Negligence of Export Promotion Councils, ECGC and Banks lead to Rs 2.35 crore fraud

In what has now become a routine type of fraud, a tobacco exporter  in Andhra has been defrauded to the extent of Rs 2.35 crtores. recalls its open letter  to RBI and ECGC in its post on July 14, 2013 about the increasing nature of such frauds.

Way back on October 30, 2011, writing in Exim Matters, Naavi in his article “The Law of Internet For Exporters” had highlighted the dangers of relying on unauthenticated e-mails and the possibility of exporters becoming victims of frauds. This was followed up in the next article on the use of Digital Signatures. Had the contents of these articles been properly assimilated by exporters, some of the frauds which we are now facing could perhaps have been prevented.

Again in the July 14, 2013, had highlighted the responsibility of RBI and ECGC on educating Exporters and also black listing some of the destination countries to which fraud remittances are usually sent. No action came forth from these regulators and the problems continued.

In the latest fraud incident the money has been sent not to Nigeria or China or Hong Kong but to USA and Turkey. It therefore appears that these fraudsters have now spread their net across other countries as well. In all these cases the original remittance instructions of an Export or Import order had been altered through fraudulent e-mails. Obviously the original contracts were in the knowledge of banks and therefore they were also privy to the fact that the terms of payment had been changed before the final remittance. This is an easily recognizable modus operandi of these fraudsters and if the Bankers had a reasonable knowledge of such cyber frauds, these could have been prevented.

I therefore place the responsibility for these frauds at the doors of irresponsible and ignorant bankers. The regulators such as RBI and ECGC also has to share the blame for not properly educating the Bankers in this regard.

I therefore suggest that just as the Police in Bangalore have recently pulled up Banks for their lack of security in ATMs, Police in Andhra should pull up Banks in this case by invoking their vicarious responsibility in this regard.

In the meantime ECGC may have to absorb the loss since the Exporter here is also a victim of a Cyber Crime.



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About Vijayashankar Na

Naavi is a veteran Cyber Law specialist in India and is presently working from Bangalore as an Information Assurance Consultant. Pioneered concepts such as ITA 2008 compliance, Naavi is also the founder of Cyber Law College, a virtual Cyber Law Education institution. He now has been focusing on the projects such as Secure Digital India and Cyber Insurance
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