How UIDAI is Using AI to Tackle Payment Frauds

What’s in today’s article?

• Why in News?
• About Aadhar Act, 2016
• Major Features of the Aadhar Act, 2016
• What is Aadhaar-enabled Payment System (AePS)?
• Rise in Aadhaar-enabled Payment Frauds
• How is UIDAI Using Artificial Intelligence to Tackle Payment Frauds?
• Can Technology Alone Solve the Fraud Problem?
• About Unique Identification Authority of India (UIDAI)

 

Why in News?

• As more frauds related to the Aadhaar-enabled Payment System (AePS) come to the fore, the Unique Identification Authority of India (UIDAI), has turned to artificial intelligence-based systems in a bid to limit the cases.

 

About Aadhar Act, 2016

• The Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016 (shortly called Aadhar Act), was passed by the Parliament in March, 2016.
• Objectives:
  • To provide legal backing to the Aadhaar unique identification number project.
  • To provide for targeted delivery of subsidies and services to individuals residing in India by assigning them unique identity numbers, called Aadhaar numbers.

 

Major Features of the Aadhar Act, 2016

• Eligibility:
  • Every resident shall be entitled to obtain an Aadhaar number. 
  • A resident is a person who has resided in India for 182 days, in the one year preceding the date of application for enrolment for Aadhaar.
• Information to be Submitted:
  • Biometric (photograph, finger print, iris scan) and Demographic (name, date of birth, address) information.
• Use of Aadhar Number:
  • To verify the identity of a person receiving a subsidy or a service, the government may require them to have an Aadhaar number.
  • Any public or private entity can accept the Aadhaar number as a proof of identity of the Aadhaar number holder, for any purpose. 
  • Aadhaar number cannot be a proof of citizenship or domicile.
• Protection of Information:
  • Biometric information such as an individual’s finger print, iris scan and other biological attributes (specified by regulations) will be used only for Aadhaar enrolment and authentication, and for no other purpose. 
  • Such information will not be shared with anyone, nor will it be displayed publicly, except for purposes specified by regulations. 
• Offences & Penalties:
  • A person may be punished with imprisonment up to three years and minimum fine of Rs 10 lakh for unauthorised access to the centralized data-base, including revealing any information stored in it.

 

What is Aadhaar-enabled Payment System (AePS)?

• AePS is a payment service that allows a bank customer to use Aadhaar as his/her identity to access his/her Aadhaar enabled bank account.
• Through this, a person can perform basic banking transactions like balance enquiry, cash withdrawal, remittances through a Business Correspondent.
• The customer looking to avail AEPS should mandatorily:
  • Have a Bank Account with a Bank participating in AEPS
  • His / Her Aadhaar should be linked to his/her Bank account with other Bank.
  • Transaction is completed using his/her biometric authentication only.

 

Rise in Aadhaar-enabled Payment Frauds

• According to the Home Ministry, in the financial year 2020-21, 2.62 lakhs financial crimes, such as money laundering, bribery, corruption and different kinds of frauds, were reported.
• The number jumped to 6.94 lakhs in 2022, as per a report released by the Standing Committee on Finance.
• However, due to limited awareness about cyber frauds, a significant number of people do not report them to authorities, the committee said.
  • Out of 6.94 complaints related to financial frauds only in 2.6 per cent of cases an FIR was registered.

 

How is UIDAI Using Artificial Intelligence to Tackle Payment Frauds?

• UIDAI launched Aadhar Fingerprint technology in February, 2023.
• The technology uses a combination of both finger minutiae and finger image to check the liveness of the fingerprint captured.
• The measure was implemented after instances of people creating fake fingerprints using silicone to syphon off money from unsuspecting individuals’ bank accounts were reported.
• In effect, the AI-based technology is able to identify whether the fingerprint is from a real, or ‘live’ finger, or a cloned one.
• In May this year, Airtel Payments Bank collaborated with the National Payments Corporation of India (NPCI) to roll out a facial recognition-based authentication measure for Aadhar-enabled payments.

 

Can Technology Alone Solve the Fraud Problem?

• Deploying technological measures to curtail financial frauds has its own limits, though.
• For instance, they have failed to thwart a number of frauds related to AePS, in which a business correspondent, a key member in the payment supply chain, is the culprit.
  • A business correspondent (BC) is an informal bank agent equipped with a biometric Point-of-Sale (PoS) machine, which works like a micro ATM.
  • If someone needs Rs 500, they have to give their bank details to the BC along with their Aadhaar-based biometric details and the BC will give them the Rs 500.
  • However, officials aware of the matter said often, BCs misrepresent the amount they have paid an individual and input a higher amount in their system.
  • Unsuspecting individuals, especially in rural areas, do not always have the wherewithal to ask for a receipt that the BC is supposed to generate after each transaction.
• There have also been instances of fingerprint cloning, which AI-based technologies — at least in theory — are better equipped to deal with.

 

About Unique Identification Authority of India (UIDAI)

• The Unique Identification Authority of India is a statutory authority established under the provisions of Aadhaar Act 2016.
• UIDAI was created to issue a 12-digit Unique Identification numbers (UID), named as "Aadhaar", to all residents of India.
• Under the Aadhaar Act 2016, UIDAI is responsible for:
  • Aadhaar enrolment and authentication,
  • Operation and management of all stages of Aadhaar life cycle,
  • Developing the policy, procedure, and system for issuing Aadhaar numbers to individuals and
  • Perform authentication and the security of identity information and authentication records of individuals.
• As on 30th November 2022, the Authority has issued more than 135 crore Aadhaar numbers to the residents of India.
• Nodal Ministry – Ministry of Electronics and Information Technology (MeitY)

 

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Q1) What is 2 factor authentication and how does it work?

Two-factor authentication (2FA) is a security system that requires two separate, distinct forms of identification in order to access something. The first factor is a password and the second commonly includes a text with a code sent to your smartphone, or biometrics using your fingerprint, face, or retina.

 

Q2)  What is machine learning in simple terms?

Machine learning is a branch of artificial intelligence (AI) and computer science which focuses on the use of data and algorithms to imitate the way that humans learn, gradually improving its accuracy.

 

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Source: How UIDAI is using AI to tackle payment frauds | PRS