Fraudulent Transactions: Cyber Criminals Exploit NBFC Systems

I’m on my third coffee today. And I just returned from DefCon — still high off the hardware hacking village. But here’s the rub: While we were having orgasms over RFID spoofing car hacking, the cybercriminals were busy discovering new ways to target NBFCs (Non-Banking Financial Companies).

Historically, NBFCs are one of the biggest targets for fraud. They deal with huge financial transactions but tend to be less mature than traditional banks in cybersecurity. I have witnessed this firsthand while working with banks and financial institutions to modernize their zero-trust architectures. And I would tell you this—most NBFCs do not yet realize what is threatening them.

Fraudster Attack Vectors on NBFCs

Cybercriminals are not magicians. They simply understand systems as well as anyone. And they know where the vulnerabilities are. Here’s what I’ve seen:

1. Account Takeover (ATO) Fraud

Cybercriminals use compromised credentials (typically purchased on the dark web) to access customer accounts and make unauthorized transactions.

• Credential stuffing – Automated bots attempt thousands of username-password pairs.
• SIM swapping – Hackers socially engineer telecom providers into intercepting multi-factor authentication codes.
• Malware-infected devices – Keyloggers steal login credentials in real time.

2. Scams Involving Fake Identities for Loans

Criminals use fake identities or stolen credentials to apply for fraudulent loans. By the time the NBFC discovers this, the money is already gone.

• KYC fraud via deepfake – Digital verification systems fooled by AI-generated faces.
• Synthetic identity fraud – Merging real and fake information to create fictitious persons.
• Complicity of insiders – Staff members knowingly sanction fraudulent applications.

3. MITM Attacks on Payment Systems

Attackers intercept transactions using vulnerabilities in network security and modify payment content without triggering alarms.

• Session hijacking – Hackers steal cookies to take over digital banking sessions.
• DNS spoofing – Redirecting users to fake payment gateways.

4. Scams Using Social Engineering & Phishing

Cybercriminals convince bank employees or customers to hand over credentials, often using highly convincing methods.

• Business email compromise (BEC) – Scammers impersonate executives to approve transactions.
• Phishing banking portals – Customers provide their login credentials on replica sites.
• WhatsApp fraud – Attackers pretend to be NBFC representatives to “verify” accounts.

Real-Life Examples of Fraud in Action

Case 1: The Ghost Loan Scheme

A mid-sized NBFC discovered ₹20 crore siphoned off into various accounts via:

• Leaked employee credentials.
• Counterfeit KYC documents.
• Social engineering to manipulate employees internally.

Example 2: Payment Gateway Manipulation

An NBFC’s payment system was breached. Hackers:

• Modified API calls in real time to reroute payments.
• Bypassed transactional limits without triggering alerts.
• Used MITM and phishing attacks for financial takeovers.

The AI Question in Real-Time Fraud Detection

AI tools are not a magic bullet. They are only as good as the data they’re trained on, while criminals adapt faster than models can evolve. However, real-time detection systems are critical for combating fraud.

• Anomaly detection – Machine learning tuned for behavioral patterns.
• Behavioral biometrics – Typing speed, device fingerprints, and login behavior.
• Transaction alerts – Monitor out-of-pattern withdrawals or transfers.

Quick Take: Best Practices for Fraud Detection

• Multi-layered fraud detection – Combining humans and AI for better outcomes.
• Endpoint security – Protect devices from being compromised.
• Network segmentation – Prevent lateral movement within networks.
• Access control policies – Prevent unauthorized transaction freedom for staff.

Prevention Mechanisms for NBFCs

1. Implement Zero-Trust Security

Trust nobody—verify everything to reduce vulnerabilities.

• Continuous authentication – MFA is just the beginning.
• Admin restrictions – Grant users the least privilege access.
• Micro-segmentation – Prevent lateral threats across your network architecture.

2. Improve Verification Systems for Payments & Loans

• AI-assisted KYC verification – Reduce the risk during customer onboarding.
• Adaptive authentication – Take a risk-based approach to customer verification.
• Anti-fraud scoring – Monitor new customers and transactions for anomalies.

3. Routine Cybersecurity Training

• Conduct phishing awareness programs for employees.
• Harden endpoint security to prevent device-based attacks.
• Encourage password managers to reduce weak passwords.

Final Thoughts

Financial criminals follow the money, making NBFCs increasingly susceptible to fraud. Considering cybersecurity as compliance alone is a mistake—organizations must take proactive steps to improve their security posture. Remember, once fraudsters succeed, recovering lost funds is often impossible. Don’t rely solely on AI for solutions—start with foundational strategies to secure your systems today.