information residing in 

a computer etc., or diminishes its value, utility or 

affects it injuriously; 

• Steals, conceals, destroys, alters any computer source 

code or causes commission of such acts with intent 

to cause damage; 

• Abetment of such acts by assisting others;

Personal Security: 

Identity theft & 

Impersonation 

• S.66C: Identity Theft: Fraudulent or 

dishonest use of electronic signature, 

identity password or unique identification 

feature – punishable with imprisonment up 

to 3 yrs & fine of up to Rs.1 Lac.; 

• S.66D: Cheating by impersonating – 

punishable with imprisonment up to 3 yrs & 

fine of up to Rs.1 Lac. 

N S NAPPINAI ©

Hack & Crack 

• May 20, 2013: Current account of RPG Group hacked & 

Rs.2.34 Crores siphoned out using RTGS; 

• May 9, 2013: Global cyber crime ring steals $45 million 

from two Middle Eastern banks by hacking into credit 

card processing firms (In India & USA) & withdrawing 

money from ATMs in 27 countries; 

• Norton security report: September 2012, 42 million 

Indians were victims of cyber crime losing $8 billion 

dollars (Rs.44,000 Crores) in 12 months. 

• Mphasis Data theft case: huge impact on the BPO 

industry in India. highlighted the lack of Data Protection 

Laws in India; 


Finance through Fraud! 

• Case of Pranab Mitra (a former executive of 

Gujarat Ambuja Cement); 

• Daredevil fraud against one V.R. Ninawe, an 

Abu Dhabi based victim; 

• Culprit cheats by first posing as “Rita Basu” & 

then as “Ruchira Sengupta” & by concocting a 

case of suicide etc., 

• Fraud to the tune of Rs.95 Lakhs!; 


Fraud Affecting Individual 

Rights 

• MphasiS-MsourcE – Citibank e-banking Fraud 

(2005): 

• Employees misuse their position to obtain and 

retain confidential details of account holders. 

• Get password/PIN numbers from customers on 

the phone; 

• Misuse data to siphon out funds; 

• One of the fastest and earliest detections of 

Cyber Crime; 


Professors or Police – Not 

spared 

• Mumbai Police lose lakhs to Greek Criminals; 

• Debit card details illegally procured & in a 

sweep attack overnight about 37 a/cs 

including of 15 cops, cleaned out. After 

inquiry, Bank has reimbursed the victims; 

• Joy Kutty, Associate professor of SNDT 

Women's University, loses Rs.88,000/- 

through Bank fraud – recovers after pursuing 

criminal action; 


Credit / Debit Card Fraud 

• Phishing attacks – still a menace. Innumerable 

warnings – not paid heed to; innovation in same 

crime! 

• India – high on the phishing site hosting chart; 

• Mumbai accounts for maximum phishing attacks 

followed by Delhi and then Chennai & Bangalore; 

• Credit / Debit Card frauds still on the rise; 

• Banks’ liability Vs. Individual Liability; 

• Availability of Civil & Criminal remedies; 


Civil Penalty proves 

efficacious 

• Umashankar Sivasubramaniam Vs. ICICI 

Bank (2010); 

• Case filed before Adjudicating Officer, 

Chennai; 

• Phishing resulting in money transfer of about 

Rs.6.5 Lakhs 

• Adjudicating officer awards about Rs.12.85 

Lakhs compensation including travel costs of 

Complainant, who was based on Abu Dhabi. 


Financial Institutions fall prey 

to Banking Fraud (2013) 

• West Bengal Infrastructure Development 

Finance Corp. (WBIDFC) transfers about 120 

Crores to UCO Bank, Kolkatta, by RTGS on two 

tranches – August 2012 & January 2013 for 

starting term deposits; 

• Amounts however siphoned out by one Pradeep 

Chongdar, Proprietor, SA Enterprises; 

• Documents submitted by Pradeep found to be 

fake; address fake – KYC?; 

• About 82 Lakhs siphoned out – still not traced!; 


Nigerian Fraud goes Global! 

• Email requests for financial assistance citing dire 

straits – on the rise; 

• More focused and targeted crime – details too 

close to the truth! 

• Hacked accounts; personal data online menace; 

• Some reported cases: Pune case of 6 

businessmen’s email a/c hacked and foreign 

counterparts contacted for funds; 

• KYC comes under scrutiny; 


Money Circulation & Money 

Laundering online 

• MLM Companies on the rise; 

• Online presence broadens the victim base! 

• Money Laundering – a proximate cause? 

• Greed as a driver? 

• Application of Prize Chits & Money 

Circulation Scheme (Banning) Act, upheld; 

• Efficacy of prosecutions; 


Jurisdiction in Cyber 

Space 

• Long Arm jurisdiction under IPC (179 IPC) & IT Act 

(S.75 IT Act); 

• Territorial Jurisdiction based on where 

consequences arise; 

• Efficacy of Long Arm Jurisdiction?; 

• Speed – A victim of circumstances? 

• Pivotal Role of Jurisdictional issues in the 

enforcement of Cyber Laws; 

• Shadow lines make for strong Barriers!! 

• Extradition – out of reach? 

N S NAPPINAI ©

Q & A 

THANK YOU 

N S NAPPINAI 

ADVOCATE 

(nappinai@nappinai.com)

Financial Frauds in Cyber Space - The Associated Chambers of ...

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