A Analysis of I4C’s 2026 SOP for Financial Cybercrimes | M S Sulthan Legal Associates

Navigating the New Digital Shield: A Comprehensive Analysis of the I4C’s 2026 SOP for Financial Cybercrimes

Cyber Law & Policy Analysis | By M S Sulthan Legal Associates | January 2026

Executive Summary

In a landmark move to fortify India’s defenses against the surging tide of digital fraud, the Ministry of Home Affairs (MHA), through the Indian Cyber Crime Coordination Centre (I4C), released a new Standard Operating Procedure (SOP) on January 2, 2026. This document establishes a unified protocol for the National Cybercrime Reporting Portal (NCRP) and the Citizen Financial Cyber Fraud Reporting and Management System (CFCFRMS).

The SOP addresses critical gaps in the previous ecosystem, specifically focusing on the immediate "putting on hold" of defrauded funds, the complex process of restoring money to victims, and a structured grievance redressal mechanism for account holders.

1. Background and Context

The initiative stems from a directive by the Hon'ble Supreme Court of India and the subsequent operationalization of the NCRP in 2019. While the CFCFRMS has successfully prevented ₹7,647 Crore from leaving the financial system since April 2021, a significant bottleneck remained: only ₹167 Crore (approximately 2.18%) had been restored to victims by November 2025.

The new SOP was devised to bridge this gap between "saving" money and "restoring" it, providing a legal and procedural pathway to return funds to citizens rather than letting them languish in frozen bank accounts.

2. Objectives and Scope

The SOP aims to establish a transparent, fair, and uniform process for all "Participating Entities" (PEs), which include police agencies, banks, fintech companies, and Payment System Operators (PSOs).

  • Prevention of Money Laundering: To stop defrauded money from exiting the financial system immediately upon reporting.
  • Victim Restitution: To provide expeditious processes for giving interim custody of the amount put on hold to the victim.
  • Accountability: To ensure all stakeholders are accountable for their actions (or inaction) and to prevent the misuse of freezing powers.
  • Rights Protection: To safeguard the rights of citizens, including the Right to Livelihood, by minimizing unnecessary litigation and offering grievance redressal.

3. Operational Workflow: From Reporting to Action

A. Complaint Registration

Victims can report crimes via the Helpline 1930 or the NCRP portal (cybercrime.gov.in). Police officers must verify that a prima facie Cyber-Enabled Financial Crime (CEFC) has occurred before pushing the complaint. Banks can also register complaints on behalf of their customers.

B. Immediate Action: "Put on Hold"

Once a transaction is flagged, notices under Section 168 read with Section 94 of the Bharatiya Nagarik Suraksha Sanhita (BNSS) are sent to banks. Banks must place the reported amount on hold immediately. If an account is reported multiple times, banks are mandated to suspend digital banking services (UPI, Net Banking) pending Enhanced Due Diligence (EDD).

C. Specific Entity Protocols

  • Cryptocurrency (VASPs): Virtual Asset Service Providers must put crypto assets on hold. If instructed by Law Enforcement, they must liquidate Virtual Digital Assets (VDAs) into INR and transfer them to the victim’s bank account.
  • E-Commerce: Merchants must cancel undelivered orders funded by fraud and hold the funds. If goods were delivered, they must provide recipient details to the police.

4. Restoration of Funds: The 5 Alternative Processes

A core innovation of this SOP is the introduction of five distinct processes for returning money to victims, moving away from indefinite freezes.

Process 1: Interim Custody (Single Victim)

For cases involving a single victim, the police officer (IO) can issue a notice under Section 106(3) BNSS. The account holder is given 15 days to justify the transaction. If they fail, the IO can direct the bank to release the money to the victim upon execution of an indemnity bond.

Process 2: Interim Custody (Multiple Victims)

In "mule" accounts where funds from multiple victims are commingled, the Pro-Rata principle is applied. Victims receive a share of the available funds proportional to their loss. Investigating officers from different jurisdictions must coordinate to agree on the distribution.

Processes 3, 4, & 5: Court-Led Disposals

Victims can apply directly to courts under Sections 497, 498, or 503 of BNSS. Police can also seek attachment and forfeiture of property under Section 107 of BNSS. Specific processes prescribed by High Courts or local courts can also be followed.

5. Grievance Redressal Mechanism

To prevent abuse of power, the SOP mandates a time-bound grievance redressal system.

  • Submission: An aggrieved account holder approaches their bank. The bank verifies their bona fides and submits the grievance to the CFCFRMS module within 7 days.
  • Police Verification: The Investigating Officer (IO) must decide within 15 days.
  • The 90-Day Rule: If no lawful direction to continue a hold is received within 90 days of a grievance being raised, the bank is instructed to remove the hold.

6. Conclusion and Takeaways

The 2026 SOP represents a paradigm shift in India's fight against financial cybercrime. By operationalizing Section 106 of the BNSS, the MHA has empowered law enforcement to act as facilitators of restitution rather than just investigators of crime.

  • Speed: Real-time integration via CFCFRMS.
  • Clarity: Clear distinction between "holding" and "seizure."
  • Fairness: Adoption of pro-rata distribution for complex cases.
  • Remedy: Structured grievance timeline prevents indefinite freezing.

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