The Rise of Mule Accounts in India

There are rising menace of mule accounts in India. Mule accounts have become a significant challenge for financial institutions and law enforcement agencies worldwide. These accounts, unwittingly or knowingly used by individuals to transfer illicit funds, are a critical component of money laundering operations.

A big part of threat intelligence and payment fraud is mule detection. Mules, or money mules if you will, are utilized by criminals to move illicit funds from account to account. Fraudsters recruit money mules to move illicit funds through their bank accounts, often in exchange for a small percentage of the funds, for the sole purpose of laundering dirty money before it is deposited into a legitimate account.
Mule accounts can be problematic in a variety of industries. However, they present the biggest issues in financial services. Without even knowing it, financial services organizations could be accepting payments and deposits consisting of laundered money that went through multiple mule accounts before arriving at its final destination.
Recently, RBI Governor Shaktikanta Das raised alarms about the increasing prevalence of mule accounts in India, highlighting the urgent need for enhanced monitoring and preventive measures.

The Reserve Bank of India (RBI) raised concerns about certain banks having ‘lakhs’ of such accounts used for fraudulent transactions and loan evergreening. There is urgency need for the banks to crack down on mule accounts and intensify customer awareness and education initiatives to curb digital frauds.

As per Digital fraud detection company BioCatch found that,  nine out of every 10 mule accounts had gone undetected. It further says, that while 86% of the first session of documented mule account activity came from within India, after a month that figure fell to just 20% and 16% of those sessions used a VPN. 

“Analysing the activity of the original reported mule accounts, we observed that the first connection typically takes place in India. We also see a low use of VPNs, suggesting that these are Indian nationals creating and using the accounts,” the report said.

While most mule account activity—15% —happens in Bhubaneswar, Lucknow and Navi Mumbai account for 3.4% each. Two cities in West Bengal – Bhagabatipur and Gobindapur—recorded 1.7% and 2.6% mule account activity respectively, whereas Mumbai and Bengaluru reported 2.2% and 1.8% of mule account activity, respectively.

Going further, there has to be instructions to the banks when when they open any accounts and monitoring of transactions should be strictly adhered to, in order to minimise the operations of money mules.Money mules present a significant challenge in the financial services industry due to their role in facilitating payment fraud and laundering illicit funds.