In a recent statement, a member of the RBI's board of governors has urged banks to step up efforts against mule accounts. According to Piyush Shukla, money mules in India do much more than move money. A MULE ACCOUNT IS a bank account that receives funds from illegal activities and then transfers those funds to other accounts, thus serving as a bridge for money laundering and other illegal practices to take place.
It is not uncommon in India to come across people who are opening mule accounts based on their bank accounts that they are offering in place of money as payment.
The account holder's onboarding process is not automated in this way, which makes it more difficult to detect such accounts. Even though there are ways to put a stop to these accounts, the right controls and monitoring of the user's behaviour throughout the lifecycle of the account can be employed to give the user the greatest protection.
Last November it was reported about the arrests of six people in Bengaluru about the alleged operation of 126 mule accounts. There has been raised concern by the Reserve Bank of India (RBI) earlier this week regarding certain banks having a huge number of fraudster accounts used for fraudulent transactions and loan evergreening by their customers. In a move to curb digital fraud, Shaktikanta Das, the governor of the Reserve Bank of India, has directed banks to crack down on the use of mule accounts as well as increase customer awareness and education initiatives.
Money mules can be generally categorized into five different kinds based on their level of complicity in a money laundering scheme and the way they are employed.
A victim mule is a person who is unaware, for example, that his account has been compromised and that it is being abused by a fraudster who wants to launder money through his account. An incident of data breach most likely resulted in the victim's account details being leaked.
Money mules can also come in the shape of misled parties, who are misled into sending and receiving money on behalf of fraudsters, believing that the money they are sending and receiving is clean.
It is not uncommon for mules to respond to job advertisements they find interesting, and they respond to one or more of them that involve them executing transactions on behalf of the employers.
One of the most common types of money mules is the deceiver. He or she opens new accounts by using stolen or synthetic identities to send and receive stolen funds.
One way in which money is mulled is through the use of "peddlers", or people who sell their information to fraudsters, who then use that information to send and receive stolen funds.
Mules can also be accomplices, who can open a new account in his name or use an existing one to send and receive funds at the direction of a fraudster, who instructs him to do so.
In the study conducted by BioCatch, a digital fraud detection company, it was revealed that nine out of ten accounts were undetected as mule accounts by one of its Indian partners.
During the first month of documented mule account activity, 86% of the sessions that were posted from within India were documented, however after a month those numbers dropped to just 20%, and 16% of those sessions were using a VPN to access such accounts.
Although most of the activity in mule accounts happens in Bhubaneswar—15% —Lucknow and Navi Mumbai are each responsible for 3.4% of the activity.
Two cities in West Bengal, Bhagabatipur and Gobindapur, recorded 1.7% and 2.6% of mule account activity, respectively. In comparison, Mumbai and Bengaluru reported 2.2% and 1.8% of such activity, respectively.
To help customers prevent their bank accounts from becoming mule accounts, the following practices are recommended:
1. Treat all unexpected communications, especially those offering lucrative, effortless jobs, with scepticism.
2. Unrealistically high payments for straightforward tasks should raise alarms.
3. Be wary of job offers with ambiguous descriptions and responsibilities, particularly if money transfers are involved.
4. Scammers often pressure customers into making swift decisions, such as hurriedly confirming their identity or claiming a reward. Customers must pause and assess their demands carefully.
5. Be extremely cautious while using unconventional payment methods, such as gift cards or virtual currencies.
In October 2023, the Reserve Bank of India (RBI) tightened the customer due diligence (CDD) norms by instructing banks and regulated entities to adopt a risk-based approach for periodic updating of know-your-customer (KYC) data. According to the latest Master Directions, the risk-based approach for periodic updating of KYC has been amended to state: “Registered Entities (REs) shall adopt a risk-based approach for periodic updating of KYC, ensuring that the information or data collected under CDD is kept up-to-date and relevant, particularly where it is high-risk.”
Furthermore, the Master Directions emphasize that instructions on opening accounts and monitoring transactions should be strictly adhered to, to minimize the operations of money mules. These mules are used to launder the proceeds of fraud schemes, such as phishing and identity theft, by criminals who gain illegal access to deposit accounts.
Banks are required to undertake diligence measures and meticulous monitoring to identify accounts operated as money mules, take appropriate action, and report suspicious transactions to the Financial Intelligence Unit.
