Today, almost all major services in all walks of life can be availed online. And this is no less true in the case of financial services, with almost all major services across various areas of finance such as banking, investments, taxation and so on being available online. This has definitely made it a lot more convenient for us to deal with various operations involving our money. But at the same time, it also leaves us vulnerable to a variety of financial frauds that are effected online. Therefore, one of the major responsibilities for financial advisors the world over today is to educate their clients on how various forms of online financial fraud are effected and how clients must guard against them. Therefore, today I will be talking about the most common and frequent ways in which online financial frauds are effected and suggesting precautionary measures to safeguard our money and key financial details against them.
One of the most rampant variants of online financial fraud is phishing. This is a form of fraud that is most commonly effected via email. And given that almost everyone has their own email ID, phishing automatically becomes a simple way to effect widespread financial fraud. Fraudsters who indulge in phishing usually do so by creating fake email IDs in the name of well reputed individuals or companies. They then use the fake IDs to send their targets emails asking for bank details and other sensitive personal information on behalf of the company or individual. They even provide links within the email where targets can submit the requested details, to make the fraudsters' emails look genuine. But these links direct the targets to fake websites created by the fraudsters, and once the details are submitted on the website the fraudsters would be free to use our details as they please. Some of these links may also contain highly malicious viruses which would attack our computers and potentially other electronic and mobile devices that we may use. This poses a significant threat to any data that may be stored on these devices.
Therefore it is vitally important for us to verify the sources of such suspicious emails before interacting with them. If the suspicious email ID is similar or identical to the ID of someone we know, it is advisable to check with them and verify whether or not it is indeed they who have sent us the email.
Those of us who prefer storing sensitive data such as bank account details, passwords and/or login credentials on online platforms such as web browsers are vulnerable to these details being extracted and used against us by third parties. One of the most common ways this is done would be a situation where the perpetrators of the fraud extract our details and use them to avail multiple high cost loans such as personal loans, vehicle loans and credit card loans in our names. And because the debts have been availed in our name on the back of our details the lenders would send us all the relevant notifications and reminders with regard to the loans, even though we haven't availed them ourselves. And quite obviously, this would present the prospect of getting involved in lengthy disputes with our lenders which could potentially have an adverse impact on our credit scores. To avoid such outcomes, we must ideally avoid storing sensitive personal information on online platforms. If we still wish to use online platforms for storage, we must use strong passwords and two step verification (which sends an OTP to our mobile number every time a login is attempted with our password) wherever possible so that the chances of our information being misused is minimised.
Towards the fag end of each tax filing season (July and September every year), we must also remain on the lookout for fraudulent text messages from apparent tax authorities asking for our PAN and other confidential tax details. Such fraudulent notifications are usually sent via SMS or email. They state that there is a tax refund due to be credited to our accounts, and therefore our confidential tax details are being requested for. The main thing to remember here is that official tax authorities rarely send out such notifications. And even if there is a potential refund due to us, we must verify our tax returns to ensure that there actually is a refund due to us. And finally any procedural aspects required to be undertaken to claim any refund due to us must be effected only through the official income tax website and other official channels as prescribed by the Government of India. We may also consider availing professional help from a chartered accountant or tax consultant to get this done if need be. Other forms of online tax scams and frauds are listed in the graphic that follows.
Reward points or loyalty points offered to cardholders who have used a particular credit card over a long period of time become another important medium through which financial frauds are given effect. Here, fraudsters pose as representatives of the organisation offering the credit card and get in touch with the target, usually via telephone call. The target is then asked to share their credit card details such as credit card number, CVV number and OTP in order to redeem their reward points and avail 'exclusive offers’. The targets are further pressed to take action, on the pretext that the offers available would lose validity soon. And once we share our details, the fraudsters would gain access to our credit cards and the ability to use them to make transactions. This would ultimately deplete our credit and bank account balances. Those of us who recieve such calls must therefore first check with our credit card companies to verify whether such an exercise is actually being carried out by the company. The constant push from the callers for us to take action should be another obvious cause for suspicion. Another tip would be to ask the caller for their name or employee ID and then verify with the credit card company as to whether or not an employee with the details as provided is actually employed by the company. If the caller we speak to refuses to share their name or employee details, it is a sure shot indication of the fact that there is something fraudulent about the caller.
The shift towards digitisation of financial services undoubtedly makes things a lot easier for anyone who makes use of these services. But such convenience would be of very little use if used without responsibility. Awareness and education on a certain subject facilitates responsible use of the knowledge gained. And this is where component financial advisors would have a lot of potential to contribute meaningfully. In fact, it is important for today’s advisors to be effective communicators and educators before being effective with their technical acumen and financial planning skills. Cybersecurity and online financial frauds are topics that are not only highly relevant today, but would also retain relevance long into the future. Therefore it is vitally important that financial advisors and planners constantly educate their clients on the prevalent trends in these spheres at regular intervals so as to ensure that clients make responsible use of financial services online and stay clear of any adverse repercussions associated with their use.