Explainer: What are mule accounts?
Mule accounts are bank accounts that facilitate illegal transactions by receiving and transferring funds from unlawful activities. In India, these accounts are often created by individuals who offer their bank accounts for a fee, making detection difficult during the on-boarding process. While some of them also gullible victims who are unaware that their accounts are being exploited for criminal purposes.
Common practices seen in mule accounts
The most common money mule red flags include accounts having minimal activity over a period of time but suddenly receive large money. Also, it includes rapid movement of funds through the account with little or no balance retention or multiple cash deposits just under reporting thresholds, followed by rapid transfers.
Why it is a cause for concern
The mule accounts are used for financial fraud. These accounts help criminals in money laundering. According to data shared by Minister of State (MoS) Finance Pankaj Chaudhary, in a response to a query in the Lok Sabha, bank frauds have more than trebled to 32,363, amounting to Rs 2,715 crore in FY24 compared to FY22 when 8,752 frauds were reported, amounting to Rs 9,298 crore. Further, online financial frauds account for 67.8 per cent of cybercrime complaints, according to the National Crime Records Bureau (NCRB). Despite government and other law enforcement agencies actively working to stop this unlawful activity, cybercriminals continue to come up with innovative ways to circumvent the law. Thus, there is a critical need for effective AI-based fraud prevention solutions.
RBI initiative
The Reserve Bank of India (RBI) has developed an AI/ML (artificial intelligence/machine learning)-based model called MuleHunter.ai to tackle the issue of mule accounts. The Reserve Bank Innovation Hub collaborated with banks to evaluate existing methods for identifying and reporting mule accounts. Early results indicate significant improvements in detection efficiency and accuracy. Developed by the Reserve Bank Innovation Hub, the new initiative is piloted with two public sector banks.
How customers can protect themselves
According to experts, customers are advised to be vigilant, especially if they receive unexpected communications offering lucrative jobs or high payments for simple tasks. Confusing or uncertain job offers, especially those involving money transfers, should be handled with caution. Customers should not be succumbing to pressure tactics demanding immediate decisions. They should also be cautious while unconventional payment method like gift cards or virtual currency.
