Mule accounts, so named because they act as conduits for sending and receiving funds that do not belong to the bank account holder, usually remain dormant but can see a sudden spurt in typically low-value, high-volume transactions.
The Reserve Bank of India (RBI) has urged banks to keep a close watch on such accounts.
RBI governor Shaktikanta Das recently expressed concern over digital frauds and the “rapid increase in use of mule bank accounts to perpetrate such frauds”. In FY24, the value of digital payment frauds at banks was at ₹1,457 crore and involved 29,082 transactions, higher than both FY22 and FY23, as per the RBI’s annual report.
Experts said mule accounts are used by scamsters for digital frauds that involve transferring money out of the victim’s bank account into a chain of accounts, making it harder to trace such funds.
Typically, the mule accounts involve up to 15 accounts in a distribution chain, and this entire chain is kept ready at any point—with scammers tasked with live-tracing which accounts are operational, and which are not.
Teams at banks are using artificial intelligence (AI) and machine-learning (ML) tools in order to take on such scams. For instance, Axis Bank created a new internal unit about six months ago that consolidated some of the existing roles of monitoring and detecting suspicious accounts across the bank.
“We call that unit the financial crime intelligence unit,” Subrat Mohanty, executive director of banking operations and transformation, Axis Bank said during an earnings call on 24 July.
“This unit has been working on 20 initiatives as we speak, largely focussed on preventing frauds and identifying suspicious and mule accounts. This is something we believe we are a bit ahead in terms of our thinking and execution.”
However, Mohanty declined to share details on what kind of accounts these were—savings or current—saying the bank does not share “that kind of internal intelligence at this point in time to the external world”.
“It is something we work very closely with the law enforcement authorities.”
Rival lender Kotak Mahindra Bank is also using technology to detect mule accounts. According to Ashok Vaswani, chief executive, Kotak Mahindra Bank, the lender takes the issue “extremely seriously”.
“We have actually seen, and the governor has also pointed out, that it (mule accounts) is more in the current account space than in savings accounts,” Vaswani said in response to a question on its earnings call on 20 July.
“We have built machine learning models that spot these transactions and therefore the accounts as early as possible. We are very very vigilant on this particular…
Read More: Indian banks deploy tech tools to counter mule accounts
