Fintech Frauds Amidst Lockdown: Reality Check and Techniques to Prevent, Detect and Investigate the Impact on Indian Corporate World

Fintech Frauds Amidst Lockdown

Fraud is considered as wrongful or criminal deception intended to result in financial or personal gain. During lockdown we came across many ways these fraudsters tried to dupe the organizations and civilians individually. Detecting and investigating signs of fraudulent activity shall never be overestimated or taken too superficially. It is the responsibility of an Employer to know the measures of preventing corporate frauds and not let someone take benefit of it. Employers must keep in mind the impact on the corporate reputation and internal environment of putting the wrong person under investigation. Following are some real cases taken which provide in-depth analysis of how these frauds took place during the lockdown situation continued by the solution for the same and also gives highlight and measures for prevention, detection, and investigation of Frauds in Corporate and Cyber Environment.


On the Date of 16 May 2020 this Financial, Bank Fraud came into the light where Fraudster, Board of Jammu and Kashmir State Cooperative Bank Limited (JKSCBL) and Victim, On the name of Non-Registered and Non-Existing body, River Jhelum Cooperative House Building Society for construction of Satellite Township at Shivpora, Srinagar were found. The JKSCBL is A Non-Urban State Cooperative Bank at Srinagar which works under the guideline of the Cooperative Societies Act, 1989 for Agriculture Sector, Credit Sector, Consumer Sector, and Various levels of Society. It carried out fraud on a non- existing body.

Now, how did this Transpire? The Chairman in connivance with officials and beneficiaries had sanctioned Rs 223 Crore fraudulently in favor of a non-existent co-operative society – River Jhelum Co-operative Housing Building Society. It was further revealed that the Chairman of the so-called society had moved an application in the Department of Co-operative Societies, seeking directions to the J&K Cooperative Bank for grant of financial assistance of Rs 300 Crore for taking over possession of 300 canals of land on the outskirts of Srinagar city for construction of a satellite township, without obtaining any details of the society like balance sheet, profit, and loss account business, activities being done by the society, PAN number, Income Tax Returns details and details of construction of the Board, and Board resolutions among other things.

The Chairman of the so-called society named Hilal Ahmad Mir, Srinagar, by acting in league with the chairman of J&K Cooperative Bank and others had prepared fake and fictitious registration certificates and managed the sanction of Unsecured Loan amount to the tune of Rs 223 Crore. This Case is directed and handled by Anti-Corruption Bureau, NABARD, J&K Registrar Cooperatives from Core. And in Conclusion, The Registrar Cooperative Societies superseded the Board of Directors in view of large-scale bungling committed by them. The J&K Migrant Immovable Property (Preservation, Protection, and Restraint of Distress Sales) act, 1997′, ‘The Benami Transactions (Prohibition) Amendment Act 2016’ ‘The Prevention of Money Laundering Act 2002′ and the Agrarian Reforms Act 1976 were Violated. In order to protect the interest of Bonafide Depositors, the Government has directed that the Divisional Commissioner Kashmir, as an ad-interim measure, will attach the land measuring 257 Canals and 19 Marlas along with structures erected thereupon, if any, falling at Shivpora, Srinagar, known as `Seed Farm’ and place land in the safe custody of District Magistrate, Srinagar till further orders.

From this case, we may understand the fact that, for the State of Jammu & Kashmir, these Cooperative Bank’s play a very big role in evolving the Regions and its Development. If the Authority fails to keep a check on such a huge amount of loan passes, frauds like these will happen to occur in the future. We can say that if the statements were passed in the proper channel then the person in authority could have filtered the Wrong Statements and could have stopped the fraud prior. The people involved in this scam took benefit from the current situation trading in the world i.e. Covid-19 Pandemic.

The Fraudsters take Advantage of such Opportunity as per the Fraud Triangle Concept. One can only stop such Cases happening by deliberately doing his Duty with Responsibility without having any intension to defraud.

Indian-Origin Man Charged in Us for Fraudulently Seeking $10 Million from Covid-19 Relief Fund

Again, when the world is facing a lockdown crisis, here on 14 May 2020 a new Financial Fraud took place by Shashank Rai who duped Coronavirus Aid, Relief, and Economic Security (CARES) Act in a way. Shashank Rai is 30 years old, Indian-Origin Engineer at Texas, US. He has a purported Family business in the name of Rai LLC.

The Government in the US was providing support for legitimate small businesses suffering the economic hardships by providing Forgivable Loans guaranteed by the Small Business Administration (SBA) for COVID-19 relief through the Paycheck Protection Program (PPP) to enable them to keep their employees and the loans under the program which will be written off after eight weeks if all the workers stay on the payroll. Mr. Rai took advantage of the Government’s policy and tried to defraud and fetch a handsome amount of money in the name of it. He transpired the act in the application submitted to the First lender; Rai allegedly sought USD 10 million in PPP loan proceeds by fraudulently claiming to have 250 employees with an average monthly payroll of USD 4 million. While, in the Second Application, he allegedly sought approximately USD 3 million in PPP loan proceeds by fraudulently claiming to have 250 employees with an average monthly payroll of approximately USD 1.2 million.

Later found by the Texas Workforce Commission which provided information to investigators of having no records of employee wages having been paid in 2020 or having any Revenue in the Last Quarter of 2019 and First Quarter in 2020 by Mr. Rai or his purported business, Rai Family LLC.

The Justice Department’s Criminal Division, US Attorney of the Eastern District of Texas, Federal Deposit Insurance Corporation Office of Inspector General (FDIC OIG), US District Court in Beaumont, Texas Workforce Commission, Texas Comptroller’s Office of Public Accounts and Public Investigators were the Departments this case was handled by, which is possibly a Good sign of under veining the process of finding the insights of such fraud and one can understand how and at which stage the fraud took place. The Federal Prosecutor Joseph Brown said: “The behavior, in this case, was very brazen. Those who submit these applications for loans or other assistance need to understand that there are people checking on the representations made.”

Well, it gives us a Conclusion that for any Country, any type of Fraud, at any level may happen but if we have a strong channel to keep a check and track reports of any transaction, then such frauds cannot get accomplished. Also, Physical Investigation on such Establishments must be done at regular intervals of time and the number of working employees must be recorded by Authority to track whether the firm is taking any extra benefit on the name of any non-existing employee or not. Another way to control such cases can be the way of Fines and Penalties levied on fraudsters, the charges of committing such act must be high so that the consequences of getting caught and that fear would stop one to do so. The Court must take strict actions to set an example for others who plan to corrupt the laws. The US can be taken as an example for the same. Fraudsters may try to dupe but if they get caught at the very beginning or small level, then such intension of people to commit fraud will not get any chance to defraud the system and will slow down soon by itself.

The main ideology behind writing these cases was to make one understand certain criteria’s which will help on how to assess and get cushion support before getting trapped. I decided to come up with the idea of taking the latest Real Case that occurred during Lockdown in India. The number of frauds is increasing and here is the peak time we need to know the aspects of preventive measures and investigative measures to keep a superior hand over such fraudsters.

Dealing with Corporate Frauds:

How does this work? There are ways you can minimize fraud occurrences by implementing different procedures and controls. Let’s know them first.

1. Know your Employees
2. Daily Reporting System
3. Strong Internal Control System
4. Monitoring Absents
5. Hiring Quality and Trustworthy experts
6. Disciplined Work Culture
7. Fraud Detection

The moment you start to catch up with your employees is when you start to learn their traits and behavior closely, not that it will help you to know if he/she will commit fraud but will let you understand the way they behave as prevention to your future actions.

Daily Reporting is again very important to track the records and find the loopholes in the system, one must take this step thoughtfully and implement in their system of work culture. The internal control system is considered one of the strongest evident places or root start to any fraud. How? Well, if you have a leak at the main pipe, then fixing other branches will not give a permanent solution. Same way if your internal control system is not well built, then chances of leakage are high. Monitoring the movements of employees is must, it is important to know that how much of time an employee is spending in work, is he/she doing any overtime which is not required, is there anything fishy happening around him? If you can answer these questions then you’re good to go. One thing we find missing incorporate is that usually, they hire just anyone with the tag of being called an expert. It’s very important to test their skills before hiring them as they will be the ones guiding you or your company and you cannot handover the leash to just anyone. In my surrounding, I have come across so many individuals calling themselves experts and joining reputed Company’s and taking benefit of their posts and authorities given, that’s where the act of trust and foolishness arises leading to corporate frauds.

It will be appreciated, to check the knowledge and skills of any person you hire for such vacant post. We see a lot of people looking considerable with knowledge but we get trapped in their good-looking profiles and the reality is not so fancy. In case you are one of those who have the opportunity to hire someone, please consider the ground level reality instead of the fancy Resume and Curriculum Vitae they bring. One wrong person sitting at a higher place will sledge the good and result will be like the case of Jammu & Kashmir State Cooperative Bank Limited (JKSCBL).

Moving ahead next in line is throwing up with a well-disciplined environment in your organization. A disciplined Work environment shows the dedication employees maintain and promotes appropriate behavior. Efficiency comes when there is discipline.

Another aspect I would add with discipline is Punctuality. Yes, being on time is a way of setting an example of disciplined work culture. It’s a way how the mind of fraudster gets suppressed with time seeing a good work environment he/she is surrounded by. These are some valuable and important factors any organization needs to know to prevent frauds from happening to incorporate.

Dealing with Cyber-Crime in Corporate World:

Now looking at the third case explained and other similar cases that are not mentioned here, the cases of cyber-crime are growing around the world. We need to know the preventive, detective, and investigative measures to mitigate such frauds happening online.

The lack of awareness amongst the owners/operators of small businesses is especially severe and dangerous. The fraudsters know that fetching less money per transaction will give them more money easily. They target hundreds of accounts daily and possibly make money from at least 45% of them. Data protection is very important these days, let’s understand a few points.

1. Risk Identification
2. Who can defraud you?
3. Search for Vulnerabilities
4. Knowing the loss of impact on Business
5. Countermeasure Vulnerabilities

The first step is to identify risks. A full risk assessment will identify what data cyber-criminals might be interested in, which usually includes private customer data, the loss of which may open you up to fines, lawsuits, and a collapse in trust in your customer base.

One must Track down where the company’s data is stored and who has access to it, including employees using personal laptops and phones on your business network.

Second is to give thought to who may have plans to capture your data or who can defraud you? It’s worth researching the kinds of attacks your type of business is usually subjected to.

Also, give thought to disgruntled employees or “undercover hackers” who may have recently become employed by you to gain access to your network.

The third step is searching for vulnerabilities in your network security system before anyone else does it. It is the best solution. There are off-the-shelf software tools and dedicated specialists who can carry out these kinds of intrusion detection and do the preventive system examinations.

Next is to build a realistic idea of what a successful attack on your system would mean. How much damage would occur and what data would be lost? This business-impact analysis will help focus decision-making and create an order of priorities.

If you don’t understand the loss a fraudster can make to you, you will never realize how important it is to protect your data.

Finally, prioritize the potential risks that have been discovered and begin resolving them as quickly as possible. Make a list of what needs to be done to protect not only your data, but also the data of your customers and vendors, and start crossing things off the list.

You’ll never guarantee complete and permanent safety from cyber-attacks, but the last point, prioritizing vulnerabilities and by taking countermeasures you can mitigate the chances that your business suffers a catastrophic cyber-security breach. By having mitigation procedures in place, action can happen more swiftly and effectively in case the worst does occur.


The following information gathered from various sources is true and fair to the best of my knowledge and is authentic.



Author: Rinshita Gupta

Rinshita Gupta is a student currently pursuing MBA in Forensic Accounting and is in her last year of the programme and is self-employed and working from last 3 years now. She has good knowledge of Forensic Accounting and Fraud Examination. She enjoys investigating cases and analyzing the insights and jotting down her interpretation and understandings.



Disclaimer: This article has been published in Forensic Science Application, NVAFRCI, 1(10):2020

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