Litigation & Compensation Recovery

How to recover lost money through fraudulent bank transfers?

Under Information Technology Act One can file an application before the Adjudicating Officer appointed under Section 46 of Information Technology Act, 2000 claiming breach of reasonable security procedures by the bank.An analysis of selected cases ordered by the Adjudicating Officer revealed that the banks and telecom operators in most cases have failed to maintain reasonable security procedures, including non-compliance of KYC norms, Anti-money laundering guidelines, and automatic suspicious transaction monitoring facilities. As per Section 43A of Information Technology Act, 2000 the banks and other intermediaries who have failed to maintain reasonable security procedure must pay adequate damages as compensation to such person to cover the loss. The Adjudicating Officer has the power to adjudicate in the matters where the claim does not exceed Rs 5 crores. The bank must prove that they have maintained reasonable security procedures to prevent such fraudulent acts. In case the bank fails to prove that they have maintained reasonable security procedure, the Adjudicating Officer who has the powers of a Civil Court, may order the bank to pay damages as compensation to the victim.

Now days, most banking functions have moved to core banking system and a large number of transactions are made using internet banking, mobile banking or use of debit/credit cards. A significant number of urban and semi-urban customers of the banks use debit/credit cards for their every day purchases through e-commerce sites or withdrawal of money through ATMs. The banks are in possession of sensitive personal information of their customers including account numbers, PIN, credit/debit card numbers and other financial information of the customer in an electronic form. The banks are responsible for protection of such information from unauthorized usage through maintaining reasonable security procedures laid down in different rules and regulations issued by RBI and other bodies. Some of the important rules and guidelines which govern maintenance of reasonable security standards for banks include, Master Circular – Know your Customer (KYC) norms, Anti-Money Laundering standards, Combating of financial terrorism, Obligations of banks under Protection of Money Laundering Act, 2002 and by RBI and other international standards for information technology security (ISO standards).

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