COURTKUTCHEHRY SPECIAL REPORT ON UPI’s FRAUD LAWS
Nationwide freeze after Faridabad cyber fraud: What India’s laws say and how victims can get help
36,000 bank accounts blocked across India after UPI-linked scams
Legal remedies, FIR steps, and how to unfreeze accounts smartly
By Our Legal Reporter
New Delhi: December 17, 2025:
What happened in the Faridabad cyber fraud case
A major cyber fraud investigation in Faridabad triggered a nationwide freeze of more than 36,000 bank accounts, many flagged as “mule” or suspicious accounts that received small sums linked to a larger scam. People reported accounts being blocked for receiving amounts as low as ₹826, sparking public concern overdue process and how to restore access. Police sought central review mechanisms, citing widespread disruption and innocent customers getting trapped due to automated blocking linked to the probe. In a separate Faridabad case earlier in 2025, police arrested two suspects over a ₹49.48 lakh investment scam that moved funds through various mule accounts, showing how fraud networks spread across states and platforms.
Also Read: SEBI’s New Stockbroker Rules Promise Simpler Compliance and Stronger Oversight
The legal framework: cybercrime, bank account freezes, and consumer rights
India’s response to cyber fraud rests on three pillars: criminal law, specialized cyber statutes, and financial sector regulations.
- Information Technology Act, 2000 (IT Act): Covers unauthorized access, data theft, identity misuse, and computer-related offenses. Sections like 43, 66, 66C (identity theft), 66D (cheating by personation), and 66F (cyber terrorism) are commonly used. When UPI or digital platforms are misused, the IT Act enables police to investigate and prosecute.
- Indian Penal Code (IPC): Fraud typically invokes sections on cheating (Section 420), forgery (Sections 468–471), criminal conspiracy (Section 120B), and theft/receipt of stolen property (Sections 378–411).
- Code of Criminal Procedure (CrPC): Allows police to register FIRs, seize evidence, and issue notices. Account freezing is usually executed via directions to banks during investigation, often supported by Section 102 CrPC (seizure of property suspected to be linked to an offense).
- Prevention of Money Laundering Act (PMLA): If proceeds of crime and layering are involved, the Enforcement Directorate may step in.
- Payment’s regulations (RBI/NCPI): RBI’s KYC, AML/CFT norms and NPCI’s UPI procedural rules require banks and payment service providers to flag suspicious transactions, freeze accounts provisionally, and file STRs with FIU-IND. These frameworks aim to stop rapid dissipation of funds while investigations proceed.
These laws together enable swift action against fraudsters, but they also require fair treatment of customers, including notice, documentation, and a route to challenge freezes.
Why so many accounts were frozen and how this happens
Investigators often map money trails from a primary complaint, identify downstream beneficiaries (including tiny test transfers), and send freeze requests to multiple banks. Automated compliance systems then lock accounts tied to the flagged transaction IDs or payee accounts to prevent withdrawals. This “follow-the-money” method is standard in UPI and net-banking fraud probes where hundreds or thousands of accounts may be involved, including mule accounts operated by handlers or duped users who shared credentials. Reports from Faridabad describe this pattern, including very small credits and widespread blocking requests sent to banks, prompting calls to the Home Ministry for a review mechanism to protect innocents.
If your account is frozen: what you can do
- Get freeze details from the bank: Ask for the freeze memo or reason code. Banks should disclose the originating police station, FIR number, date of request, and sections invoked.
- File a representation: Submit a written request to the investigating officer (IO) named in the freeze memo, with proof that funds are lawful (salary slips, invoices, GST filings, contracts, bank statements) and an explanation for the alleged transaction.
- Seek partial release: Request permission to operate for essential credits (salary, pension) or minimum debits (EMI, medical bills), especially if your livelihood is affected. Courts often permit conditional operation while probes continue.
- Approach the jurisdictional court: Under CrPC, you can move an application for de-freeze or limited operations, attaching evidence of genuine transactions. Courts weigh hardship against investigative needs.
- Escalate to regulators: If the freeze persists without clarity, complain to the bank’s nodal officer, RBI’s Banking Ombudsman framework, and FIU-IND via the bank’s compliance wing (for mis-tagging or erroneous STR links).
- Record every step: Keep copies of bank letters, emails, FIR numbers, and your submissions. This paper trail helps if you later seek damages or relief for wrongful freeze.
Also Read: Evergreening of Patents in India: Delhi High Court’s Semaglutide Ruling and Its Global Impact
These steps align with typical freeze procedures seen in the Faridabad matter, where accounts received small amounts and were mass-blocked pending verification.
How to file an FIR and report cyber fraud
- Use official portals: Report on the National Cyber Crime Reporting Portal (cybercrime.gov.in) and follow up with your local cyber police station.
- Include precise evidence: Provide UPI IDs, transaction IDs, screenshots, call recordings, chat transcripts, bank statements, and timestamps.
- Freeze request early: Ask the IO to issue immediate freeze notices to beneficiary banks, PSPs, and wallets. Speed matters; UPI funds can move across multiple accounts quickly.
- Link bank and PSP nodal teams: Share FIR and freeze request with your bank’s fraud desk and the UPI app provider (PhonePe/Google Pay/Paytm/Bank PSP).
- Track the case: Get the DD entry number/FIR copy, the IO’s contact, and hearing dates. Persist with weekly updates.
Policing actions in Faridabad show arrests are possible when victims report quickly and investigators trace mule networks across states.
What police and banks can legally do—and must not do
- They can:
- Freeze accounts provisionally tied to suspect transactions to preserve evidence and funds.
- Seek KYC and transaction data from banks and PSPs for chain analysis.
- Coordinate inter-state with nodal officers and payment operators to trace flows.
- They must not:
- Ignore representations from customers who show legitimate sources.
- Withhold notice indefinitely; banks should provide freeze details and a route to remedial action.
- Delay de-freeze once innocence is established; proportionality and due process apply.
Also Read: Vaping Ban in India: Supreme Law, Parliament Controversy, and What Citizens Must Know
Reports after the Faridabad incident highlighted the need for a balanced approach—blocking suspected accounts quickly but creating a review pathway for innocent users, which police sought at the central level.
Prevention tips: reduce your risk and avoid becoming a mule
- KYC vigilance:
- Never share credentials: Do not share UPI PIN, OTP, or write them down.
- Lock your SIM and apps: Use app locks and mobile security; enable device encryption.
- Transaction hygiene:
- Verify payees and requests: Decline unknown collect requests.
- Beware micro-credits: Do not accept “test transfers” from strangers; they can tag your account in fraud chains.
- Profile hardening:
- Limit UPI handles publicly: Avoid posting payment IDs.
- Monitor statements: Set alerts for all credits/debits.
- Job and loan scams:
- Do not “rent” your account: Refuse offers to receive funds for a fee; this is mule activity and a crime.
- Validate employers: For gig payments, insist on contracts and GST invoices.
These practices mirror patterns seen in Faridabad-linked cases, where tiny transfers and investment scams fed larger networks.
When to seek legal counsel and what to ask
- Hire a cyber-law-savvy lawyer if your account remains frozen beyond a reasonable time or if you receive a notice under IPC/IT Act sections.
- Ask for:
- A tailored CrPC application to unfreeze or allow limited operations.
- Guidance on evidentiary bundles (proof of source, affidavits, digital logs).
- Strategy against wrongful tagging, including complaints to the Ombudsman and damages for loss of livelihood if applicable.
- Consider writ jurisdiction in High Court if there is prolonged, unexplained freezing impacting essential rights (salary, medical expenses), citing proportionality and due process.
Also Read: Gujarat High Court: Long Possession Cannot Create Ownership Rights
Policy ideas raised by this incident
Law enforcement asked for a central review mechanism to distinguish genuine customers from mule operators quickly—such as time-bound verification windows, standardized freeze notices, and faster appeals via nodal teams. Public reporting noted innocent users facing hardship due to small credits and automated flags, emphasizing better communication and layered risk scoring rather than blanket freezes.
Direct answers
- Laws and rules involved: IT Act (Sections 43, 66, 66C, 66D), IPC (420, 468–471, 120B), CrPC (notices, seizures, Section 102 for freezing), RBI/NPCI KYC–AML–CFT norms, and FIU-IND suspicious transaction reporting.
- What insurers or banks can do in case of deniability: Banks can freeze accounts tied to suspected fraud and demand documentation; they must provide reasons and allow representations. Police can investigate, seize evidence, and seek court directions. Customers can contest freezes, provide proof, and approach courts and regulators.
- How victims can seek help: Report on national portal, file FIR, request freeze of beneficiary accounts, submit evidence to bank and IO, apply to de-freeze in court, escalate to Ombudsman/RBI, and keep records.
Keywords for faster searches (Google + ChatGPT)
- Core event: Faridabad cyber fraud 36,000 accounts blocked; UPI fraud accounts frozen nationwide; mule accounts India freeze
- Law and process: CrPC Section 102 account freeze; IT Act Section 66D cyber cheating; RBI AML KYC UPI fraud; FIU-IND STR process
- Victim help: How to unfreeze bank account India; cybercrime FIR UPI; National Cyber Crime Reporting Portal steps; bank freeze memo reason
- Prevention: UPI micro-credit scam; mule account risks India; investment scam WhatsApp India; due diligence for digital payments
Also Read: Supreme Court: Motor Accident Liability Must Rest on Credible Evidence, Not Assumptions