Chinese scammers exploit loan apps and payment systems

A new malicious operation involves Chinese scammers who created a scheme that uses fraudulent loan apps and India’s real-time mobile payment system, Unified Payments Interface (UPI).

Based on reports, these scammers leveraged a loophole in the UPI service providers that currently operate without coverage under the Prevention of Money Laundering Act (PMLA), which makes these platforms relatively easy to exploit.

These attackers commonly disguise themselves as loan app providers, sometimes even assuming the identities of legitimate entities, luring victims with the promise of quick and easy money in exchange for a fee. This fee typically goes from 5 to 10 per cent of the loan amount.

Unsuspecting victims will likely get fooled by the scheme into providing sensitive personal information, including bank details and phone numbers, and even uploading their national identity cards, such as Aadhaar and tax-related Permanent Account Number (PAN) cards.

Unfortunately, the loan will never arrive in their accounts once they pay the alleged fee. On the other hand, the scam will funnel the ill-gotten expenses from the Indian targets to China through intermediaries known as mules. The scammers benefit from Chinese payment gateways, which shield them from the reach of Indian authorities.

 

The Chinese scammers have established connections with money mules to collect the funds.

 

The Chinese scammers rely on mules that maintain legitimate bank accounts in smaller banks with less rigorous scrutiny to transfer the ill-gotten wealth.

These mules receive a 1 to 2 per cent cut for facilitating the transactions. They also regularly change the phone numbers associated with their bank accounts, giving the scammers control over the accounts and enabling money laundering.

The scammers operate their recruitment through Telegram, using enticing advertisements and text messages to entice new participants.

Further investigation revealed the existence of 55 such fraudulent apps on the Android platform and 22 Chinese gateways. Over nearly two months, scammers successfully laundered Rs 37 lakhs, equivalent to $44,000, through a single app out of the 55 apps they use for their scheme. This particular scam impacted more than 30,000 Aadhaar cards and bank accounts.

It is important to note that UPI has played a crucial role in promoting digital payments and financial inclusion in India, being widely accepted and utilised across numerous banks, merchants, and service providers. These scams will likely continue if relevant individuals do not scrutinise these transactions closely.