Huzeifa Unwala, Senior Partner, JHS & Associates
Red Flag ReportThis quarterly publication aims to create awareness about Fraud Risks & Red flag Indicators.
“Fraud is a real risk impacting Indian organizations The techniques deployed by fraudsters are complex and usually masked in a complex web of falsehood, forgery and cheating Businesses especially smaller ones that are most vulnerable find it very difficult to unearth frauds and material control breaches Therefore, we believe that dissemination of Red Flag Indicators Report and related information (primary goal of this publication) would assist Corporates in developing robust defense control mechanisms.
In Q4 of 2020 we observed a tsunami of GST frauds This trend is likely to continue as a registered tax payer base has increased to 1 25 crores in India with 59 24 crores total returns being filed under GST law as on 10th January 2021 The volume and velocity of GST transactions in our country is surging, GSTN system recorded 16 96 crores total number of transactions until 10th January 2021 In last couple of months, the directorate of GST intelligence arrested 100 people and booked 3479 entities in 116 places for illegally availing or passing on Input tax credit (ITC by using fake invoices In majority of cases booked by the tax authorities, fraudsters have been found to have floated multiple dummy firms, obtained GST registrations, issued fake GST invoice without actual supply of goods or services and passed on ineligible ITC accrued from the bogus invoices to clients for a commission The Directorate
General of analytics and Risk management, GST has identified and issued a list of 9757 companies that have either issued or availed fake ITC across the country between 2017 and March 2020.
In Q 4 of 2020 we observed emergence of “Instant Loan App Frauds” The C 19 pandemic led to job losses and pay cuts, the need for immediate credit among people increased significantly It also became an opportune time for instant loan apps (Made in China) to set up shop and acquire vulnerable customers in India The Reserve Bank of India ( in December, took notice of the practices of these instant loan companies and put out a warning, asking the public to stay away from unauthorized digital lending applications RBI has set up a working group to study digital lending activities of the regulated and unregulated players The group will suggest steps to regulate digital lending including online lending platform and mobile lending.
According to a recent “Fraud in the wake of C 19 Benchmarking Survey Report” undertaken by the ACFE, 92 of respondents expect to see a further rise in the overall level of Fraud during 2021. It is famously said that forewarned is forearmed keeping this in mind our publication team has researched on newspaper and electronic media stories from leading portals about fraud and red flags Post research a crisp compilation of red flag stories has been made for readers highlighting the nature of breach, quantum of impact and modus of the operator to the extent available in the public domain.
