Alert! Keep Your Account Safe from Online KYC Scam

Updated on: 25 May 2023

Published on: 21 September 2021

Table of contents:

1. KYC for banks
2. KYC fraud
3. Three important tips from SBI to avoid KYC scam
4. Reporting KYC fraud
5. FAQs on KYC scam

With the country transforming into a cashless and digitised economy, there has been a rise in digital payments. However, there are some downsides to it as well – the increase in cyber fraud. 

One of the most common concerns about banking transactions is KYC fraud. Simply put, KYC (Know Your Customer) is the verification process that banks, financial institutions and insurance companies adopt. With the help of a KYC check, these institutions are assured that your identity and address are valid.

The RBI mandates all digital payments companies, banks and other financial institutions to follow a compulsory KYC check before offering any financial products. With the increasing number of KYC fraud, you may even begin to wonder, ‘Is KYC safe or not?’

Read on to understand how you can avoid falling prey to the KYC scams and a few tips from SBI to ensure safe banking transactions.

KYC for banks

The KYC completion process and updates vary according to the account type and depending on the bank’s risk perception. As a result, KYC becomes critical when performing transactions such as:

• Opening bank accounts
• Investing in fixed deposits, recurring deposits or mutual fund accounts
• Making online investments

Doing a KYC check is essential as it allows banks to ensure that the application and all supporting details received are from a legitimate customer. Banks can easily predict and prevent fraud by ensuring an individual’s identity.

KYC fraud

Since the pandemic, online fraud has increased in the country owing to increased usage of digital platforms such as UPI, mobile wallets and mobile banking applications. This has even led to customers wondering whether KYC is safe or not.

Amidst an increase in the Know Your Customer (KYC) deception, one of India’s largest lenders, the State Bank of India (SBI), has warned its customers of increased online fraud. 

In a statement, SBI stated that KYC fraud is real and has spread across the country.

SBI issued a warning to its customers via its official Twitter account, stating that there have been cases of fraudsters duping people with KYC verification.

“KYC fraud is real, and it has proliferated across the country. The fraudster sends a text message pretending to be a bank/company representative to get your personal details,” tweeted SBI.

During the second wave of the Covid-19 pandemic, the bank recently allowed customers to update their KYC via mail or post. As customers were unable to visit the bank branch to complete their formalities due to the pandemic, this step had to be taken.

Three important tips from SBI to avoid KYC scam

Customers can protect their accounts by following three safety tips provided by SBI:

• Think before you click any link

Customers must exercise extreme caution before clicking any link, especially if they receive a message stating that failing to click it will suspend their account.

• No bank would send links to customers for KYC updation

According to SBI, it never sends any links to customers to update their KYC. However, fraudsters often pose as bank representatives to trick people.

• Avoid giving your phone number or any confidential information to anyone

SBI has warned its customers not to share their mobile numbers or other confidential data with any third party.

This is not the first time the bank has tweeted about safety precautions. It has regularly communicated these precautionary measures to its customers. Sharing your ATM PIN, CVV or OTP is strictly prohibited, even with bank officials.

SBI has also advised its customers not to download any mobile apps based on the advice or tips given by unknown individuals. Understand that messages containing OTP/PIN/CVV can be read or tapped even from a remote location.

Reporting KYC fraud

The State Bank of India warns its customers to immediately report any unauthorised or suspicious bank transactions in their accounts. You can use the toll-free customer service numbers 1800-4253-800 and 1800-112-211 if you detect any unauthorised transaction in your bank account.

You may also file a complaint with the National Cyber Crime Reporting Portal, a government initiative to combat cybercrime. Ensure you provide accurate information when filing your complaint so that action can be taken as soon as possible.

There has been an increase in robust digital payments infrastructure with UPI at its core in recent years. The pandemic also highlighted the significance of digital payments. It resulted in a significant shift in consumer behaviour, forcing them to adapt to digital transactions. 

However, the convenience that digital transactions provide has its drawbacks. Fraudsters and scammers with a strong understanding of social engineering techniques have used KYC procedures to steal people’s hard-earned money. 

They primarily target people who are unfamiliar with these technologies. Hence, it is critical to protect yourself from these KYC scams in order to protect your finances.

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FAQs on KYC scam

What are the different ways in which KYC frauds in India are happening?

KYC fraud may happen in the following ways:

• Smishing executed through text messages having unusual attachments or links that misuse the name of genuine companies 
• Pretending to be bank officials to extract customer KYC details
• Phishing performed by collecting customer information using online databases or social media channels
• Using someone’s identity when applying for a credit or filing taxes 

What is the process to follow to complain about KYC scams in India?

Follow this simple process to complain about KYC scams:

• Prepare a summary of the facts giving clear details of the scam
• Keep a screenshot of the Email, SMS or any other link sent by the scammer 
• Collect all the necessary documents for proof, such as your bank transaction statements 
• Visit the nearest police station and file a complaint by providing clear details of the incident and submitting the relevant documentation
• Keep a soft copy of all these papers and submit them to the investigating officer 

What is KYC?

KYC is an important process implemented by banks and other institutions to check the authenticity of a customer before providing any financial offerings.

Why is KYC required?

KYC is required as it helps financial institutions assess and verify their customer’s claims related to address and identity. This helps monitor risks and prevent illegal practices.

What are the simple ways to identify KYC scams?

Follow these simple ways to identify KYC fraud:

• Avoid clicking on unknown email or SMS links
• Check the identity of the banking representative before entertaining them
• Refrain from providing your bank account or credit card information
• Avoid installing any third-party apps to complete your KYC details