The Rs 3,000-cr swindle: How ‘digital arrests’ paralyze the gullible

In what the Supreme Court of India has termed a “shocking” revelation, a silent epidemic has drained nearly Rs 3,000 crore from the bank accounts of Indian citizens. This is not a stock market crash or a corporate default; it is the result of a sophisticated psychological weapon known as the “Digital Arrest.”

As the winter session of Parliament debates economic reforms, millions of Indians—particularly the elderly and the financially prudent—are falling prey to transnational syndicates that have turned fear into a billion-dollar industry. The staggering scale of the loss has exposed gaping holes in India’s banking system and telecommunications infrastructure, forcing the judiciary to intervene and demand accountability.

The anatomy of a digital arrest

The modus operandi is terrifyingly simple yet effective. It typically begins with a phone call. The caller, posing as an official from the Telecom Regulatory Authority of India (TRAI) or a courier company like FedEx, informs the victim that a parcel addressed to them has been seized. The contents? Narcotics, forged passports, or illegal weapons.

Within minutes, the call is transferred to a “police officer” or “CBI official” via Skype or WhatsApp video. The victim sees a man in uniform, sitting against a backdrop that mimics a police station or a courtroom. They are told they are under “digital arrest”—a term that has no legal basis in Indian law but carries enough weight to paralyze a law-abiding citizen with fear.

For hours, sometimes days, the victim is kept on a video call, isolated from their family, and coerced into transferring their life savings into “secret supervision accounts” for “verification.” By the time the screen goes black, the money is gone.

The banking system: A silent accomplice?

While the fraudsters operate from the shadows, their gateway to Indian money is the formal banking system. The Rs 3,000 crore figure cited in recent Supreme Court hearings did not vanish into thin air; it flowed through “mule accounts”—bank accounts rented or hijacked to launder dirty money.

The failure of the banking system is two-fold:

* The mule account menace: Fraudsters actively recruit poor individuals to “rent” their accounts for a commission. However, a more disturbing trend is the misuse of Current Accounts. Shell companies are set up solely to open high-limit bank accounts that funnel crores of rupees abroad within hours. The banking system’s Know Your Customer (KYC) protocols, designed to stop money laundering, are failing to flag these erratic high-value transactions in real-time.

u The freezing lag: The “Golden Hour” is critical in cybercrime. When a victim reports a fraud to the 1930 helpline, the I4C (Indian Cyber Crime Coordination Centre) alerts the banks. However, the response time from banks often lags. In the digital age, money moves in milliseconds, but freezing orders often move at the speed of bureaucracy. The Supreme Court recently flagged this delay, remarking that banks could be held liable for “deficiency of service” if they fail to secure customers’ funds despite timely alerts.

The SIM card explosion: Selling indiscriminately

If banks provide the getaway car, telecom operators provide the disguise. The Department of Telecommunications (DoT) recently blocked over 1.7 crore mobile connections to curb cybercrime, yet the hydra grows new heads daily. The root cause is the indiscriminate sale of SIM cards.

u Point of Sale (PoS) negligence: Local SIM vendors often activate multiple SIM cards using a single person’s biometric data without their knowledge—a practice known as “silicon thumb” fraud.

u Corporate loophole: Fraudsters exploit “corporate connections,” which allow bulk issuance of SIM cards without stringent individual verification.

u Sim box farming: Recent raids have uncovered “Sim Boxes”—devices that hold hundreds of SIM cards to route international calls as local calls, masking the caller’s true location.

Despite the launch of the Sanchar Saathi portal and the Chakshu facility for reporting suspected fraud communication, the sheer volume of active, unverified SIMs remains the fraudsters’ greatest asset.

The international connection: Cyber slavery

The trail of the Rs 3,000 crore does not end in Jharkand or Mewat; it crosses borders. Intelligence agencies have confirmed that the masterminds operate from “scam compounds” in Cambodia, Myanmar, and Laos.

In these lawless zones, thousands of Indians—lured by promises of IT jobs—are held captivity in “cyber slavery” camps. They are forced to make scam calls to their countrymen under the threat of physical violence. This transnational nature makes investigation difficult. While the Indian police can freeze a mule account in Mumbai, they have no jurisdiction over the puppet master sitting in Phnom Penh.

Global lessons: How others are fighting back

India is not alone in this battle. The “pig butchering” scam (a variation of investment fraud) has plagued the world. However, other nations have adopted aggressive countermeasures that India could emulate:

u Singapore: The city-state has introduced a “Kill Switch” for banking customers—a feature that allows a user to instantly freeze all their accounts and credit cards if they suspect a scam, without waiting for a bank representative. Furthermore, Singaporean banks are now co-sharing liability for losses in specific phishing scams, incentivising them to upgrade security.

u Australia: The National Anti-Scam Centre (NASC) facilitates real-time data sharing between banks, telcos, and digital platforms to block scams at the source. They have also mandated that telcos block SMS messages that look like scams using alphanumeric sender IDs.

u The UK: Under the new reimbursement rules by the Payment Systems Regulator (PSR), banks are required to reimburse victims of authorized push payment (APP) fraud, shifting the financial burden from the victim to the institution. This forces banks to implement better fraud detection AI.

The way forward

The loss of Rs 3,000 crore is a wake-up call. Tackling this requires a “whole-of-government” approach:

u Banking liability: The Reserve Bank of India (RBI) must strictly enforce penalties on banks that harbor mule accounts. If a bank opens an account without proper diligence that is later used for fraud, the bank should bear partial liability.

u Telco accountability: The penalty for issuing SIM cards on fake documents needs to be prohibitive, not just a slap on the wrist.

u International diplomacy: India must leverage its diplomatic weight to pressure Southeast Asian nations to raid these scam compounds and repatriate the Indian nationals held there.

Until these gaps are plugged, the “digital arrest” will remain a lucrative business, and the common man’s hard-earned money will continue to be just a video call away from disappearing.

(The author is former OSD to former Union Civil Aviation Minister)