Did you ever think that your bank account can be frozen for no fault of yours, leading to a police investigation in a cybercrime fraud case?
Yes, you read that right – your bank account can be frozen for no fault of yours, simply because of one casual UPI transaction. It doesn’t matter if you are a social media influencer, jeweller, restaurant entrepreneur, poultry shop owner, or a savvy student outsmarting fraudsters; you are at risk of having your bank account frozen, which could lead to a cyber police investigation against you.
Let’s understand how your bank account can be frozen for no fault of yours, why you should be concerned, and how to protect yourself.
UPI Payment – Alarming Concern and Fear
In recent years, India’s Unified Payments Interface (UPI) has transformed the way people conduct financial transactions, making it easier, faster, and more accessible. With over 14 billion transactions per month, reported in August 2024, UPI is leading the digital payments revolution.
With its seamless, real-time payments, and user-friendly approach, UPI has become a household name, making everyday transactions as simple as a tap on the screen. UPI allows users to make instant transfers, pay for goods or services, all without the need for physical cash or cards. UPI offers convenience and speed.
However, as with all technological advancements, there’s a darker side to this story. While UPI payment offers convenience, users are increasingly facing the fear of cyber police freezing their bank accounts, leading to legal implications, and causing fear and uncertainty among UPI activated bank account users.
The convenience has also brought with it a surge in cybercrime fraudulent scams, prompting authorities to take stringent actions, including freezing bank accounts linked to suspicious cybercrime activities.
Power of Police and Why Police Freeze Bank Accounts?
Freezing a bank account is a legal measure often employed by law enforcement agencies to prevent the withdrawal or transfer of funds during an ongoing investigation. This action is typically taken when there is a suspicion of illegal activities, such as cyber fraud, money laundering, or other financial scams. In some cases, innocent UPI users find their accounts frozen due to mistaken identity or because they unknowingly received or transferred money to fraudulent parties.
The bank accounts are considered as a “property” under Section 102 of the CrPC, permitting authorities to seize them during investigations. The action of seizing a movable property, which includes freezing of the Bank account, is taken under Section 102 of the CrPC, reproduced below:
“102. Power of police officer to seize certain property.–
(1) Any Police Officer may seize any property which may be alleged or suspected to have been stolen, or which may be found under circumstances which create suspicion of the commission of any offence.
(2) Such police officer, if subordinate to the officer in charge of a Police Station, shall forthwith report the seizure to that officer.
(3) Every Police Officer acting under sub-section (1) shall forthwith report the seizure to the Magistrate having jurisdiction and where the property seized is such that it cannot be conveniently transported to the Court or where there is difficulty in securing proper accommodation for the custody of such property, or where the continued retention of the property in police custody may not be considered necessary for the purpose of investigation, he may give custody thereof to any person on his executing a bond undertaking to produce the property before the Court as and when required and to give effect to the further orders of the Court as to the disposal of the same:
Provided that where the property seized under sub-section (1) is subject to speedy and natural decay and if the person entitled to the possession of such property is unknown or absent and the value of such property is less than five hundred rupees, it may forthwith be sold by auction under the orders of the Superintendent of Police and the provisions of Sections 457, and 458, shall, as nearly as may be practicable, apply to the net proceeds of such sale.
The rise in cybercrimes has prompted authorities to enforce stricter measures to protect India’s economic interests. One such measure is the power of law enforcement agencies to freeze bank accounts, as outlined under Section 102 of the Criminal Procedure Code (CrPC), 1973 (now replaced by Section 106 of Bharatiya Nagarik Suraksha Sanhita (BNSS).
The Information Technology Act of 2000 and other financial laws allow law enforcement to freeze bank accounts if they suspect criminal activity. Unfortunately, as criminals find new ways to exploit digital platforms, many innocent individuals find themselves in the crossfire.
The stolen money moves through multiple layers of accounts, creating a complex trail. It often passes through several accounts before being withdrawn from ATMs or converted into bitcoins. Investigators often need to trace up to eight levels of accounts beyond the fraudster’s original account to trace the money’s path. Freezing bank accounts preemptively is a key strategy used by cyber police to combat cybercriminals.
As per the rules, banks freeze all related accounts, including primary, secondary, and tertiary accounts, as soon as a cybercrime is reported. While this initially helps the victim recover the amount transferred online, unfreezing the accounts later remains a challenge.
How your Bank Account can be Frozen for No Fault of Yours?
Imagine waking up one day to discover that your bank account is frozen, despite having done nothing wrong. This nightmare scenario is becoming increasingly common with UPI linked bank account users.
Fraudsters often exploit UPI by stealing users’ personal details or orchestrating scams, leading victims to unknowingly participate in fraudulent transactions. When such cases are reported, cyber police freeze the involved bank accounts to investigate, sometimes affecting innocent users. This creates anxiety, as access to funds is blocked without warning, causing financial distress and leading to legal implications.
Here are some common scenarios, inspired by real-life cybercrime horror stories, that explain why your bank account could be frozen for no fault of yours:
You are a creator and social media influencer. You were contacted on Instagram by someone impersonating the Marketing Manager of an Influencer Marketing Agency, offering Rs 50,000 for a promotional video for an online game. After creating and posting the video, you received the payment. However, the next morning, your bank informed you that your account had been frozen by the Cyber Police, allegedly linking you to cybercrime fraud. Now, you’re facing numerous calls from the Cyber Police for inquiries, resulting in frustration and harassment, while your funds remain frozen
You’re a jeweller, chilling in your shop, when a customer walks in and picks out some shiny gold worth ₹3.55 lakh. They snap a pic of your QR code, and someone else makes the payment. Sweet, right? You get the full amount, everything looks legit—until you wake up the next morning and bam, your account is frozen by the cyber police!
You run a poultry shop. It was just another busy Friday for you when you attempted to make a ₹25,000 payment to your supplier via Google Pay. After multiple failed transactions, you contacted your bank, only to discover that your account had been frozen on the orders of the Cyber Police due to an unauthorized transaction. This account held your life’s savings, and suddenly, you lost access because of a cybercrime investigation in which you had no involvement. Now you’re stuck wondering, “What did I do wrong?” Answer: nothing—except getting caught in the tangled web of cyber fraud.
Imagine discovering one day that your account had been linked to an online fraud case and frozen by the cyber police. Things quickly escalate when the police also freeze the accounts of your father-in-law, a grocery store, and a gym where you had made payments. Later, you realize that your teenage son had occasionally used your UPI account to purchase Bitcoin—an innocent activity that inadvertently linked your account to a cyber fraud case.
You’re a hotel owner who accepted a UPI payment from a customer for a meal, only to discover that the customer’s UPI account was linked to an online fraud. As a result, your bank account was frozen, along with the accounts of your chicken supplier and even the supplier’s father-in-law.
You’re enjoying a lovely family lunch at a local restaurant, all set to pay the bill with UPI, only to suddenly find yourself facing the nightmare of frozen accounts and police inquiries, leaving you with no access to the funds.
Fake review scams trick people into writing fraudulent reviews for money or rewards, and you know about it. When a scammer approached you for fake reviews, you agreed and earned ₹500 for your first task. The scammer then asked for ₹2,000 to unlock a bigger reward, so you blocked their number, thinking you had outsmarted them. However, days later, your bank account was frozen by the Cyber Police. The Police informed you that to unfreeze it, you’d need a No Objection Certificate (NOC) from the victim. The victim, who lost ₹45,000, demanded ₹25,000 in exchange for the NOC.
Now, you’re stuck between the bank, police, and victim, struggling to unfreeze your account. You tried to outsmart the fraudster but became the victim.
This unsettling experience isn’t fictional; it serves as a stark reminder of the very real and growing threat of cybercrime. Incidents like these are becoming increasingly common across India, where individuals, businesses, and their connections face the consequences of financial fraud through no fault of their own.
Victims of frozen bank accounts often find themselves in a frustrating and exhausting situation, running from pillar to post to resolve the issue. For many, the journey to unfreeze their bank accounts can stretch for months, or even years, resulting in severe financial difficulties. In many cases, banks refuse to unfreeze accounts despite court orders, citing a lack of clear guidelines from their respective legal departments. This burdens account holders, as they have already lost money to cybercrimes, and their remaining funds are frozen.
Is This the Beginning of The End of UPI?
A bank account freeze can occur with any inward transaction—be it UPI, IMPS, or NEFT. If the sender’s account involves fraudulent money, the recipient may face serious repercussions. Unlike traditional methods, which require specific account details, UPI simplifies the process, making it both accessible and risky.If the sender’s account contains fraudulent money, you’re in trouble.
With UPI, only a phone number or QR code is needed to make a payment. This ease of access can be a double-edged sword. Unlike IMPS or NEFT, where you need to provide your name, account number, and branch IFSC code—information that is typically safeguarded—UPI allows anyone to check if a mobile number is linked to a UPI account. They can initiate a payment without ever needing to contact the account holder.
This lack of stringent checks makes UPI-activated bank accounts susceptible to freezing, even when the account holder is innocent. Cybercriminals can exploit this vulnerability, using random phone numbers to conduct unauthorized transactions. In worst-case scenarios, competitors might also misuse your UPI details to create financial chaos, disrupting your business operations and personal finances.
This makes your UPI-activated bank account vulnerable to being frozen for no fault of your own. If these issues persist without adequate solutions from financial institutions and regulatory bodies, we may m indeed be witnessing the beginning of the end for UPI
Judgement on Freezing Bank Account
In India, freezing a bank account is typically carried out under the Section 102 of CrPC, which allows police to seize property (including bank accounts) suspected to be involved in an offense. However, this action cannot be taken arbitrarily. According to the Supreme Court of India, police officers must show probable cause that an account is linked to a criminal activity before freezing it. They are also required to notify the account holder and provide the reasons for the freeze, allowing them an opportunity to appeal.
The Supreme Court in State of Maharashtra v. Tapas D. Neogy, clarified that bank accounts fall under the definition of “property” in Section 102 of CrPC, allowing authorities to seize them during investigations. This section allows police to seize property, including bank accounts, if there is suspicion of its involvement in a crime. However, the power to freeze accounts requires a reasonable suspicion linking the funds to the alleged offences.
Recently, in the case of Mohammed Saifullah v. State of Tamil Nadu (W.P.No.25631 of 2024), the Madras High Court ruled that the police cannot freeze an entire bank account; only the specific amount linked to financial fraud can be frozen. Freezing the entire account, would deprive the account holder of their right to livelihood. The Court held that “Under the guise of investigation, order freezing the entire account without quantifying the amount and period cannot be passed Such order will be construed as violation of the fundamental rights of trade and business as well as violation of livelihood.”
For example, in State of Maharashtra v. Tapas D. Neogy, the The Supreme Court upheld the police’s authority to freeze bank accounts linked to criminal activities. Additionally, the Bombay High Court in Ezulix Software Pvt. Ltd. v. State of Maharashtra affirmed this power, emphasizing that freezing accounts must be based on suspicion and proper evidence.
Nevertheless, certain procedural safeguards exist. Section 102(3) mandates police to immediately report the freezing of any account to the Magistrate. Failure to notify the Magistrate may invalidate the account’s freezing, as noted by the Delhi High Court in Muktaben M. Mashru v. State of NCT of Delhi.
While freezing is often done without prior notice to the account holder, affected parties can seek relief through the courts. Under Sections 451 and 457 of the CrPC, individuals can request the Magistrate to unfreeze accounts if the seizure is unlawful or lacks connection to the alleged crime.
How to Protect Yourself from Having Your Bank Account Frozen?
The Individuals and business owners should exercise caution when accepting financial connections on UPI and similar platforms. Such transactions carry risks because they create a link between your account and theirs. In financial fraud cases, scammers typically move money to various bank accounts, buy products, or invest in different services. When the police receive a complaint, they quickly instruct banks to freeze the accounts where the diverted funds are located.
While UPI transactions are inherently safe, you must adopt best practices to protect your financial well-being:
- Avoid Using Primary Account for Bitcoin Trading and Casual UPI Payment: Refrain from using your primary account for bitcoin P2P trading, casual transactions, or linking it to your UPI.
- Keep Maximum Funds in an Alternative Account: Keep maximum funds in an alternative bank account to avoid complications if your primary account gets frozen.
- Verify UPI IDs Before Making Transfers: Always double-check the UPI ID before sending money. Fraudsters often use fake or look-alike UPI IDs to deceive users.
- Avoid Large Transactions on Unverified Platforms: If you are unsure about the authenticity of a UPI ID, especially on new or unknown platforms, it’s better to avoid large transactions. This lowers your risk of being implicated in fraud.
- Monitor Your Transactions Regularly: Keep an eye on your transaction history to identify any unusual activity. Early detection can help you take preventive steps, such as reporting unauthorized transactions or closing accounts that might have been compromised.
- Report Fraud Immediately: If you fall victim to fraud, report it to your bank and the cybercrime cell immediately. Swift action can prevent further losses and protect your account from being frozen.
What to do if Your Bank Account is Frozen?
If your bank account is frozen, act quickly by contacting your bank and local law enforcement to understand the reason and request formal notice of the freeze. Immediately seek legal advice if you believe the freeze is unjust, as a lawyer can assist in filing petitions to unfreeze your account. Be ready to provide documentation, such as invoices or contracts, to prove the legitimacy of your transactions if needed.
Conclusion
While UPI digital transactions provide unmatched convenience, the increasing instances of account freezing by police underscore a significant risk. Users must stay vigilant and adopt best practices to protect themselves from fraud, as unknowingly transacting with scammers can lead to serious legal complications.
Swift action and legal intervention are essential if your account is frozen. By understanding the risks and knowing your legal rights, you can better safeguard your financial security in this dynamic digital landscape.
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