KYC Details Of Indian Users Misused By Chinese Loan Apps To Create Fake Bank Accounts

After a 48-year-old lecturer from West Bengal lost her job at a private institution, she was forced to take loans from the Chinese instant Loan apps due to financial difficulties. These apps provide no-collateral micro-loans with extremely high-interest rates.

She began using these speedy loan applications in September 2020 to cover her bills, but she quickly fell behind in repaying the loan with interest rates.

Micro-loans of up to Rs 1,000 are available through digital lending apps. They do, however, have a shorter repayment time. In addition, interest rates are significantly higher. They sometimes also charge 14% to 15% of the loan amount as a processing fee and a standard interest rate of 1% a day on average. The interest rates also increase on a weekly or fortnightly basis.

The lecturer took 24 other loans just to pay off just one loan and fell into a debt trap. She took loans of around Rs 2.4 lakh. And began getting threatening calls and faced harassment to pay back the loan.

She paid Rs 7.8 lakhs along with the interest rates and was on the verge of suicide due to her mistake.

She lost access to 3 of her bank accounts in December 2020. Her phone had been hacked by the Chinese app and all her details were taken away. She very soon noticed an email from Kotak Mahindra Bank. The mail congratulated her on opening a new bank account. She also received an OTP email from Bitbns, a cryptocurrency exchange for an account of which she knew nothing about. Cryptocurrency exchanges act as a platform for trading in digital currencies such as Bitcoin, Ethereum, Ripple and converting them into real money.

But according to her, these 2 bank accounts were not created by her and she was also not aware of cryptocurrency. She did not have access to the 2 bank accounts. Cyber experts have confirmed that these accounts were made by misusing her KYC details by the Chinese Loan Apps.

A very similar case happened in Chennai, where a person who used the Chinese Loan Apps saw an SBI Bank account to which he did not have any access. This account was also made using his KYC details.

He also received an OTP from Binance, a cryptocurrency exchange, via email as well. This, suggests how the Chinese Apps have started their cyber attack on India in every possible way.

Save them India Foundation, a team of cybersecurity professionals is researching the Chinese-operated instant loan and online betting apps since March 2020. It has been assisting and helping loan app users who have been cheated. The team is active in connecting the victims to law enforcement agencies.

In February 2021, five instances were documented by them, where accounts were created on crypto exchanges using KYC details of the loan defaulters. While all had crypto exchange wallets created in their name, two also had bank accounts opened in their name.

The loan app users were unaware of these bank and crypto exchange accounts. But in contrast, these accounts were being operated using their KYC details. The independent investigators believe that there could be many such fake bank and crypto exchange accounts being used to drain money out of India in the form of cryptocurrencies.

Investigation regarding the loan apps has been undertaken by Telangana, Tamil Nadu, Karnataka, Delhi police as well as the Enforcement Directorate (ED).

The Cyber Crime Department has been functional in the removal of many such instant loan apps, but still, 100s of such other apps remain on the Play Store.

Till now seven Chinese Nationals and 35 Indian Residents have been arrested under the Instant loan app scam.

The people who are trading in cryptocurrency exchanges can buy and sell digital currencies without a KYC. But, a KYC verification is required if a bank account is to be linked to these crypto exchanges. Regulations in the cryptocurrency sector in India are still not very concrete and there is no standardisation of KYC verification processes on these platforms, so they are easily able to fulfill their purpose.

Recently, banks have started sending emails to customers flagging their crypto transactions based on the 2018 circular of the RBI. The RBI clarified that the banks cannot state 2018 circular, but later said that it has “major concerns” about cryptocurrency. The RBI has also created a working committee to form regulations for digital lenders. It was formed after media reports about instant loan app victims dying by suicide owing to harsh recovery methods and the subsequent police investigations.

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