Chinese scammers have found new ways to exploit Indians and people in other developing countries. But in the case of India, the worrying thing is that these Chinese fraudsters are exploiting India’s digital payments ecosystem, primarily UPI, to not only scam Indian citizens but also launder the loot to China. That’s what I’m trying to do.
But how exactly are these Chinese scammers exploiting people? They pose as instant loan apps, real money gaming apps, and fraudulent investment apps.
By now, we have heard stories and seen countless news articles about how certain loan apps tricked people into taking loans and then ruined their lives.
Instead of actually paying money to loan applicants and then going through the hassle of tracking down collection agencies, Chinese scammers have found a new way to do so.
Use loan offers and games to trap people
CloudSEK’s research report reveals that scammers are using illegal instant loan apps to lure thousands of victims with large loans and false promises of easy repayments . To process a loan, these apps only ask for a few basic details and charge around 5-10 percent of the loan amount as processing fees. Also, since these loan apps promise instant loans of up to 500,000 to 1 million yen, the fees can be significant.
In some cases, these scammers pose as real-money gaming apps, luring victims first with small rewards and then having them invest real money in the game.
It disappears once the fee is collected. These scammers use Chinese payment gateways to evade law enforcement action. In certain cases, the funds were found to be transferred to Indian bank accounts and then finally laundered from India to China via several mule accounts.
3.7 million rupees washed in 2 months using just one app
During the course of our investigation, CloudSEK also discovered that there are at least 55 such malicious Android apps distributed through various channels. Additionally, some scammers force victims to sideload apps that are not on the Google PlayStore. CloudSEK was able to identify approximately 15 Chinese gateways to which these apps are being sent.
The investigation also revealed that between July 22, 2023 and September 18, 2023, a total of Rs 3.7 million was looted from just one app and laundered to China. CloudSEK also emphasizes that this figure comes from just one of his apps, an amount that it was able to verify. CloudSEK believes that the actual amount washed must be significant.
“A notable trend we have observed is that fraudsters are exploiting Chinese payment gateways due to their relative ease of use and limited regulatory oversight. Utilizing advanced techniques of obfuscation, it becomes a convenient bridge for funneling funds outside India, making them difficult to trace and intercept. This allows fraudsters to bypass legal and financial hurdles. This makes it imperative for authorities to step up cooperation and adopt advanced countermeasures to counter this advanced threat.” Sparsh Kulshrestha, Senior Security Analyst, CloudSEK states.
The strange case of India’s money mule
CloudSEK’s research also revealed some of the loopholes that exist in our banking system. China-based scammers open several fraudulent payment gateways that are mainly hosted in China. These gateways exploit UPI QR codes by generating fake QR codes that redirect victims to legitimate UPI apps like PhonePe and GPay linked to money mule bank accounts. To do.
Scammers recruit individuals through Telegram, provide a bank account to send money to, and offer a fee to keep it there. Instead of getting people to open new accounts, these scammers look for people who already have bank accounts with smaller cooperating banks. These banks typically don’t have the infrastructure to flag suspicious activity.
These new employees are then instructed to change the mobile phone number associated with their bank, giving the fraudsters complete remote control of their accounts. These compromised bank accounts are used to receive payments from victims through fraudulent payment gateways, which are then distributed through numerous similar accounts and ultimately laundered to China through the hawala system. will be done.
