The surge in AI-generated deepfakes, cryptocurrency fraud, and online manipulation has intensified concerns over social media–driven scams underscoring the urgent need for safeguards.

• According to the Ministry of Home Affairs (2024), Indians lost ₹22,845 crore to cyber frauds—a 206% increase from 2023—much of it linked to scams run through social media.

Types of Financial Frauds via Social Media

• Fake Investment and Trading Schemes: Fraudsters promote stock tips, cryptocurrency schemes, and forex trading platforms through social media ads, groups, and influencer-style profiles. They lure users with high return promises and fake testimonials.
  • Example: Recently, an IT professional in Belagavi lost ₹62 lakh in a fake “forest trading” scheme promoted on Instagram.
• Romance Scams: Cybercriminals build emotional/romantic trust with victims online, later manipulating them into sending money, gifts, or investments.
  • A business person in Kolkata lost ~₹3.8–4 crore after befriending someone on Facebook who convinced him to invest in a fake crypto trading platform.
• Pig-Butchering (term from Chinese “Shāzhūpán”): Criminals “fatten the pig” by slowly gaining the victim’s trust and then “slaughtering” (defrauding) them through fake investment schemes, usually in cryptocurrency or forex.
  • Examples:  The Ministry of Home Affairs (MHA), via the Indian Cybercrime Coordination Centre (I4C), warned about “pig butchering” / investment scams targeting unemployed youths, housewives, students, and financially vulnerable people.
• Impersonation of Celebrities and Officials: Fraudsters create fake social media profiles of celebrities, bureaucrats, or corporate icons to solicit money or investments.
  • Example: Recently, a Mumbai woman was duped of ₹65,000 by a scammer posing as actor Keanu Reeves on Instagram.
• Virtual/ Digital Arrest: Criminals impersonate police, RBI, or ED officials via WhatsApp/video calls, threatening arrest or asset seizure unless money is paid.
  • Examples: In Kollam (Kerala), a 79-year-old man lost ₹3.72 crore after being tricked into believing he was under “virtual arrest.”
• Mule Accounts and Social Media Rentals: Fraudsters rent genuine social media and bank accounts to route scam money, shielding their identity. Accounts were used for money laundering and illegal payment gateways
  • Examples: The MHA via I4C froze over 1.33 million mule accounts, preventing fraudulent transactions worth ₹4,631 crore.

Causes of Rising Frauds

• Push for Digital Economy : India’s digital economy has expanded rapidly with the rise of UPI, wallets, and online banking, but social media platforms like WhatsApp, Instagram, Facebook, and Telegram have also become hubs for financial frauds.
• Low Digital Literacy: Despite widespread smartphone penetration (85.5 percent of households possessed at least one smartphone), Only 38% of households in India are digitally literate (Oxfam’s India Inequality report 2022).
• Overtrust in Social Media: India has a large population of social media users (~ 462 million active social media identities in early 2024  increases exposure to ads, influencer content, etc. 
  • The Bengaluru AI-trading scam above used Facebook ads with deepfaked video of a prominent figure (Infosys cofounder NR Narayana Murthy) to lure people in.
• AI as a New Weapon: Deepfakes, AI-generated voices, and cloned images have made scams more sophisticated,  82.6% of phishing campaigns in 2024 using AI-generated content.
  • Pi-Labs’s report forecasts that deepfake scams could cost India ~₹70,000 crore in 2025.
• Weak Regulation: The IT Act, 2000 is outdated and does not cover AI-driven, crypto-based, or deepfake-enabled frauds, limiting legal safeguards.
  • The MeitY (Ministry of Electronics & IT) has flagged the lack of standardised definitions of “deepfake”, weak detection tools, and enforcement challenges in reports submitted to Delhi HC.
• Regulatory Vacuum in Cryptocurrency: Lack of clarity on whether crypto is a currency (RBI) or a security (SEBI) has created a grey area that scammers exploit.
  • In the Thane digital arrest scam, after collecting money, the fraudsters converted it into crypto, which adds complexity to tracing and jurisdictional enforcement.
• Platform Inaction: Social media platforms rely on reactive reporting instead of proactive detection, citing scale issues but prioritising engagement and revenue over fraud prevention.
  • In several of the fraud investigations, scam operators used VPNs, proxies, public WiFi, offshore servers or mule accounts to hide traces.
• Cross-Border Syndicates: Fraud networks operating from abroad via VPNs, mule accounts, and offshore servers exploit jurisdictional loopholes and weak enforcement.
  • Trichy’s cyber-crime cell reports that many fraud networks are run by Indians based abroad.

Consequences of Rising Frauds

• Economic Impact: India lost ₹22,845 crore in 2024 (MHA data), weakening consumer trust in digital payments and forcing banks/fintechs to spend heavily on fraud detection and security upgrades.
• Security Risks: Fraud money routed through mule accounts can fuel terror financing and organised crime, while impersonation of police and regulators undermines state authority.
• Digital Sovereignty: Securing social media platforms strengthens India’s digital autonomy, reduces dependence on foreign cybersecurity tools, and protects national digital infrastructure.
• Psychological and Social Impact: Victims face mental trauma, stigma, and social isolation, especially elderly and first-time digital users, discouraging reporting and accurate data collection.
• National Security Concerns: Cross-border syndicates using Virtual Private Networks (VPNs) and offshore servers evade Indian jurisdiction, creating challenges in investigation and prosecution.
  • A VPN is a service that allows users to create a secure, encrypted connection over the internet. It hides the user’s IP address and location, making online activities private and anonymous.
    • It is often used to bypass geo-restrictions, access blocked content, or protect sensitive communications.
• Erosion of Digital Trust: Frequent scams reduce confidence in UPI, wallets, and fintech platforms, slowing India’s transition to a cashless economy and undermining the Digital India vision.
• Impact on Governance: Scammers impersonating government and financial authorities damage the credibility of institutions, making citizens skeptical of genuine digital advisories and schemes.

India’s Cybercrime Laws, Agencies, and Preventive Mechanisms

• Information Technology (IT) Act, 2000: India’s primary cyber law that governs offences like identity theft, impersonation, and hacking; however, it is outdated for AI and deepfake frauds.
• Bharatiya Nyaya Sanhita (BNS): Provisions against cheating, forgery, criminal intimidation, and fraud, applied alongside IT Act in cybercrime cases.
• Reserve Bank of India (RBI) Guidelines: Norms on digital payments security, liability in fraud cases, and KYC requirements for banks and fintech firms.
• Indian Cyber Crime Coordination Centre (I4C): Nodal agency under the Ministry of Home Affairs (MHA) coordinating cybercrime prevention, investigation, and training.
• National Cybercrime Reporting Portal (NCRP): A citizen-centric platform for online reporting of cyber frauds, including those linked to social media scams.
• Helpline Number 1930: A toll-free national helpline for victims to report financial frauds in real time, enabling banks and payment service providers to block or freeze stolen funds quickly.
• Citizen Financial Cyber Fraud Reporting and Management System (CFCFRMS): Enables real-time reporting of digital frauds and freezing of suspicious transactions by banks.
• CERT-In (Indian Computer Emergency Response Team): Monitors and responds to cybersecurity incidents, issues advisories, and mandates reporting of significant cyber events.
• Data Protection & Digital Personal Data Protection (DPDP) Act, 2023: Provides a framework for data security and accountability of entities handling personal information, indirectly supporting fraud prevention.
• Public Awareness Campaigns: MHA’s CyberDost initiative and RBI’s RBI Kehta Hai campaign spread awareness about safe digital practices.

International Frameworks and Agencies for Combating Cybercrime

• United Nations Office on Drugs and Crime (UNODC): It runs the Global Programme on Cybercrime, providing technical assistance and training for investigation of online frauds.
• Budapest Convention on Cybercrime (2001): First international treaty to address computer and internet crime, promoting legal harmonisation and cross-border cooperation.
• Financial Action Task Force (FATF): Sets international standards for Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT), urging member countries to monitor and report suspicious financial flows.
• Interpol Global Cybercrime Programme: Provides a 24/7 cybercrime alert system, facilitates international law enforcement cooperation, and targets phishing and social media fraud syndicates.
• OECD Anti-Fraud Framework: Encourages data sharing, transparency norms, and international reporting standards to reduce financial crimes.

Way Forward

• Strengthening Legal and Regulatory Framework for Online Financial Security:  Update Information Technology Act, 2000 or introduce a Cybersecurity and Digital Fraud Act covering artificial intelligence, deepfakes, cryptocurrency, and platform accountability.
• Digital Literacy as Policy Priority: Incorporate awareness into schools and community programmes, moving beyond occasional advisories.
  • Scale up “Jaago Digital Grahak Jaago”, RBI Kehta Hai 2.0, CyberDost 2.0 with focus on artificial intelligence-driven frauds and deepfakes.
• Platform Accountability and Technology-Driven Safeguards: Mandate proactive detection and removal of fraudulent content rather than relying solely on user complaints.
  • Deploy AI / Machine Learning tools to detect and block deepfakes, fake advertisements, and impersonation accounts. Mandatory Know Your Customer (KYC) for Advertisers: Prevent anonymous financial advertisement campaigns.
  • Fraud Loss Sharing: Adopt European Union-style liability, mandating compensation for negligence in content moderation.
• Institutional Strengthening and Enforcement Measures:
  • Strengthen Indian Cyber Crime Coordination Centre and Indian Computer Emergency Response Team – CERT-In: Increase funding, manpower, real-time monitoring, digital forensics, and AI-based predictive systems.
  • Cybersecurity Workforce: Train specialised cyber police cadre at district levels with forensic and AI expertise.
• Adopting International Standards for Online Fraud Prevention: Create a single national reporting hub linked with the RBI, SEBI, and cyber police based on the UK model.
  • Unified National Fraud Database: Centralised repository linking banks, telecom companies, and platforms for trend analysis and predictive policing.
• Global Cyber Diplomacy: Strengthen bilateral cooperation with scam hubs (Myanmar, Thailand, Cambodia, Colombia) for extradition, intelligence sharing, and joint task forces.
  • Singapore: Develop an India-specific app to block scam calls, phishing SMS, and fake investment advertisements in real time.
• Additional Measures and Innovative Interventions: National Deepfake Detection Laboratory, Financial Cyber Insurance: Encourage low-cost coverage for individuals and MSMEs.

Conclusion

Mahatma Gandhi reminded us that “A customer is the most important visitor.” Safeguarding digital consumers from fraud is both governance and dharma, essential to uphold trust in India’s transformative journey toward a secure digital economy.

DOWNLOAD PDF