Fraud Alert: Beware! Police Are Freezing Bank Accounts for Accepting Payment from UPI Accounts Linked with Cybercrimes
A person eats a meal at a hotel in Muppathadam in Kerala and pays the bill using a unified payment interface (UPI). Unfortunately, the UPI account from which the payment was made is linked with an online fraud. The result? The bank accounts of the hotel, its chicken supplier and the father-in-law of the supplier are now frozen on orders from the police. 
 
Sounds like fiction? Unfortunately, this is what is happening quite frequently everywhere these days. Tech expert Srikanth L and public interest technologist Anivar Aravind flagged this scary issue from Kerala on Twitter. Now, more and more people are coming forward to talk about their inability to access their bank accounts. These incidents are not limited to one or two states but are happening nationwide. 
 
While freezing of accounts may be required in some cases, the big issue here is that the police or even banks (who cite the finance ministry's money laundering rules when they freeze accounts for the delay in revalidating know-your-customer—KYC documents) seem to be able to stop people from accessing their own savings, on the flimsiest grounds, without adequate checks & balances or adequate redress in case of excessive action or police overreach.
 
 
 
According to a report from OnManorama, banks in Kerala are freezing savings accounts of hundreds of customers based on directions from police. "Victims of indiscriminate account freeze say police are using unrelated cyber crimes to rob their money. At least four victims paid money to police officers in Punjab, Delhi, Karnataka, Telangana, and Rajasthan to get their accounts unfrozen. From small-time eateries to elderly women and day labourers are facing the brunt of bank freeze," the report says.
 
Banks in Kerala are freezing accounts on directions from police from other states investigating online frauds, which are registered on the National Cyber Crime Reporting Portal (NCCRP) run by the Union ministry of home affairs, the report says. "But the victims who have come out in Kerala had nothing to do with the frauds, nor are they named in the first information reports (FIRs). Police are directing banks to freeze accounts that have transacted with accounts linked to online financial frauds."
 
Funnily, debit transactions in accounts in Kerala have been frozen on the directions of police in Punjab, Delhi, Karnataka, Telangana, Rajasthan, Himachal Pradesh, and Gujarat, says the report. 
 
Mr Aravind terms it as an 'attack vector'. He says, "NCCRP portal and criminal procedure code (CrPC) 102 notices and fast responding banks is an attack vector used for freezing accounts with balance citing small amount disputes."
 
 
A report from New Indian Express narrates an incident that happened with Noushad PK, a fruit vendor. He told the newspaper that he could not transact through UPI since 20 March 2023. "The bank officials said my account was frozen following the direction of the Gujarat police claiming that I received money from another account which is being probed as part of a cyber fraud case. The said transaction was made by a person after buying watermelon from my shop. My wife's account has also been frozen after I sent her some money from my account," Noushad told the newspaper.
 
Freezing a bank account is quite easy for banks and police; however, for the customer, it is a Herculean effort to de-freeze the account. According to a lawyer from Mumbai, who handles cybercrime-related cases, when police make the request (to freeze an account), bank officials mostly oblige. "It is happening in Mumbai too. Courts are filled with unnecessary applications to de-freeze bank accounts," he says. 
 
Most banks only insist on written communication from the police to remove the freeze on accounts. Ironically, the National Payments Corporation of India (NPCI), which has fathered the extraordinarily popular UPI, also wants nothing to do with the issue. 
 
Last year in April, Moneylife Foundation submitted a memorandum to the Reserve Bank of India (RBI) highlighting hardships faced by bank customers whose accounts are frozen. As pointed out in the memorandum, denying customers access to their own money is an extreme punishment which is imposed with impunity by bank officers, often without adequate notice.
 
Before initiating any coercive action against a bank customer, RBI says at least three notices should be issued. However, in most cases, especially account freeze, almost no notice is received by customers. 
 
In almost all cases reported by the two newspapers, customers knew about the account freeze only when they failed to make or receive any payment. A senior officer from a bank gave a rather vague answer to New Indian Express. He told the newspaper that the main reason for the account freeze is that traders use savings bank accounts for commercial transactions. 
 
What is worse, when it comes to imposing a freeze on accounts, banks treat all accounts, whether saving or current, in the same high-handed fashion. What the bank officer cited above is not true.
 
Advocate Ameen Hassan, representing around 20 victims, told OnManorama that police and banks could put a lien on the account to withhold only the disputed amount. "But by freezing bank accounts, they are misusing the provision put in place to help the real victims of online frauds," he says.
 
Since the issue is complex, there are no straightforward solutions for these cases, which are rising rapidly. If it happens to you, you need to request your bank and the concerned police station to share details and apply for de-freezing your account. If it does not work, then you need to file a case in a court or a consumer forum. It may be a time-consuming process, though.
 
According to retired banker and consumer activist Abhay Datar, online inward remittance gets automatically credited, so you cannot refuse to accept the payment from an unknown entity. "However, the recipient (bank customer) may request the bank in writing that the (remitted) money does not belong to him, and the bank may put the amount under lien till the issue is resolved. The bank branch may refer to policy guidelines in such cases."
 
Last year, in a similar case, a bank customer received payment for his professional services. However, the bank prevented him from withdrawing the amount credited to his account the next day.
 
On further enquiries with the bank, he was told that the account through which he had received the money was reported as involved in suspicious transactions. While the Telangana police had asked for a hold of Rs10,000 only, the bank put a hold on the entire payment the customer had received.
 
Karnataka Bank further asked the account-holder either to bring an order from a court or directions from the Telangana police to remove the hold on the amount involved in the transaction. 
 
He then filed a case in the consumer court, which asked the Bank to allow a complainant to operate his bank account by putting on hold only Rs10,000 until further orders. (Read: Consumer Forum Asks Karnataka Bank To Release Hold and Allow Customer To Use Undisputed Amount)  
 
How To Report Cyber Fraud?
 
Do report cybercrimes to the National Cyber Crime Reporting Portal http://cybercrime.gov.in or call the toll-free National Helpline number, 1930. To follow on social media: Twitter (@Cyberdost), Facebook (CyberDostI4C), Instagram (cyberdostl4C), Telegram (cyberdosti4c). 
 
 
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