Freezing/ Lien Marking of Accounts by Banks-Complaints Registered in NCCRP
Account freezing/lien marking by banks based on the directions issued by the Law Enforcement Agencies(LEAs) in respect of complaints registered by the customers in the National Cyber Crime Reporting Portal (NCCRP) has created controversy in Kerala. This article analyses various aspects related to account freezing/lien marking by banks.
What is the root cause for the freezing/lien marking of accounts?
Digital banking enables banks to extend various transactional facilities to customers seamlessly through various secured digital channels. At the same time, unscrupulous elements have been wooing customers and committing fraud by making them reveal their online transaction credentials and One Time Passwords (OTP). Fraudsters have been using various methods like phishing, vishing, malware attacks, identity thefts, lottery scams, tax scams, password stealing, etc for stealing digital banking credentials for carrying out fraudulent transactions. With the progress in technology adoption and digital banking in the country, frauds have also been increasing. Banks have been taking many measures to educate customers on various facets of cyber attacks. However, fraudsters have always been one step ahead in innovating their strategies and targeting vulnerable and innocent customers.
The government of India has been taking various measures to curb the menace of cyber crimes with the active involvement of Law Enforcement Agencies (LEAs). National Cyber Crime Reporting Portal (NCCRP) is a facility made available for Indian citizens to report cyber crimes immediately upon detection. With the introduction of NCCRP, there has been an increase in the number of reported cyber crimes and subsequent quick actions from the police leading to increased incidences of account freezing and lien marking.
To have a better understanding of NCCRP, please click National Cyber Crime Reporting Portal (NCCRP) and Digital Banking.
Why increase in the number of frozen / lien-marked accounts?
The NCCRP portal is an additional facility to the traditional crime filing method of complaining to the local Police Station. The difference is in the response to the complaint. The complaints lodged in the NCCRP portal are immediately assigned to the respective State Police department for investigation and they initiate an investigation immediately and seek details from the bank about the details of the beneficiary of the crime. To ensure that the amounts of crime are not withdrawn, they may demand to freeze the account or lien mark on the amount, based on the gravity of the crime and initial assessment.
What are the enabling sections of the law that authorize freezing/lien marking of accounts?
Law Enforcement Agencies (LEAs) may serve notices to the banks under the following sections of the Criminal Procedure Code (CrPC), as part of their investigation.
i. Section 91 – Summons to produce a document or other thing and
ii. Section 102- Powers to LEAs to seize certain property
Under these sections, LEAs have the freedom to
i. Seek details of the accounts through which disputed/ suspicious transactions are routed ( Sec 91).
ii. Direct banks to debit freeze/total freeze of the account/lien mark for specified amounts (Sec 102). The decision of appropriate action is taken on a case-to-case basis, based on the gravity of the complaint, the amount involved, the suspected involvement of the account holder, etc. Banks may also be advised to furnish details of transactions/copies relating to account opening forms, KYC documents, etc. The demands are normally sent to the central office of the banks for quick action, though LEAs may approach the branch mentioned in the complaint or any other office of the bank at their discretion.
Are banks empowered to revise the directions of Law Enforcement Agencies (LEAs)?
No. As part of preventing crimes / preventing criminals from using banking channels for routing illegal money, banks are bound to follow the directions of LEAs strictly and promptly. Banks do not have any discretion in modifying the direction of LEAs based on their judgment or relationship with the customer.
Banks, being highly regulated entities and organizations with social obligations, are bound to extend full support to law enforcement agencies. Banks are liable for ignoring the directions /modifying the directions / delaying the implementation of the directions of LEAs.
What are the roles of the banks on receipt of directions from LEAs on account freezing/lien marking?
As mentioned above, banks are bound to obey the directions from LEAs. Banks are not envisaged to modify the direction based on their relationship or independent assessment of the track records of the customer.
However, banks may inform the account holder in writing about the freezing/lien marking. They may also share the essential details such as reference number, name and address of the law enforcement agency, case/ FIR number, etc., with the customer.
What are the responsibilities of account holders on freezing/lien marking of accounts?
Based on the details provided by the bank, customers shall directly take up with the LEA which directed the freezing. A customer who is not involved in the financial crime shall take up with the law enforcement agency for review of the decision. Customers may seek the support of the branch of the bank with which the account is maintained for additional details required. However, banks would be able to remove the restriction placed only if a revised direction is received from the LEA, even if they are convinced of the non-involvement of the account holder.
Are all banks bound to obey the instructions of LEAs on freezing/lien marking of accounts?
All banks, without exception, are bound to obey the instructions of LEAs. However, names of selected banks may be referred to frequently by media for various reasons like more number of branches in a particular geography, more impact, etc. Shifting of account/ transferring the balance to another bank may not be an ideal solution as the new bank is also required to abide by the direction of LEAs in similar instances. If the account holder is not involved in the crime approaching the LEA for resolution/ revisit of the direction, with the guidance of the bank, would be the most feasible solution.
(The various aspects related to the issuance of directions by LEI and freezing/lien marking of the accounts by the banks are presently ( as of 22/04/23) under examination by the High Court of Kerala, and better clarity is expected to emerge soon)
