By Sarosh Bana, Mumbai Correspondent.
Indian police investigating the brutal loan recovery racket that has driven several borrowers to commit suicide and humiliated many others on social media have found the trail of crime leading overseas to Nepal and China.
Numbers of cash-strapped people have fallen victim to questionable mobile apps mushrooming on the internet that lure potential borrowers with offers of instant loans and pre-set credit limits. The apps seek personal data and promptly gain complete access to the borrower’s phone, following which those behind this fraud resort to ruthless recoveries by recruiting agents, at times college-going youngsters, to who they provide generous commissions from the amounts they reclaim.
The present loan scam mirrors the one that had emerged earlier this year when the Indian police approached the Kathmandu Metropolitan Police Range, which arrested two Chinese and 115 Nepalese nationals for their involvement in running online fraud loan schemes targeting Indians. The Chinese nationals operated illegal business activities, targeting Indians with the help of Nepalese youth. The Nepalese arrested from Kathmandu included 23 boys and 13 girls.
Four recent arrests in and around Mumbai helped the Economic Offences Wing (EOW) unearth the activities of the fraudulent firms running the mobile apps and investigate the trail of the money extorted from the victims. The EOW police found that these companies and their recovery agents located in India were relatively small fry, while the sharks controlling the fraud operated from Nepal. They, in turn, converted the money obtained through threats and blackmail into cryptocurrencies and routed it to China.
The police made a series of arrests, one of them being the Mumbai-based director of Mahagram Payments Private Limited which operated two lending apps. The EOW also arrested two people, one who was the proprietor of six shell loan companies, and another the owner of a fake company, IWT India, from where the police recovered Rs6.57 crore (over A$1.2 million) in different accounts. Police also blocked 1,058 virtual accounts created by Mahagram Payments for illegal transactions.
Inquiries revealed that the apps run by these companies were not created in India, nor were the firms registered with the Reserve Bank of India (RBI) as Non-Banking Financial Companies (NBFCs) as mandated by law. The illegally acquired money was invested in cryptocurrencies.
With many in India in a financially precarious situation, a large number of people have fallen for these loan apps, as the fraudsters announce that they do not require much paperwork for granting loans and they would disburse even small loan amounts. The recovery agents are then put on the job of harassing the borrowers.
The police have found that the recovery agents are trained to harass borrowers by their handlers in Nepal. The Cyber Cell of the Mumbai police has approached Interpol for help in tracking down the suspects operating out of Nepal and China.
Even the Reserve Bank has been unnerved enough by these developments to notify banks across the country to observe certain guidelines in their loan operations. Its notification stated: “It is understood that some banks set very stiff recovery targets or offer high incentives to recovery agents. These have, in turn, induced the recovery agents to use intimidatory and questionable methods for recovery of dues. Banks are, therefore, advised to ensure that the contracts with the recovery agents do not induce adoption of uncivilised, unlawful and questionable behaviour or recovery process.”
The Reserve Bank warned it would view any violations very seriously, even temporarily banning errant banks from engaging recovery agents. It urged for pre-employment police verification of the agents banks choose to engage. The central bank also asked the banks to provide borrowers details of the recovery agencies, and to ensure that all recovery agents carry the notice and authorisation letter for recovery along with their identity cards.
The Mumbai Police have also circulated 20-page booklets for their force that cite Standard Operating Procedures (SOP) in dealing with the loan app fraud, with instructions on how to register and investigate such cases and the documentation required.
The booklet mentions the modus operandi of loan apps, how citizens get trapped in it, and what details officers should seek from complainants for effective action and investigation. It also covers important aspects such as fund flow or money trail. In his foreword in the booklet, Mumbai Police Commissioner Sanjay Pandey mentions, “As the fake loan app cases are largely reported in Mumbai city, SOPs have been introduced for Mumbai Police officers/men for easy understanding of the modus operandi of fake loan app fraud and implementation of standard procedure for investigation of such cybercrime cases.”
Pandey might only be too aware that a crippling shortage of manpower hampers investigations of all important cases, not only those concerning the loan fraud. This has compelled the state cyber police which previously functioned as a nodal agency for the general police force to now even register First Information Reports (FIRs) as well as investigate important cases like the loan app harassment cases.
India’s financial capital city of Mumbai alone registered an 18 percent rise in cybercrime in 2021, the digital criminals smug in the belief that they are less likely to be detected and caught than the crooks operating in the streets. Moreover, many of these online frauds either go unreported or are not registered by the police who are already too overworked, Mumbai’s approximately 30,000 policemen and policewomen who are on public duty – as distinct from the 10,000 others who exclusively protect politicians and prominent persons – serving a population of around 22 million. The skewed ratio makes for one policeman for 733 citizens.
In the recent crime conference of the Mumbai Police, cybercrime was acknowledged as a “challenging issue” and difficult to solve. Of the only 2,883 cybercrime cases that police designed to register in 2021, only 455, or 16 percent, were detected.
These numbers scarcely reflect the actual increase in online crime, because cyberpolice too are woefully few and both ill-equipped and unable to cope with the surging cyberfrauds. Sixteen officers and men constitute the total cyber police force in Maharashtra, the state of which Mumbai is the capital and which has a population of 125 million.
The menace is daunting. Even as investigations are underway and arrests are being made, there are reports of a 34-year-old man from a Mumbai suburb going missing following relentless harassment by recovery agents. His mother and sister are receiving rape threats, while his photographs are being morphed and shared with his contacts, who are also informed by the fraudsters that his mother and sister are available for paid sex so that he could repay the loan.
