Money Refund Process in Online Fraud Cases:

The virtual world crimes including cyber frauds are rising at an alarming rate. According to crime data, identity theft accounts for 77 % of the fraud cases registered in India. Another analysis suggests that, “one in every three Indian will be affected by identity theft at some point in their lives”.

Victims in cyber fraud cases are concerned not only with conviction of cyber criminals but also with refund of money. Hence, this blog, focuses on legal aspect of refund of money as well as procedure for the same.

RBI Notification:
The bank’s (All scheduled commercial banks, Small finance bank and Payment Banks) liability in case of Unauthorized Electronic Banking Transactions is governed by RBI circular - RBI/2017-18/15, DBR.No.Leg.BC.78/09.07.005/2017-18 dated July 06, 2017.

SALIENT POINTS OF CIRCULAR:
Broadly, the electronic banking transactions are divided into two categories:

1. Remote/ online payment transactions (transactions that do not require physical payment instruments to be presented at the point of transactions e.g. internet banking, mobile banking, card not present (CNP) transactions), Pre-paid Payment Instruments (PPI), and
2. Face-to-face/ proximity payment transactions (transactions which require the physical payment instrument such as a card or mobile phone to be present at the point of transaction e.g. ATM, POS, etc.)

Reporting of Unauthorized Transactions by Customers to Banks:

1. Banks must ask their customers to mandatorily register for SMS alerts and wherever available register for e-mail alerts, for electronic banking transactions.
2. The SMS alerts shall mandatorily be sent to the customers, while email alerts may be sent, wherever registered.
3. The customers must be advised to notify their bank of any unauthorized electronic banking transaction at the earliest after the occurrence of such transaction, and informed that the longer the time taken to notify the bank, the higher will be the risk of loss to the bank/ customer.
4. To facilitate this, banks must provide customers with 24x7 access through multiple channels (at a minimum, via website, phone banking, SMS, e-mail, IVR, a dedicated toll-free helpline, reporting to home branch, etc.) for reporting Unauthorized transactions that have taken place and/ or loss or theft of payment instrument such as card, etc.
5. Banks shall also enable customers to instantly respond by "Reply" to the SMS and e-mail alerts and the customers should not be required to search for a web page or an e-mail address to notify the objection, if any.
6. Further, a direct link for lodging the complaints, with specific option to report unauthorized electronic transactions shall be provided by banks on home page of their website. The loss/ fraud reporting system shall also ensure that immediate response (including auto response) is sent to the customers acknowledging the complaint along with the registered complaint number.
7. The communication systems used by banks to send alerts and receive their responses thereto must record the time and date of delivery of the message and receipt of customer’s response, if any, to them. This shall be important in determining the extent of a customer’s liability.
8. The banks may not offer facility of electronic transactions, other than ATM cash withdrawals, to customers who do not provide mobile numbers to the bank.
9. On receipt of report of an unauthorized transaction from the customer, banks must take immediate steps to prevent further unauthorized transactions in the account.

LIMITED LIABILITY OF A CUSTOMER:
1. Zero Liability of a Customer

• A customer’s entitlement to zero liability shall arise where the unauthorized transaction occurs in the following events:
• Contributory fraud/ negligence/ deficiency on the part of the bank (irrespective of whether or not the transaction is reported by the customer).
• Third party breach where the deficiency lies neither with the bank nor with the customer but lies elsewhere in the system, and the customer notifies the bank within three working days of receiving the communication from the bank regarding the unauthorized transaction.

2. Limited Liability of a Customer:
A customer shall be liable for the loss occurring due to unauthorized transactions in the following cases:

• In cases where the loss is due to negligence by a customer, such as where he has shared the payment credentials, the customer will bear the entire loss until he reports the unauthorized transaction to the bank. Any loss occurring after the reporting of the unauthorized transaction shall be borne by the bank.
• In cases where the responsibility for the Unauthorized electronic banking transaction lies neither with the bank nor with the customer, but lies elsewhere in the system and when there is a delay (of four to seven working days after receiving the communication from the bank) on the part of the customer in notifying the bank of such a transaction, the per transaction liability of the customer shall be limited to the transaction value or the amount mentioned in Table, whichever is lower.

 Image Source:BusinessToday Magazine

Reversal Timeline for Zero Liability/ Limited Liability of customer:
On being notified by the customer, the bank shall credit (shadow reversal) the amount involved in the Unauthorized electronic transaction to the customer’s account within 10 working days from the date of such notification by the customer (without waiting for settlement of insurance claim, if any). Banks may also at their discretion decide to waive off any customer liability in case of unauthorized electronic banking transactions even in cases of customer negligence. The credit shall be value dated to be as of the date of the unauthorized transaction.

Further, banks shall ensure that:

• A complaint is resolved and liability of the customer, if any, established within such time, as may be specified in the bank’s Board approved policy, but not exceeding 90 days from the date of receipt of the complaint, and the customer is compensated as per provisions of paragraphs 6 to 9 above;
• Where it is unable to resolve the complaint or determine the customer liability, if any, within 90 days, the compensation as prescribed in paragraphs 6 to 9 is paid to the customer; and
• In case of debit card/ bank account, the customer does not suffer loss of interest, and in case of credit card, the customer does not bear any additional burden of interest.

Burden of Proof:
The burden of proving customer liability in case of unauthorized electronic banking transactions shall lie on the bank.

PROCEDURE VICTIM SHOULD FOLLOW:
There is no strict procedure to be followed, except for rigid timelines as enumerated before. However, for maximum efficiency, following procedure is recommended:
Step 1:The complainant/ victim should lodge a complaint with the nearest Police Station or Cyber Cell. Following documents should be submitted along with the complaint –

• Self attested, Government ID proof of the complainant
• Screen Shots of the SMS which reflects the unauthorized transaction details (received on the victim's registered mobile number)
• A detailed application describing the whole incident i.e., how the caller obtained the private information like card details and OTP etc.
• Name of any suspected webpage or application used by the victim
• Phone numbers of the fraudster (if available) i.e., Whatsapp, IMO, WeChat, Skype, email etc
• Updated bank statement reflecting the unauthorized transactions
• Any other relevant detail

The chats, fraudulent mails, voice recordings, phone messages etc. should be retained in the “Original Device” as such. This is important to enable adduce them as evidence in the Court of Law. Once, the contents from original device are deleted, they lose their sanctity (even though present in other devices, as forwarded materials). Hence, care must be taken not to delete the original incriminating evidences.   

Ideally, an FIR should be lodged (U/S 154 Cr.P.C), but if police resists get a DDR (Daily Diary Register) entry made and receive a stamped copy of the proof of submission of the complaint. Now-a-days several state police allows lodging similar complaint via mobile application or web based interfaces too.
The whole idea is to lend weight and credibility to the complaint you shall finally make to your bank, with the use of such FIR/ DDR entry.

Step 2:Submit a similar complaint to the nearest bank branch and the RBI branch. The complaint to RBI branch is primarily meant to pressurize the bank to deal with the case swiftly and strictly as per the procedure prescribed by RBI.
RBI Bank branches: The RBI branches pan India can be seen using this link -https://www.rbi.org.in/Scripts/Regionaloffices.aspx
Care must be taken to ensure you notify the bank within three working days of receiving the communication from the bank regarding the unauthorized transaction, to enjoy zero customer liability.  

Step 3:Stay in contact with bank officials, seeking refund as per RBI guidelines. In case of delay, seek reasons for the same.