Government Freezed 4.5 Lakh Mule Accounts in Banks, Highest Accounts freezed in SBI and PNB

The Centre has frozen around 4.5 lakh “mule” bank accounts in the past year, typically used for laundering money from cybercrimes. While these accounts are spread across several banks, the majority have been identified in the State Bank of India (SBI), Punjab National Bank (PNB), Canara Bank, Kotak Mahindra Bank, and Airtel Payments Bank.

What are Mule Accounts?

Mule accounts are bank accounts that are used by criminals to funnel or launder illegally obtained money. These accounts are typically opened by individuals who may or may not be aware that their accounts are being used for illicit purposes. In many cases, the person who opens the account is either tricked or coerced into doing so by criminals, or the account is opened using fraudulent or stolen KYC (Know Your Customer) documents. The account holders are known as “mules” because they serve as intermediaries who help move the illegal money, often without realizing the full extent of the crime they are involved in.

Fraudulent Activities in Mule Accounts

Officials from the Indian Cyber Crime Coordination Centre (I4C), which operates under the Ministry of Home Affairs, recently reported this issue to the Prime Minister’s Office (PMO). During a meeting, they discussed the flaws within the banking system that enable such activities. Fraudsters are now withdrawing money from mule accounts using various methods, including cheques, ATMs, and digital transfers. These mule accounts are often created using the KYC (Know Your Customer) documents of other individuals.

Data on Mule Accounts Across Banks

Data from the Citizen Financial Cyber Frauds Reporting and Management System highlights the following findings:

• SBI: 40,000 mule accounts
• Punjab National Bank: 10,000 mule accounts (including Oriental Bank of Commerce and United Bank of India)
• Canara Bank: 7,000 mule accounts (including Syndicate Bank)
• Kotak Mahindra Bank: 6,000 mule accounts
• Airtel Payments Bank: 5,000 mule accounts

Fraudsters withdraw money from these accounts using cheques, digital transfers, and ATMs. Since January 2023, around 1 lakh cybercrime complaints have been registered with the National Cybercrime Reporting Portal, with an estimated ₹17,000 crore in fraudulent transactions over the past year.

PMO and I4C’s Action Plan

In the three-hour meeting with the PMO, I4C officials explained that the Centre’s high-level inter-ministerial panel has identified the key loopholes in the system. The panel has directed state and union territory police forces to take proactive action against mule bank accounts. Authorities have also been instructed to investigate the involvement of bank managers and officials in opening these accounts. Additionally, the Reserve Bank of India (RBI) and the Ministry of Finance’s Department of Financial Services have been urged to implement necessary measures to curb these crimes.

How Are Mule Accounts Used in Frauds?

Mule accounts are used in various ways to facilitate fraud and money laundering:

1. Money Laundering: Criminals use mule accounts to transfer or “clean” illegally obtained money. The idea is to move the funds through multiple accounts to make it harder to trace the origin of the money. This is often part of larger schemes such as phishing, cybercrimes, and fraud.
2. Cybercrime: In many cases, mule accounts are used to withdraw money obtained through cybercrime. Fraudsters might use phishing attacks or other fraudulent methods to steal money from individuals or organizations. Once the money is obtained, it is transferred into mule accounts to obscure the source.
3. Fake Transactions: Fraudsters can use mule accounts to make fake payments or transfers, helping them create a cover for their criminal activities. For instance, they might simulate legitimate transactions that appear to be innocent but are actually part of a larger scheme.
4. Withdrawal of Funds: Once the illicit money has been funneled into mule accounts, criminals often use methods like ATM withdrawals, digital transfers, or cheques to take the money out. The funds are then either spent, transferred to other parties, or further laundered through other means.
5. Use of Fake Identity: Often, fraudsters will use fake identities or stolen KYC documents to open mule accounts. This allows them to bypass security checks and use these accounts to hide their illegal activities.

Why Are Mule Accounts a Problem?

• Difficulty in Tracing Fraud: Since the mules are often unaware that they are part of a crime, it can be difficult for authorities to trace the original fraudster. The money moves through multiple accounts, which complicates investigations.
• Impact on Financial Institutions: Banks and payment platforms can be held accountable for allowing the use of mule accounts for fraud. They can suffer reputational damage and financial penalties if found complicit in enabling money laundering.
• Increase in Cybercrime: The rise of digital banking and online fraud has led to an increase in the number of mule accounts. Criminals are constantly exploiting weak points in the banking system, using mule accounts to commit a variety of frauds.