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To combat cyber fraud through mule accounts, banks are seeking the authority to freeze accounts involved in channeling illicit transactions without delaying the process by seeking permission from authorities. Currently, banks freeze or block accounts based on internal triggers; however, according to the Prevention of Money Laundering Act (PMLA), they lack the authority to freeze or block customer accounts without proper authorization from a court or law enforcement agencies (LEAs).
In this regard, a working group constituted by the Indian Banks’ Association may propose this as a suggestion for further consideration by the RBI, as stated in a report.
Mule accounts are utilized by fraudsters to move illegal funds through the banking system. Although banks freeze thousands of these accounts annually, fraudsters rapidly create new accounts by exploiting loopholes in the system.
Additionally, it was suggested that banks may verify and restrict accounts most vulnerable to misuse as “mule” accounts for channeling illicit money.
Banks have proposed using the Election Commission database to verify individuals who open accounts using voter identification cards and Form 60 — in the absence of a permanent account number, or PAN — and capping the number of transactions on such accounts.
The fight against mule accounts demands a dynamic, technology-driven approach. By integrating Artificial Intelligence (AI) and Machine Learning (ML) into transaction monitoring systems, banks can address existing gaps, anticipate criminal strategies, and protect the integrity of the financial ecosystem, as suggested.
A concerted effort involving investment in technology, staff training, and collaboration among stakeholders will ensure a more secure financial landscape.
The report represented a blueprint for curbing money mule activities, adding that implementing these measures will require dedication and cooperation from financial institutions, regulators, law enforcement agencies, and technology providers.
Together, it was stated, banks can safeguard the financial system against evolving threats and the menace of money mule accounts.
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