Chinese syndicates to keep hurting India via loan app scams: Cyber expert

Chinese criminal syndicates and gangs operating digital loan shark scams are expected to further dent the Indian economy in 2024, warns cybersecurity law expert Pavan Duggal. The surge in illegal activities, through Chinese loan apps, has raised concerns about the exploitation of unemployed youth and financially-stressed individuals in India.

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Investigations reveal that the masterminds behind these operations are predominantly based in China, leveraging local recruits in neighbouring countries to conduct their transnational criminal activities. The illicit operations include data collection and financial disruptions targeting the Indian economy.

Pavan Duggal, Chairman of the International Commission on Cyber Security Law, said that Chinese loan apps are significantly impacting the Indian economy as part of a broader approach. “China aims to target the Indian economy due to their past relationship with the nation. As a result, China is actively working to destabilise the Indian economy and gather as much data as possible through these loan apps.”Duggal also pointed out that these apps offer instant loans with high-interest rates, leading people into financial distress. While many Chinese apps fall under the IT Act of 2000, they do not comply with Indian law, causing significant financial losses in crores to Indian citizens

“The need for dedicated cybercrime courts, as existing courts are overwhelmed with criminal prosecutions,” he said. He also stressed the necessity for new legal frameworks to address the misuse of emerging technologies for criminal purposes.

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According to Duggal, the pandemic has marked the beginning of a golden age of cybercrime, which is expected to continue for many decades. He believes that cybercrime has become our constant companion, and cybersecurity breaches are the new norm.”Unfortunately, India is not fully prepared to handle this surge in cybercrime, especially with cybercriminals leveraging emerging technologies like Artificial Intelligence and tools like ChatGPT for their malicious activities,” he said.

Regarding cybercrime laws, Duggal pointed out three crucial issues. Firstly, there is currently no dedicated law specifically addressing cybercrime. Secondly, certain cybercrimes are covered under the Information Technology Act 2000 and the Indian Penal Code, but not comprehensively. And thirdly, the existing laws are inadequate in effectively responding to cybercrimes, posing significant challenges in combating them.

“The Government needs to bring stringent laws to deal with the people in our country who cahoot with Chinese loan app fraudsters,” Duggal added.

Last year, the Enforcement Directorate (ED) had frozen Rs 106 crore, lying in merchant IDs, and bank accounts. in the Chinese loan app case.

It had initiated an investigation on the basis of the FIRs registered by Cyber Crime Police Station, Bengaluru under various sections of Karnataka Money Lenders Act, Information Technology Act, the Karnataka Prohibition of Charging Exorbitant Interest Act, and various sections of Indian Penal Code against numerous entities in connection with their involvement in extortion and harassment of the public who had availed small amounts of loans through the mobile apps being run by those Chinese national controlled entities.

The investigation by ED revealed the modus operandi of these entities wherein these entities were incorporated by appointing dummy directors on behalf of Chinese nationals, obtained KYC documents of company staff and appointed them as Directors of such entities and even opened bank accounts in their name, without their knowledge or prior consent.

“These entities were involved in criminal activities by submitting fake addresses in KYC documents and taking assistance from various professionals and other persons. They provided instant short-term loans to the public through loan apps and other means and charged high processing fees and exorbitant rates of interest and amounts were subsequently recovered from the public by these companies by way of threatening and causing mental torture to the borrowers of the loans over the phone as well as contacting their family members, relatives, and friends asking for the money,” the ED had said.

The official said that these Chinese national-controlled entities have indulged in huge money laundering activities through the merchant IDs maintained with various payment gateways, Razorpay, Cashfree, Paytm, PayU, Easebuzz and bank accounts maintained with various banks and thereby generating proceeds of crime.


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