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4 banks to pay firm Rs 11 lakh over fraudulent transactions

Holding four banks and a telecom company responsible, outgoing principal secretary (Information Technology) Rajesh Aggarwal ordered them to pay Rs 11 lakh as compensation to a company after a fraudster withdrew Rs 11.18 lakh from its account using a duplicate SIM card and net banking details.

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Holding four banks and a telecom company responsible, outgoing principal secretary (Information Technology) Rajesh Aggarwal ordered them to pay Rs 11 lakh as compensation to a company after a fraudster withdrew Rs 11.18 lakh from its account using a duplicate SIM card and net banking details.

In his order, Aggarwal, who is the adjudicating officer under the IT act, pointed out that these banks had fallen short on many counts like the need for strong KYC norms to prevent cyber crime and noted that when a citizen applies for a SIM card, he/she provides sensitive information with the faith that the company will not share these details.

Chetan Tupe, is the business director of M/s Insta Control Pvt Ltd, which has a current account with the Bank of Maharashtra. The account is linked to his Idea Cellular number. The complainant was using the netbanking facility. On September 30, 2013, all services on the mobile number were suddenly barred. When Anil Shitole, the company's finance head, checked the account balance, he noticed fraudulent transactions where Rs 11.18 lakh was transferred to three different accounts held with Standard Chartered Bank, Central Bank of India and ICICI Bank. Shitole then requested the bank to freeze this amount and lodged a complaint with Pune's Shivajinagar police.

Idea Cellular Limited said that on September 30, 2013, a person posing as Pankaj Jain visited their Pune shop claiming to be an authorized signatory of the complainant and applied for a SIM card replacement on the complainant's purported letterhead. "Due to the extent of forgery committed by the unknown person, the respondent genuinely believed that it had issued the duplicate SIM card to the complainant and had no reason to suspect foul play," it said.

During the hearing, the Bank of Maharashtra said that a one time password (OTP) for addition of new beneficiaries and SMS alert for each transaction were sent to the registered mobile number. But since the number being used by Tupe had been barred after the fraudster got a duplicate SIM, the amount could be siphoned off without Tupe receiving alerts about it. The complainant's user ID and password were either compromised or stolen through unfair means.

The three banks said that by the time they received information about the fraudulent transactions, the beneficiaries had already withdrawn the money except for some paltry amounts.

"It is extremely crucial that telecom companies actively follow strict security procedures while issuing SIM cards, especially in wake of the fact that mobiles are being increasingly used to undertake financial transactions," said Aggarwal.

The police said that while the SIM card was issued to the fraudster on the basis of a PAN card and forged letterhead, the beneficiary of the three fraudulent transactions, Arun Kumar, was staying on rent at the account opening address but was untraceable now. No physical verification of the address was done by the bank. Other beneficiaries Anil Yadav (Bhopal) and Manisha Arjun Kumar (Delhi) had provided fake addresses.

Aggarwal held the banks guilty of violating the circular regarding money mule accounts by not taking sufficient precautions. He said the banks had fallen short on the RBI's 'Guidelines on information security, electronic banking, technology risk management and cyber fraud'.

Aggarwal ordered the Bank Of Maharashtra to pay Rs 2 lakh as damages while Standard Chartered Bank, Central Bank Of India and ICICI Bank were asked to pay Rs 4 lakh, Rs 1 lakh and Rs 2 lakh respectively. Idea Cellular was ordered to pay Rs 2 lakh for "not following the reasonable security practices and procedure and the established guidelines before issuing a duplicate SIM card".

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