NEW DELHI/ MUMBAI: As part of multi-pronged efforts to crack down on online frauds, govt and RBI are discussing the feasibility of offering a “cooling off facility” to block funds received in a bank account as part of efforts to check routing of funds through multiple mule accounts, which are often difficult to recover.
A facility like this is available in some countries and govt agencies are examining how effective a freeze on transfer of funds can be, while also seeking to ensure that there is no hardship to customers.
Mule accounts are third-party bank accounts used to transfer illicit funds on behalf of criminals. Bankers say in digital payment fraud, reporting within the “golden hour” window after fraud makes a big difference. Reporting to authorities, such as the cybercrime helpline (1930), during this time greatly improves the chances of freezing stolen funds before they reach scammers’ accounts. The proposed “cooling off period” is meant to check immediate transfer of funds.
The home ministry along with the ministries of finance, IT and RBI are looking at multiple options to crack down on frauds even as banks have stepped up efforts to tackle mule accounts, which enable the menace of online frauds that are taking place almost once in every two minutes.
While most online frauds such as “digital arrests” or other cases of phishing have nothing to do with banks, the proceeds of the fraud are taken out using mule accounts.
The MHA, through its Indian Cyber Crime Coordination Centre (I4C), has advised citizens against selling or renting their bank accounts. It has also asked banks to strengthen KYC norms to prevent the establishment of accounts without proper verification of identities.
Following this, banks have started setting up central cells to tackle mule accounts and have deployed technology to identify such accounts. Banks are also closing accounts that have not been used for transactions for two years to prevent their misuse.
“A year ago, the issue of mule accounts might have been a concern for mid-level management. Today, it has risen to the top of the agenda, with CEOs of every bank prioritising measures to tackle it,” said Peeyush Dalmia, senior partner at McKinsey & Co.
Mule accounts fall into two categories. In some cases, account holders willingly participate, making them complicit in the fraud. In other instances, they are unwitting victims, unaware that their accounts are being exploited.
