How RBI is leveraging AI to crack down on ‘mule bank accounts’

The related term “money mule” is used to describe the innocent victims who are used by the criminals to launder stolen or illegal money via their bank accounts. When such incidents are reported, the money mule becomes the target of police investigations, because it is their accounts that are involved, while the actual criminals remain undetectable.

“The Reserve Bank has been taking various measures in coordination with banks and other stakeholders to prevent and mitigate digital frauds in the financial sector. These include RBI guidelines to regulated entities for strengthening cybersecurity, cyber fraud prevention and transaction monitoring. Use of money mule accounts is a common method adopted by fraudsters to channel proceeds of frauds,” the RBI said in a press release.

The RBI said MuleHunter.AI “enables detection of mule bank accounts in an efficient manner”. The release said that a pilot with two large public sector banks had yielded encouraging results, and asked banks to collaborate with RBIH to further develop the MuleHunter.AI model “to deal with the issue of mule bank accounts being used for committing financial frauds”.

How big is the mule accounts problem in India?

Mule bank accounts are seen as a key element in the majority of online financial frauds in India. The Indian Express reported last month that the Centre had frozen around 4.5 lakh such bank accounts, which were typically used for laundering proceeds of cyber crime.

Of these 4.5 lakh mule accounts, around 40,000 were detected in various branches of SBI; 10,000 in Punjab National Bank (including Oriental Bank of Commerce and United Bank of India); 7,000 in Canara Bank (including Syndicate Bank); 6,000 in Kotak Mahindra Bank; and 5,000 in Airtel Payments Bank.

And what has the government done to crack down on mule accounts?

On Friday, the Department of Financial Services (DFS) Secretary had a meeting with officials from the RBI, the Indian Cybercrime Coordination Centre (I4C), which is affiliated to the Union Home Ministry, the National Bank For Agriculture And Rural Development (NABARD), and public- and private-sector banks to discuss the growing challenge of digital financial fraud, especially mule accounts. Several such meetings have been held with various stakeholders in the recent past.

At Friday’s meeting, banks were urged to adopt best practices, leverage cutting-edge tools, and foster inter-bank collaboration to address mule accounts effectively. They were directed to adopt advanced technologies, including AI/ ML solutions, for real-time detection of mule accounts, and to train bank staff on fraud detection and prevention.

They were also encouraged to explore and implement the RBI’s new Mulehunter solution to step up the detection and monitoring of mule accounts.

In November 2023, former DFS Secretary Vivek Joshi had said there should be some restrictions on withdrawing money from bank accounts which may have suddenly become active after having lain dormant for some time.

“For instance, the balance would have been Rs 50, but suddenly Rs 50,000 would have come into the account. While it is not an issue when the money comes, there should be some restrictions at the time of withdrawal,” Joshi had told reporters after a meeting on financial frauds.

The Reserve Bank is currently also running a hackathon on the theme “Zero Financial Frauds”, which includes a specific problem statement on mule accounts, to encourage development of innovative solutions to tackle the problem.