CYBER CRIME

The usage of internet services in India is growing rapidly. It has given rise to new opportunities
in every field we can think of – be it entertainment, business, sports or education. There are
many pros and cons of some new types of technology which are been invented or discovered.
Similarly the new & profound technology i.e. using of INTERNET Service, has also got some
pros & cons. These cons are named CYBER CRIME, the major disadvantages, illegal activity
committed on the internet by certain individuals because of certain loop-holes. The internet,
along with its advantages, has also exposed us to security risks that come with connecting to a
large network.

Computers today are being misused for illegal activities like e-mail espionage, credit card
fraud, spam, and software piracy and so on, which invade our Privacy and offend our senses.
Criminal activities in the cyberspace are on the rise. Computer crimes are criminal activities,
which involve the use of information technology to gain an illegal or an unauthorized access to
a computer system with intent of damaging, deleting or altering computer data. Computer
crimes also include the activities such as electronic frauds, misuse of devices, identity theft and
data as well as system interference.

Computer crimes may not necessarily involve damage to physical property. They rather includ
e the manipulation of confidential data and critical information. Computer crimes involve
activities of software theft, wherein the privacy of the users is hampered. Today, a large
number of rural areas in India and a couple of other nations in there go
on have increasing access to the internet,
particularly broadband. The challenges of information security have also grown manifold. 

MEANING OF COMPUTER CRIME :-

Criminals can operate anonymously over the Computer Networks.

Hackers Invade Privacy.
Hackers Destroy “Property” in the Form of Computer Files or Records.
Hackers injure other computer Users by Destroying Information system.
DEFINITION OF CYBER CRIME :-

Defining cyber crimes, as “acts that are punishable by the Information technology Act”
would be unsuitable as the Indian panel code also covers many cyber crimes, such as email
spoofing and cyber defamation, sending threatening emails etc. A simple yet sturdy definition
of cyber crime would be ‘unlawful acts wherein the computers Is either a tool or a target or
both”.
 CHAPTER -2
CYBER CRIMES IN BANKS

Banks Frauds
Computer Fraud

Banks are the most Favorite’s destination of hackers. As AN Roy, commissioner of police,
Mumbai, avers, ‘Hacking a website or writing a programmed that will spread virus on
computer will not earn money. By hacking website of a bank or stealing a credit card Pin, a
street – smart program can, besides enfettering himself, cause a lot of dangerous to banks and
their customers alike.
BANK FRAUDS :

“Lapses in system make easy the job of offender to dupe banks”.

Fraud is any dishonest acts ends behavior by which one person gains or intends to gain
advantages over another person. Fraud causes loss to the victim directly or indirectly. Fraud
has not been described or discussed clearly in the Indian penal code but sections dealing with
cheating. Concealment, forgery counterfeiting and breach of trust have been discussed with
leads to the act of Fraud.

In the contractual term as described in the Indian Contract act, sec 17 suggest that a Fraud
means and includes any of the acts by a party to a counter with his convenience or by his
agents with the intention to deceive another party or his agent or to include him to Banking
frauds is a federal crime in many countries, define as planning to obtain property of money
from any federally financial institution. It is sometimes considered a white collar crime.

The number of bank frauds in India is substantial. It is increasing with the passage of time. All
the major operational areas in baking represent a good opportunity for fraudsters with growing
incidence being reported under deposit, loan and inter-branch accounting transactions,
including remittances.

Thus banking Fraud can be Classified as :

Fraud by Insiders.
Fraud by Others.

FRAUD BY INSIDERS

Rough trader
Fraudulent loans
 Wire transfer fraud
Forged or fraudulent documents
Uninsured deposits
Theft of identity
Demand draft fraud

1. Rogue traders
A rogue trader is a trader at a financial institution who engages in unauthorized trading to
recoup the loss he incurred in earlier trades. Out of fear and desperation, he manipulates the
internal controls to circumvent detection to buy more time.
Unfortunately, unauthorized trading activities invariably produce more losses due to time
constraints; most rogue traders are discovered at an early stage with losses ranging from $1
million to $100 million, but a very few working out of institutions with extremely lax
controls were not discovered until the loss had reached well over a billion dollars. The size of
the loss is a reflection of the laxity in controls instituted at the firm and not the trader's greed.
Contrary to the public perception, rogue traders do not have criminal intent to defraud his
employer to enrich himself; he is merely trying to recoup the loss to make his firm whole and
salvage his employment.

2. Fraudulent loans
One way to remove money from a bank is to take out a loan, a practice bankers would be
more than willing to encourage if they knew that the money will be repaid in full with
interest. A fraudulent loan, however, is one in which the borrower is a business entity
controlled by a dishonest bank officer or an accomplice; the "borrower" then declares
bankruptcy or vanishes and the money is gone. The borrower may even be a non-existent
entity and the loan merely an artifice to conceal a theft of a large sum of money from the
bank. This can also seen as a component within mortgage fraud (Bell, 2010)

3. Wire transfer fraud

Wire transfer networks such as the international SWIFT interbank fund transfer system are
tempting as targets as a transfer, once made, is difficult or impossible to reverse. As these
networks are used by banks to settle accounts with each other, rapid or overnight wire
transfer of large amounts of money are commonplace; while banks have put checks and
balances in place, there is the risk that insiders may attempt to use fraudulent or forged
documents which claim to request a bank depositor's money be wired to another bank, often
an offshore account in some distant foreign country.
There is a very high risk of fraud when dealing with unknown or uninsured institutions. Also,
a person may send a wire transfer from country to country. Since this takes a few days for the
transfer to "clear" and be available to withdraw, the other person may still be able to
withdraw the money from the other bank. A new teller or corrupt officer may approve the
withdraw since it is in pending status which then the other person cancels the wire transfer
and the bank institution takes a monetary loss.

4. Forged or fraudulent documents

Forged documents are often used to conceal other thefts; banks tend to count their money
meticulously so every penny must be accounted for. A document claiming that a sum of
money has been borrowed as a loan, withdrawn by an individual depositor or transferred or
invested can therefore be valuable to someone who wishes to conceal the minor detail that the
bank's money has in fact been stolen and is now gone.

5. Uninsured deposits
A bank soliciting public deposits may be uninsured or not licensed to operate at all. The
objective is usually to solicit for deposits to this uninsured "bank", although some may also
sell stock representing ownership of the "bank". Sometimes the names appear very official or
very similar to those of legitimate banks.

6. Demand draft fraud

Demand draft (DD) fraud typically involves one or more corrupt bank employees. Firstly,
such employees remove a few DD leaves or DD books from stock and write them like a

Regular DD. Since they are insiders, they know the coding and punching of a demand draft.
Such fraudulent demand drafts are usually drawn payable at a distant city without debiting an
Account. The draft is cashed at the payable branch. The fraud is discovered only when the
bank's head office does the branch-wise reconciliation, which normally take six months, by
which time the money is gone.

FRAUDS BY OUTSIDERS

Forgery and altered cheques

Stolen cheques
Accounting fraud
Forged currency notes
Money laundering
Bill discounting fraud
Cheque kiting
Credit card fraud
Booster cheques
Duplication or skimming of card information
Fraudulent loan applications
Phishing and Internet fraud.

1. Stolen cheques:

Fraudsters may seek access to facilities such as mailrooms, post offices, offices of a tax
authority, a corporate payroll or a social or veterans' benefit office, which process cheques in
large numbers. The fraudsters then may open bank accounts under assumed names and

Deposit the cheques, which they may first alter in order to appear legitimate, so that they can
subsequently withdraw unauthorized funds.

2. Cheque kiting :
Cheque kiting exploits a system in which, when a cheque is deposited to a bank account, the
money is made available immediately even though it is not removed from the account on
which the cheque is drawn until the cheque actually clears.

3. Forgery and altered cheques :

Fraudsters have altered cheques to change the name (in order to deposit cheques intended for
payment to someone else) or the amount on the face of cheques, simple altering can change
$100.00 into $100,000.00, although transactions of this value are subject to investigation as a
precaution to prevent fraud as policy.
Instead of tampering with a real cheque, fraudsters may alternatively attempt to forge a
depositor's signature on a blank cheque or even print their own cheques drawn on accounts
owned by others, non-existent accounts, etc. They would subsequently cash the fraudulent
cheque through another bank and withdraw the money before the banks realize that the
cheque was a fraud.

4. Accounting frauds :
In order to hide serious financial problems, some businesses have been known to use
fraudulent bookkeeping to overstate sales and income, inflate the worth of the company's
assets, or state a profit when the company is operating at a loss. These tampered records are
then used to seek investment in the company's bond or security issues or to make fraudulent
loan applications in a final attempt to obtain more money to delay the inevitable collapse
.Examples of accounting frauds: Enron and worldcom and Ocala Funding. These companies
"cooked the books" in order to appear as though they had profits each quarter, when in fact
they were deeply in debt.

5. Bill discounting fraud

Essentially a confidence trick, a fraudster uses a company at their disposal to gain confidence
with a bank, by appearing as a genuine, profitable customer. To give the illusion of being a
desired customer, the company regularly and repeatedly uses the bank to get payment from
one or more of its customers. These payments are always made, as the customers in question
are part of the fraud, actively paying any and all bills raised by the bank. After time, after the
bank is happy with the company, the company requests that the bank settles its balance with
the company before billing the customer. Again, business continues as normal for the
fraudulent company, its fraudulent customers, and the unwitting bank.
6. Booster cheques
A booster cheque is a fraudulent or bad cheque used to make a payment to a credit card
account in order to "bust out" or raise the amount of available credit on otherwise-legitimate
credit cards. The amount of the cheque is credited to the card account by the bank as soon as
the payment is made, even though the cheque has not yet cleared. Before the bad cheque is
discovered, the perpetrator goes on a spending spree or obtains cash advances until the
newly-"raised" available limit on the card is reached. The original cheque then bounces, but
by then it is already too late.
 CHAPTER- 3
REASONS OF CYBER CRIMES

REASONS FOR CYBER CRIME:

Hart in his work "The Concept of Law" said that 'human beings are vulnerable so rule of law
is required to protect them'. By applying this to the cyberspace we may say that computers
are vulnerable so rule of law is required to protect and safeguard them against cyber crime.
The reasons for the vulnerability of computers may be said to be:

1. Capacity to store data in comparatively small space:-

The computer has a unique characteristic of storing data in a very small space. This allows
for much easier access or removal of information through either physical or virtual media.

2. Easy to access:-

The problems encountered in guarding a computer system from unauthorized access are that
there is every possibility of unauthorized access not due to human error but due to the
complex technology. By secretly implanted a logic bomb, key loggers that can steal access
codes, advanced voice recorders; retina imagers etc. that can fool biometric systems and
bypass firewalls can be utilized to get past many security systems.

3. Complex-

The computers work on operating systems and these operating systems in turn are composed
of millions of lines of code. The human mind is fallible and it is not possible that there might
not be a lapse at any stage. The cyber criminals take advantage of these lacunas and penetrate
into the computer system using often more sophisticated means than originally anticipated by
the systems engineers.

4. Negligence:-

 Negligence is very closely connected with human conduct. It is therefore very probable
that while protecting the computer system there might be any negligence, which in turn
provides a cyber criminal to gain access and control over the computer system. This
negligence is usually a property of under resourced IT security provisions and the
improvement of security barriers within software packages and network structures could lead
to improved security. Banks should work on improving awareness of the different threats that
currently exist, including e-mail fraud, phishing and malware.

TYPES OF CYBER CRIME

 ATM Frauds
Credit card Frauds
Phishing
Identity Theft
Hacking
Electronic Fund Transfer Fraud.

ATM frauds
The traditional and ancient society was devoid of any monetary instruments and the entire
exchange of goods and merchandise was managed by the “barter system”. The use of monetary
instruments as a unit of exchange replaced the barter system and money in various
denominations was used as the sole purchasing power. 

The traditional monetary instruments from a paper and metal based currency to“plastic money”
are in the form of credit cards, debit cards, etc. This has resulted in the increasing use of ATM
all over the world. The use of ATM is not only safe but is also convenient. This safety and
convenience, unfortunately, has an evil side as well that do not originate from the use of plastic
money rather by the misuse of the same. This evil side is reflected in the form of 

That is a global problem. The use of plastic money is increasing day by day for payment of
shopping bills, electricity bills, school fees, phone bills, insurance premium, travelling bills
and even petrol bills. The world at large is struggling to increase the convenience and safety
on the one hand and to reduce it misuse.
ATM and Debit Card Fraud
ATM fraud is on the rise, Law enforcement officials say, because thrives are becoming more
and more sophisticated. Criminal have become virus clever a finding new ways to access
your funds so consumer needs to pay careful attention to their bank statements in ceases
there’re an authorized withdrawals because it’s more likely that someone has access to your
bank account information.

Criminals Steel Your Money

Methods used by criminals to gain entry to your money accounts include hacking into bank
database, phishing scams and unsolicited email the birching of retailer computer system And
card skimming device placemen ATM machines and gas pupas. There isn’t a lot you can do
About thieves gaining illegal entry into computer system and data base containing your
Financial information besides vigilance and reporting unusual activity but some odd the
methods criminals use of Greek into your bank account are directed right at the customer. I
many cases people are handling crook the keys to their accounts. Knowing something about
the methods used might save consume millions of dollar a year.

Magnetic Card Skimmers steal your data

Some tech savvy thieves are placing ATM card skimming devices over the real card readers.
They will also place a tiny camera somewhere on the ATM machine so that the information
of the screen is recorded as well as your hand punching in your PIN numbers. All of this is
often transmitted to the thieves who are often sitting in a nearby car. They now have
everything they need to empty your account of its fraud. This kind of scam has been reported
in just about every major city in the world and people lose millions of dollars a year this way.
Some of the card skimmers and cameras may be easy to detect but some of them take a
trained eye and are only discovered when the ATM’s is serviced by a professional. If you
notice anything out of the ordinary when using an ATM to withdraw funds you might
consider trying another machine and report your suspicions to the authorities.
 Hacking ATM PIN

A personal identification number (PIN, pronounced "pin"; often redundantly PIN number) is

a numeric password shared between a user and a system that can be used to authenticate the
user to the system. Typically, the user is required to provide a non-confidential user identifier
Or token (the user ID) and a confidential PIN to gain access to the system. Upon receiving
the user ID and PIN, the system looks up the PIN based upon the user ID and compares the
looked-up PIN with the received PIN. The user is granted access only when the number
entered matches with the number stored in the system.

Researchers say they have discovered a fundamental weakness in the system that banks use to
keep debit card pin codes undermine the entire debit card system. Using the methods outlined
by the researchers, a hacker could siphon of Thousands of PIN codes and compromises
hundred of banks. Criminals could them print phony debit cards and simultaneously
withdraw vast amounts of cash using ATM’s around the world.
Rarely does the transmission go directly to a customer bank. Instead, it is handed off several
times on a banking network run by several third parties. Each time a Bank passes the data
along, it goes through a switch that contains the hardware. Security modules and the PIN
block is unscrambled and then descrambled. It is at these intermediate points where hackers
could trick the machines into sensational PINs.