‘What Is Wrong With Victims?’: Supreme Court Pushes for Bank Compensation in Digital Arrest Scams

New Delhi: The Supreme Court on Thursday expressed concern over the continued rise of digital arrest scams, questioning why educated people continue to fall victim to fraud despite awareness campaigns, media coverage and previous judicial interventions. The court also called for stronger accountability from banks, saying financial institutions must act as a “protective umbrella” for customers and compensate victims if fraud occurs due to a failure of due diligence.

A bench comprising Chief Justice of India Surya Kant and Justices Joymalya Bagchi and V Mohana was hearing a suo motu case concerning digital arrest scams involving forged documents and cyber-enabled financial fraud.

During the hearing, Chief Justice Surya Kant expressed disbelief that people could be intimidated into believing they had been arrested through a mobile phone call. He questioned why victims continued to fall for such threats despite repeated warnings about the modus operandi used by cybercriminals.

“We are baffled - why don't people understand? What is the issue with the victims? Are they not ordinary, sensible people? This is being reported in the media all the time!” the Chief Justice remarked.

In another sharp observation, the CJI said that people should not believe that an arrest can be imposed through a phone call. He suggested that the fear created by such calls could be countered by verifying the authenticity of the claims instead of complying with the fraudsters' demands.

The bench also pointed out that people could verify the authenticity of purported court orders through the official website of the concerned court.

SC Questions Banks' Failure To Stop Suspicious Transactions

The Supreme Court stressed that banks and financial institutions must play a proactive role in preventing digital fraud rather than limiting their response to investigations after money has been transferred.

Questioning the effectiveness of existing safeguards, the Chief Justice asked why banks could not immediately intervene when a transaction appeared inconsistent with a customer's established banking history.

“A report is essentially a post-mortem. What about prevention? Why can't a transaction be stopped the moment it takes place?” the CJI asked.

The bench emphasised that financial institutions possess information about customers' transaction patterns and should use it to identify suspicious activity before funds are transferred to fraudsters.

It called for a mechanism to temporarily suspend transactions that deviate significantly from an account holder's usual pattern until their authenticity can be verified. The proposed safeguards also include automated reporting of suspicious transactions and physical verification, wherever necessary, to establish whether a transaction is genuine.

The court indicated that banks could be required to compensate victims for losses arising from digital arrest scams and other cyber frauds if an investigation establishes that the financial institution failed to exercise due diligence.

The bench said the Reserve Bank of India's proposed regulatory framework must include provisions for compensation of at least the amount lost by the customer in such cases.

It also stressed the need for enforceable accountability provisions, warning that general advisories would not be sufficient to ensure compliance by financial institutions.

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