Fighting Fraud in Aadhaar-enabled Payment System (AePS) with Artificial Intelligence

Context:

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.

Relevance:

GS II: Polity and Governance

Dimensions of the Article:

1. Aadhar Act, 2016
2. Aadhaar-enabled Payment System (AePS)
3. Rise in Aadhaar-enabled Payment Frauds and UIDAI’s AI-based Solutions
4. Unique Identification Authority of India (UIDAI)

Aadhar Act, 2016:

• The Aadhaar Act, passed in March 2016, provides legal support to the Aadhaar unique identification number project in India.

Objectives:

• To establish a legal basis for the Aadhaar unique identification number system.
• To facilitate targeted delivery of subsidies and services to individuals in India through Aadhaar numbers.

Major Features of the Act:

• Eligibility: Every resident of India is entitled to obtain an Aadhaar number.
• Information to be Submitted: Biometric (photograph, fingerprint, iris scan) and Demographic (name, date of birth, address) information.
• Use of Aadhaar Number: Aadhaar numbers can be used to verify the identity of individuals receiving subsidies or services. Public and private entities can accept Aadhaar numbers as proof of identity for various purposes.
• Protection of Information: Biometric data is used only for enrolment and authentication purposes and is not shared publicly. Unauthorized access to the centralized database is punishable.
• Offences & Penalties: Unauthorized access to the Aadhaar database may result in imprisonment and a fine. The act specifies penalties for unauthorized disclosure of information.

Aadhaar-enabled Payment System (AePS)

Identity Verification and Banking Access:

• AePS enables bank customers to use their Aadhaar number as their identity to access their Aadhaar-enabled bank accounts.
• Customers can perform basic banking transactions using this service.

Basic Banking Transactions:

• AePS allows customers to perform various banking activities, including:
  • Balance enquiry
  • Cash withdrawal
  • Remittances through a Business Correspondent.

Mandatory Requirements: To avail AePS, customers must meet the following criteria:

• Possess a Bank Account with a Bank participating in AePS.
• Link their Aadhaar to the respective bank account.

Biometric Authentication:

• Transactions under AePS are completed using the customer’s biometric authentication.
• This ensures secure and reliable access to banking services.

Rise in Aadhaar-enabled Payment Frauds and UIDAI’s AI-based Solutions:

Increasing Financial Crimes:

• The number of financial crimes reported in India surged from 2.62 lakhs in 2020-21 to 6.94 lakhs in 2022.
• Limited awareness about cyber frauds leads to underreporting to authorities.

UIDAI’s AI-based Solutions:

• Aadhaar Fingerprint Technology: Launched in February 2023, it uses finger minutiae and image to verify liveness of fingerprints.
• Preventing Fake Fingerprints: The technology identifies real/live fingers from cloned ones to prevent fraudulent activities.

Facial Recognition-based Authentication:

• Airtel Payments Bank collaborated with NPCI to introduce facial recognition-based authentication for Aadhaar-enabled payments.

Limits of Technological Measures:

• Challenges in AePS Fraud: Technology may fail to thwart frauds involving business correspondents (BCs) in the payment supply chain.
• Misrepresentation by BCs: BCs may manipulate transactions, misreporting higher amounts than paid to individuals without generating receipts.
• Fingerprint Cloning: Instances of fingerprint cloning may still pose challenges for AI-based technologies.

Unique Identification Authority of India (UIDAI):

• Establishment: UIDAI is a statutory authority established under the Aadhaar Act 2016.
• Purpose: It issues 12-digit Unique Identification numbers (UID) known as “Aadhaar” to all Indian residents.
• Responsibilities under Aadhaar Act 2016:
  • Aadhaar Enrolment and Authentication
  • Operation and Management of Aadhaar Life Cycle
  • Policy, Procedure, and System Development for Aadhaar Issuance
  • Authentication and Security of Identity Information and Records
• Aadhaar Numbers Issued: As of November 30, 2022, UIDAI has issued over 135 crore Aadhaar numbers to Indian residents.
• Nodal Ministry: UIDAI operates under the Ministry of Electronics and Information Technology (MeitY).

Source: Indian Express