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No More Scams – Measures to Prevent Financial Fraud

Hey! Have you received such messages? if yes, you might have been their next target.

After opening a Demat account, scammers try to convince and trap you. But fear not! This article will help you safeguard yourself from fraudulent activities.

So Lets begin.

According to RBI, in FY22, banks reported 9,102 frauds amounting to Rs 60,389 crore, compared to 7,358 frauds worth Rs 1.37 lakh crore in FY21. In the pre-pandemic FY20, banks reported 8,702 frauds totaling Rs 1.85 lakh crore.

Indian Financial Frauds Between year 1990 to 2021

In order to Understand Financial Frauds, then Financial fraud can occur in various ways, and fraudsters don't follow a specific process. They are often intelligent and skilled at evading detection.

Each fraudster has their own pattern, making it challenging for cyber teams to apprehend them. here are the some of most popular frauds:

Protect from Financial Frauds. But How?

1. Mis-selling by Banks & Insurance Companies’ RMs

Many investors often rely on their Bank Relationship managers to handle their investments.

It has been seen that, Bank Employees or Insurance Agents Mis-Sell the Products to their customers. But why? Well this is Because, Bank employees have hard sales targets to achieve, which in turn forces them to push products that lead to high incentives.

Generally, an employe who works for any bank or Insurance Agencies get paid very well. Since agents are paid commissions based on the number of sales they make, they may not keep their client’s interests in mind and will sell the policy which will achieve their sales target or earn them the maximum incentives.

To understand the difference, one has to consider some key factors like whether your Bank RM did the following or not:

No More Scams - Measures to Prevent Financial Fraud !

As per the statistics shows the answer would be most probably NO!

2. Detecting Financial Fraud: Key pointers to Look Out For

As we have discussed already, Financial Frauds usually exercised by most intelligent peoples. Carrying out such activities requires sharpest minds, in order to execute such job. So how can we sense about this in early phase

(a) Benefits which sounds too lucrative

Promising Daily/Monthly 3% - 5% returns on their Investments

(b) Promise Of Exclusive Privileges And Freebies

Club-Memberships, High Value Cash coupon/tokens, Free Seminars/webinars

(c) Unsolicited Investment Offers from Strangers

Usually, Fraudster Avoid Face 2 Face Interactions so they offer Investments over phone calls & unofficial Emails by leveraging technology.

No More Scams - Measures to Prevent Financial Fraud !

(d) Lack Of Verifiable Documentation

Another warning sign of potential fraud is the use of unverifiable documentation.

Fraudsters may provide misleading account statements, promotional materials, or notices to deceive individuals and prevent them from verifying their investment performance.

This tactic is often targeted to customers who may not have extensive online account operation knowledge or are unable to visit a branch in person due to health concerns.

So, If your have a Bank Relationship Manager, it is important to regularly review their activities to identify any red flags, such as: unauthorized withdrawals, account closures with penalties, changes in investment portfolio risk tolerance, and unusual or unexplained banking transactions.

3. Proactive Measures to protect Yourself from Fraud

If you are looking out the front picture and not the back picture along, then here you must have to be cautious. Check below key Pointers

(a) Trust them but not Blindly.

Generally, every Frauds excel when people start trusting blindly. You have a long-standing, trusted Bank RM or salesperson who has been providing you with financial advice and selling financial products to your family. But have you ever checked legal Documentation/ Licenses?

So in order to protecting yourself, Ask for these Documents :

No More Scams - Measures to Prevent Financial Fraud !

(b) Chase Potential returns instead of unrealistic Returns

Avoid advisors who make promises of doubling your investments in 3-6 months. Such claims may appear tempting with high returns, but they often lead people to borrow money from friends and family, only to end up with blown accounts.

So, Be cautious, educate yourself, and seek clarification before making any investment to avoid falling victim to potential scams or impulsive decisions.

(c) Ensure privacy & confidentiality of financial products

Protect your finances by never sharing sensitive information like usernames, passwords, OTPs, PAN, and Aadhaar. Mark self-attested copies of documents and avoid sharing blank papers or cheques, even with trusted individuals.

(d) Work on your actions and biases

"Reflection is the key for Success", But many peoples implement exact to the opposite in their life. Often, Investor biases Such as urge for high risk, the pursuit of quick wealth, fear of missing out (FOMO), and the tendency to reciprocate freebies fall them to becoming one Financial Fraud Victim.

(e) Look for Genuine Professionals

Evaluating this parameter is crucial as it requires recognizing when your gut feeling raises concerns and having the wisdom to seek guidance from trusted experts who can provide objective insights based on their knowledge and experience.

Moreover, what you can do is, look for Genuine reviews and do google for extracting their history.

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References:  Google, Industry’s Publications, News Publications, Interviews, Documentaries

Disclaimer: The report only represents personal opinions and views of the author. No part of the report should be considered as recommendation for buying/selling any stock. Thus, the report & references mentioned are only for the information of the readers about the industry stated.

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