Crackdown on digital fraud: SC orders action, gives strict directions to RBI

On Tuesday, the Supreme Court issued strict directives to various entities, including banks, financial intermediaries, regulators, and law enforcement agencies, in an effort to combat the growing issue of "digital arrest" scams and enhance the recovery of funds lost to cyber fraud. The court emphasized the need for a collaborative response, which includes faster resolution of grievances, robust mechanisms for restoring victims' money, and extensive public awareness campaigns.

The apex court mandated the Reserve Bank of India (RBI) to develop a Standard Operating Procedure (SOP) concerning mule accounts within four weeks. Mule accounts are bank accounts utilized by cybercriminals to receive, transfer, or route money obtained through fraudulent means. The court stressed the necessity of stronger systems to identify, freeze, and prevent the misuse of such accounts.

Furthermore, the Supreme Court directed all states to establish effective cyber fraud grievance redressal and money restoration mechanisms, ensuring prompt action on complaints and timely initiation of recovery efforts. Additionally, the court urged the Centre to explore the possibility of implementing a shared liability and victim compensation framework for cyber fraud cases.

An Inter-Departmental Committee was also instructed to engage with banks and financial intermediaries in devising measures to tackle digital arrest scams, with the aim of early detection of fraudulent transactions and improved chances of recovering funds for the victims.

This development follows the Supreme Court's suggestion from the previous week that the Central government consider defining "digital arrest" as a distinct criminal offense, complete with stringent penalties for those found guilty.