Bank A/Cs can be frozen for no fault of yours: What UPI users learned in Kerala

Banks in Kerala are freezing the accounts of customers who have no links to cyber crimes based on the directions of cyber police from other states.
Representative image of UPI transactions
Representative image of UPI transactions
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It was business as usual for Navas, who runs a poultry shop in Pathalam, a suburban region in Kerala’s Kochi, on March 24. Being a Friday, it was an extra busy day for the 52-year-old as he went about taking orders and selling chicken to customers and nearby restaurants. The distribution truck supplying chicken to the shop had arrived. Navas collected the stock and it was time to make the payment to the supplier. He began to transfer a total sum of Rs 25,000 via Google Pay. The transaction failed. It was probably a network error, thought Navas. He tried again. And yet again, the payment could not be done. He attempted a few more times, but without success.

A little concerned, Navas contacted his bank to know what’s happening. “The bank officials told me that my account was frozen based on the orders from the Gujarat cyber police because of an unauthorised transaction that was made into my account,” Navas said.

This is the bank account where the poultry shop owner had saved his life's earnings and all of a sudden, he lost access to all of it because the police of another state were investigating a cyber crime, which Navas had no connection with. 

When the news spread among residents of the area, Navas realised he was not the only one caught in the bank account freeze mess. Several others also began to raise complaints about their accounts being frozen, with banks not disclosing any further information about why it is happening and providing any solution. Most of these people caught in this mess were small traders or vendors, whose livelihood savings were in these accounts. 

By then, news reports about people facing similar issues started to surface from other parts of the state as well – From Thiruvananthapuram and Alappuzha to Malappuram and Kozhikode, with the state cyber cell receiving more than a hundred complaints on the same. 

Why is this happening? 

Banks in Kerala are freezing the accounts of some of their customers based on the directions of cyber police from states like Gujarat, Punjab, Delhi and Karnataka, who are investigating the complaints of online frauds, which are registered on the National Cyber Crime Reporting Portal (NCCRP), which comes under the Union Ministry of Home Affairs. 

However, people from Kerala whose accounts are frozen have maintained they had nothing to do with these crimes, nor have they been booked for it. Their accounts were asked to be frozen by the police because they have transacted with other accounts which were linked to financial fraud.

For example, in the case of Navas, his account was frozen because of a transaction made into his account by his son-in-law, Noufal, who had previously transacted with another account linked to financial fraud. Noufal’s bank account was also frozen. 

According to Jiyas Jamal, an advocate in the Kerala High Court, who specialises in Cyber crime laws, this is done in order to prevent any further diversion of swindled money into other accounts. “When a complaint of online financial fraud is registered on the NCCRP portal, the cyber police of whichever state the complaint was registered directs the bank to freeze the accounts of all who have received the swindled money,” Jiyas told TNM. 

People whose accounts have been frozen are furious with the bank authorities for not informing them about the issue and not answering their queries. “When I approached my bank about the issue, they were treating me like I’m the cause of all the issues. They were not willing to give me any more information as to why my accounts were frozen apart from the fact that they were directed by the Gujarat police. When I enquired about the solution to this issue, they began to get angry with me,” said Ashraf, a fruit vendor in Aluva. 

The Federal Bank, which had many of their customers’ accounts frozen, including that of Navas, had issued a statement on April 10, stating that as a law-abiding organisation, it was their responsibility to obey what the police said. “When a cyber fraud occurs, the concerned state police directs the banks to not just freeze the account to which the money was swindled in the first place but also of those where money was transferred by the latter. This is not just limited to UPI transactions but also to payments made via NEFT, RTGS and cheques,” said Federal Bank. 

While cyber law experts like Jiyas agree that banks cannot question law enforcement authorities, they feel that financial institutions have the moral responsibility to inform their account holders about their accounts being frozen. “Many who approached me for help told me that they came to know about their bank accounts being frozen when they were in the middle of an emergency like in a hospital or petrol pump,” said Jiyas. 

Navas said that his bank account was frozen on March 17 but he came to know about it only on March 24. “I had to mortgage my wife’s gold jewellery to pay the chicken suppliers. This is our only source of income and business should go on if we have to survive,” he said. 

Police hand in glove with perpetrators?

Even as bank users are scurrying to find a way to unfreeze their accounts, reports have emerged of cyber police officials taking advantage of the situation and demanding bribes to close the case and restore their accounts. 

Speaking to TNM, advocate Ameen Hassan, who is providing legal support to over 20 victims whose bank accounts are blocked, says that several of his clients, who approached police officials from other states who booked the case, were asked to pay money and restore their accounts. “Sometimes banks themselves advise the clients to contact the concerned police officials and pay them off. One of my clients was asked to pay Rs 2 lakh in return for the case being closed and his account being restored. But we decided to do this the legal way,”  said Ameen. 

‘Why freeze the entire account?’

The question asked by the victims of bank account freeze as well as technology experts is regarding the need to freeze the entire account of an individual, instead of just freezing the lien amount. In many cases, the accounts were frozen for small ticket transactions, like in the case of fruit vendor Ashraf, whose account was frozen because of a transaction worth Rs 430 made into his account. 

“It is a mistake on the bank’s part to freeze accounts based on small transactions. Banks and National Payments Corporation of India (NPCI) must come up with a customer-friendly system while handling United Payment Interface's (UPI) disputed transactions. There are many flaws existing within the regulatory system related to privacy of bank accounts while UPI makes them easily discoverable. The system design of UPI fails to address it. Bank’s Standard Operation Procedure to a police freeze request needs to be defined considering the nature of dispute, transaction value and legality of the request, said Anivar Aravind, a public interest technologist. 

Anivar said that normally banks have a separate fund allocated for chargebacks, which is the payment amount returned to a debit or credit card after a customer disputes a transaction. “However, such systems are not there in the case of UPI. While there have been several developments to improve UPI’s acceptance, there hasn’t been much in terms of improving user security, as a result of which financial frauds are increasing,” he says.

TNM also spoke to cyber police officers in Aluva under whose jurisdiction many complaints of bank account freezing have been reported from. “We cannot do much about lifting the freeze on their bank accounts as that has to be done by the concerned police department which ordered for the same,” said a cyber police officer.

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