Citizens' Issues
Cyber frauds cost India $870 million in 2013

Online scams and frauds have targeted and defrauded many Indians into losing upto $870 million to the scamsters in the last year alone


Two separate surveys with different objectives released almost simultaneously, reveal how susceptible Indians are to cyber fraud and email scams. The first report, by Ultrascan Advanced Global Investigations, shows that India is increasingly being targeted by such frauds, and $870 million has gone out of India because of, what they call the "advance fee frauds (AFF)" scams (better known as the Nigerian Fraud or Lottery Scam ). The second report, titled “Cybercrime Survey 2014” by KPMG, polled senior corporate officials. The KPMG report says, “Of the 170 participants from across India, an overwhelming 89% of the respondents said cybercrime has emerged as a major threat.”


The KPMG report polled corporates and as such, the results are focussed on the issues faced by corporates vis-a-vis cyber crime. It states that, about 51% perceive themselves to be an easy target for cyber attacks due to the nature of their business. Out of these 51%, about 68% respondents claim that they monitor their cybercrime threats on a daily basis. 49% of the respondents said they experienced cybercrime in the last one year. This number was at 11% 2 years ago, which indicates that the number of cybercrime incidents in India has been on rise.


About 45% of the 170 senior executives polled by KPMG said that cyber crime had caused financial loss and a slightly higher 48% said they had suffered a disruption in their business process. These are considerably high numbers and serve to highlight the urgent need for businesses to build defences against cyber crime. Another important number the report highlighted was that 58% of the respondents saw the Financial Services sector as most prone to cyber attacks, this would agree with the kind of effects that these attacks seem to be having as described above. A final worrisome number that the report brings out is that 47% of the attacks involved both internal and external employees.


The Ultrascan report on the other hand focuses on individuals who have fallen prey to cyber crime. It says says, “Where hundreds of thousands of Indians are falling mainly for low-end job and (student) visa scams. Chinese are falling for simple lottery scams perpetrated from Europe and C.O.D. (cash on delivery) scams perpetrated from Africa.” The report said the in India, poverty stricken citizens were being used to create fronts by opening bank accounts, registering companies with the chambers of commerce.


At $870 million, India was fourth in the list of countries which were monetarily most afffected by AFF scams. First was the US at $2.3 Billion, followed by China ($1.7 Billion) and third place was the UK ($1.2 Billion). India was the fourth worst affected, inspite of the fact that internet penetration in the country is still quite low compared with other nations on the list. If this trend continues, with rising internet users, the number of Indian victims of such scams will rise with as much speed.


In the recent BRICS summit in Brazil, Prime Minister Narendra Modi, has also raised the issue of cyber crime in the context of overall security. While it is encouraging to see the government take cognizance of this menace at such a high level summit, ground level steps, financial education, technical literacy etc are yet to begin. Among the possible defences against cyber crime, KPMG suggests that technology and such tools are one thing, but, the first line of defense is increasing awareness about such crimes that may affect breach in companies. For both corporate and those like the AFF, mere technological defenses won't do. The AFF type of scam (also known as the Nigerian Prince scam) goes back to the 19th Century. The only thing that has changed is the medium, while the method remains the same. The only credible defence against this and other such scams could be better awareness and wider literacy of financial matters.



SEBI bars Sunplant Forgings, directors from mobilising funds

Pulling the plug on illegal mobilisation of funds by Sunplant Forgings, the market regulator said the company and its directors raised more than Rs17 crore from 6,662 investors, a clear violation of its CIS rules 


Market regulator Securities and Exchange Board of India (SEBI) has barred Sunplant Forgings Ltd (SFL) and its directors from raising money by issuing securities.


Citing the Sahara case and the Supreme Court's order in this regard, SEBI said that Sunplant Forgings raised more than Rs17 crore from 6,662 investors amounted to a public offer and not a private placement.


"...SFL is prima facie engaged in fund mobilising activity from the public, through the issue of redeemable preference shares (RPS), which is a public issue made to 50 persons or more," SEBI said in its order.


The regulator has directed the company and its directors not to mobilise funds from investors through the issue of RPS or any other securities to the public.


SEBI also directed SFL to provide a full inventory of all assets and properties of the company. The company has been barred from disposing of any of its properties without prior permission from SEBI. Besides, it cannot divert any funds raised from the public which are kept in bank account(s) and/or in the custody of SFL.


The directions would take effect immediately and would be in force until further orders.


The regulator received a communication from Ministry of Corporate Affairs (MCA) saying that certain companies including SFL were collecting monies from the public through issue of debentures and redeemable preference shares allegedly allegedly in violation of the Companies Act.


SEBI noted that although the issue of redeemable preference shares is stated to have been made on a private placement basis, "yet, through the same offer, SFL circulated 11,904 application forms inviting subscription towards the issue of redeemable preference shares".


"Out of which it admittedly allotted redeemable preference shares to 6,662 investors and mobilised funds amounting to approximately Rs17.51 crore," SEBI noted. Since the offer was made beyond the limit of 49 persons as prescribed under Companies Act, the offer qualified as a public issue.


The directors of the company against whom the order has been issued are Abhinandan Kumar Singh, Sumanta Sinha and Neeraj Pathak.


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