No law to secure digital payments yet; security levels are abysmally low
Hyderabad: Digital cash transactions involve a lot of legal issues that have not been addressed, say legal experts. These mainly have to do with liability in case of losses sustained by customers.
Following demonetisation, people are being encouraged to transact digitally, the focus is on online transfer of money by using computers, electronic swiping machines, mobile phones and other gadgets most of which are dependant on the Internet.
Online transactions right now are governed by the Payment Settlements and Systems Act 2007 (PSS Act), the Information Technology Act 2008 and the Indian Penal Code.
The Reserve Bank of India has recognised the need to amend the PSS Act in its Vision-2018 for Payment and Settlement Systems and also introduction of customer protection measures such as zero liability clauses.
The RBI had announced that it was working to put in place a regulatory framework to address customer grievance and liability issues arising out of frauds in electronic transactions.
Referring to a question on how secure Internet connections, computers and mobile phones are, Mr A. Santosh Kumar, an advocate practising cases under the IT Act, said, “Security levels are abysmally low and the understanding of the common man regarding these issues and the standard that is required to make monetary transactions without being interfered with is also abysmally low.”
He explained that the IT Act had no specific provision in relation to digital transactions. The remedy for a citizen in the event of failed transactions and transactions made without knowledge was in the Indian Penal Code, which is a general law. read with certain provisions of the IT Act.
Mr N. Sreedhar Reddy, a High Court advocate, said the Payment and Settlement Act 2007 dealt with electronic funds transfer and the regulations for system providers who operate payment systems. It was made to regulate and supervise payment systems.
Mr S. Pradeep Kumar, criminal lawyer, said “the need of the hour is put in place a legislation which can address all the issues ranging from regulating the digital transactions, providing remedies to the innocent public in event of sustaining losses during such transactions and providing the strictest of the punishments for whoever resorts to misuse.”
E-solutions
Regulators across the world are devising new systems to deal with e-frauds.
- The Vision 2018 document of the RBI indicates that to further strengthen confidence in the payment systems and minimise instances of fraud, there is a need to monitor the types of frauds in various payment systems.
- The document indicates that sound legal basis, including good governance, is the cornerstone for building a safe and efficient payments eco-system.
- The RBI said it would encourage payment system providers to adopt best practices for protecting customer interest by putting in place risk monitoring systems.
- In India, remedy for a citizen in the event of failed transactions and transactions made without knowledge was in the Indian Penal Code, which is a general law.
- In the US, electronic money is governed by Article 4A of the Uniform Commercial Code for wholesale transactions and the Electronic Fund Transfer for consumer transactions.
- EU has been implementing the E-Money directive since 2001 to supervise digital money firms and Money Directive was amended in 2009 and 2015.
- EU noted that fraud prevention and consumer protection concerns led to the placement of transaction, turnover and purse limits on products.
