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Coping with Cybercriminals During the Festive Season

January 3, 2017

With the beginning of the festive season, organisations are gearing up for sales and discount offers to customers on their e-commerce platforms, as well as through brick-and-mortar retail stores. Indian economy has been gradually recovering from the COVID-19 pandemic and consumer sentiment seems to be positive, which is expected to propel the sales during this time of the year.

However, the huge quantum of sales can also potentially lead to a spike in frauds that could dupe companies, as well as consumers. Fraudsters take undue advantage of various process and system vulnerabilities, and positive consumer sentiment to purchase products or services with huge discounts.

The pandemic has also led to increased acceptance of e-commerce platforms and digital payments, which has presented even more avenues to cyber criminals to defraud organisations.

Organisations and consumers need to be wary of the following fraud risks during the festive season sales:

Spike in sale of counterfeit products
Festive season is an attraction for frauds of counterfeit products, who take advantage of the high demand and shortage of supply. Sale of fake products not only leads to decline in consumer trust, but also revenue and loss of reputation for the companies.

Sale of expired or damaged products
The COVID-19 pandemic has caused a build-up of stocks with organisations and its channel partners, along with substantial inventory of damaged and expired products. Such products are also sold to customers by tampering the manufacturing or expiry dates in order to meet the increased demand during the festive season.

Procurement of materials from vendors at higher than market rates
There is huge demand for purchase of various materials and services by companies during this time in order to meet the market demand. Collusion between vendors and employees can lead to procurement of materials and services at a price higher than market rates, which is not uncommon. Vendors are benefitted through higher profit on sales and employees, in turn, are provided kickbacks by such vendors.

Misuse of sales promotion schemes, discounts and cashback offers
Discounts and other festive offers that are prevalent on e-commerce platforms during festive seasons are often misused by creating fictitious online customers. Fraudsters take advantage of the vulnerabilities in various cashback schemes, which can lead to substantial cost leakages for companies.

Further, employees of an organisation also have a tendency to abuse various online cashback and discount offers, given their knowledge of the vulnerabilities in such schemes.

Companies into traditional brick and mortal retail also face this issue of misutilisation of schemes and discounts by its channel partners during festive seasons. Scheme benefits do not reach the intended recipients and the benefits are siphoned off by channel partners and employees in collusion with each other.

Surge in hacking and phishing attempts
In 2020, digital payments were the preferred way to pay for 39 percent of consumers in India during the festive season. Increasing number of consumers are now shopping online and use online payment methods, which makes festivals and sale seasons attractive for phishing cases.

Fictitious online websites, resembling the organisation’s original website
Multiple simple avenues are available for cyber criminals to create fake websites resembling existing e-commerce sites. Customers are lured to procure products and make payments through such websites by offering them high discounts and cashback schemes, however, the products are never supplied to them.

Further, critical customer data, such as KYC information, bank account, debit/credit card information is also collected through these websites which are then sold or misused for other fraudulent purposes.

The organisations and their customers are prone to higher risk of frauds during festive season on account of augmented demand of customers and higher sales promotion schemes provided by the companies.

Both need to be proactive and take precautionary steps to curb such incidents. This would not only help companies protect themselves from significant financial losses, but also build consumer trust.

Authors: Jagvinder Brar, Partner and Head of Investigations, Forensic Services, KPMG in India and Mustafa Surka, Partner – Forensic Services, KPMG in India)

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