Finance Ministry is toying with the idea of requiring banks and fintechs to appoint nodal officer or key contact point to liaise with the Law Enforcement Agencies (LEAs).

This issue was discussed at a half-day workshop jointly organised by the Department of Financial Services (DFS) in the Finance Ministry and the Indian Cyber Crime Coordination Centre (I4C) in the Home Ministry with LEAs, startups and fintech ecosystem partners in the capital on Tuesday. 

The interactive workshop also saw discussions around frauds being perpetrated through mule accounts, fintech merchant abuse etc. 

Main objective

The objective of the interactive workshop was to foster strong collaboration between fintechs and LEAs to encourage innovations, ensure due compliance with extant rules and regulations, address key challenges such as cybersecurity, digital financial frauds etc and more importantly building confidence and trust among the ecosystem partners.

This workshop was conducted in continuation of the last interaction of Union Finance Minister Nirmala Sitharaman with the start-up and fintech companies on February 26, 2024.

Addressing the workshop, DFS Secretary Vivek Joshi emphasised the contributions made by the start-ups and fintechs to India’s high and sustained economic growth. He urged for greater collaboration among the government, regulator, public and the private sector to harness the full potential of start-up and fintech sector in India. 

He emphasised that fintechs are more technology and innovation-oriented and they draw the traction of the regulators and LEAs when they grow their businesses over a period of time.

The I4C highlighted mule accounts, ATM hotspots, hotspot branches, fintech merchant abuse etc through its Citizen Financial Cyber Frauds Reporting and Management System (CFCFRMS). 

It was emphasised that an indigenous transaction monitoring and Anti-Money Laundering (AML) system catering to Indian fraud and crime scenario may be developed by the fintech companies.

Issues discussed

The points that were deliberated during the workshop include the role of technology in providing accessibility to financial services;  strategy to control the money mules; real-time monitoring of data infringement by both the fintech companies and LEAs; geotagging of digital transactions to track the money trails; creation of suspicious registry of BCs and fraudsters involved in the financial frauds; conducting regular audits of digital KYC for fostering trust and accountability and establishing a mechanism for freezing and unfreezing of accounts for faster recovery of defrauded money. 

Other issues discussed include devising a mechanism to ensure data privacy and prevention of data theft; and modernisation of digital infrastructure by leveraging technologies like IPv6, API integration etc.

The insights focused on emerging trends of cybercrime and financial frauds were provided by Gujarat, Haryana and Uttarakhand State Police Departments along with I4C. 

While the Fintech Associations presented the operational modalities and key challenges faced by the fintech companies, the LEAs from the states shared their best practices on curbing cybercrime and financial frauds. 

The workshop was also attended by Heads of around 60 fintech companies, four Fintech Associations, 23 State Police Departments, Central Bureau of Investigation (CBI), Enforcement Directorate, FIU-Ind and the Central Government Ministries/ Departments, Regulators and other agencies concerned.