No Alerts Or Red Flags Raised By Banks, Says NCDRC Notice On Digital Arrest Scam Transactions

Notice to banks on digital arrest scam transaction: The National Consumer Disputes Redressal Commission (NCDRC) has served notices to several banks across the country after receiving three complaints from victims of "digital arrest" scams—two from Gurugram, who lost Rs 10.30 crore and Rs 5.85 crore, respectively, and one from Mumbai. The panel has directed the banks to clarify how they approved various suspected transactions despite being put on alert by the victims. 

The order by NCDRC added, "The guidelines for checking unauthorised electronic banking transactions are governed by circulars and it appears that the accounts in which the amounts have been transferred by the complainants, those accounts were maintained seemingly without taking any precautions and no alerts or red flags were raised by any of the Banks in the background that the transactions were all suspicious for huge amounts…"

Notifications were issued to HDFC Bank, ICICI Bank, Sreenivasa Padmavathi Bank, Federal Bank, UCO Bank, Yes Bank, State Bank of India, and Kotak Mahindra Bank. Some of the banks had representation at the hearing held on July 7, 2025.

How the Digital Arrest Scam Works

The "digital arrest" fraud is a type of cybercrime in which scammers pose as police or central agency representatives during video calls. They inform victims that their name or bank account is associated with criminal activity such as money laundering or drug trafficking.

Employing the use of fear strategies and fabricated legal intimidation, the scammers subject the victims to prolonged video calls, often days long, isolating them from friends and relatives. On these calls, the victims are forced into sending large amounts of money to "safe accounts" for staged investigations, only to subsequently realise they have been scammed.

What Led the Consumer Panel to Take Action

After the couple from Mumbai filed a complaint, the panel issued notices to multiple banks, seeking explanations on why standard security protocols did not prevent or flag the fraudulent transfers. It pointed out that delays in action after a complaint could amount to a serious service lapse. 

This is the first time a consumer court has held banks answerable in connection with digital arrest scams, shifting the focus from just catching the scammers to scrutinising the financial systems that failed to prevent the fraud. 

Why the Banks Are Being Questioned

Banks have to track unusual or large-value transactions and move quickly when an instance of fraud is reported.

In some frauds, funds were transferred between accounts in the same or adjacent banks within a very short time. The panel is interested in knowing how these big and frequent transactions did not raise alerts from the internal mechanisms of the banks, and what protection was lacking.

NCDRC's Direction to Banks and Consumers

The NCDRC has directed the banks to reply and make it clear if they had complied with the procedures due and what measures, if any, were initiated to help the victims.

In the meantime, authorities are reminding individuals to remain vigilant. Any legitimate-sounding threat requesting cash should be cross-checked with official channels. No law enforcement agency will ever request payments via a video call.