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Mule Bank Accounts
Context
Context
The Reserve Bank of India (RBI) has developed an AI-powered model called MuleHunter.AI to combat the rising problem of mule bank accounts used for financial fraud. This initiative is part of RBI's broader efforts to reduce digital fraud and enhance security in the banking sector.
What is a Mule Bank Account?
- A mule bank account refers to a bank account that is used by criminals for illegal activities, including money laundering.
- Criminals typically take over these accounts, which are often owned by victims—individuals who may be from lower-income groups or lack technical literacy.
- These individuals, known as money mules, unknowingly become part of illegal schemes when their accounts are used to launder stolen or illicit funds.
- Unfortunately, when fraud is detected, the money mules are often the ones investigated, while the actual criminals remain hidden.
- The Scale of the Problem in India: Mule bank accounts are a significant issue in India, particularly in the context of online financial fraud.
- In the past few years, the government has taken action by freezing a large number of these accounts. 5 lakh mule accounts were frozen by the Indian government, with notable numbers detected in major public sector banks.
- The involvement of such a large number of accounts demonstrates how prevalent the use of mule accounts is in financial crimes.
RBI’s Initiative (MuleHunter.AI):
- To address this issue, the Reserve Bank Innovation Hub (RBIH) has developed AI, a model that leverages artificial intelligence (AI) to detect mule bank accounts more efficiently.
- This AI-powered system aims to help banks identify suspicious accounts used for fraud, making the process quicker and more effective.
- A pilot test conducted with two large public sector banks showed positive results.
- The RBI has encouraged other banks to collaborate with RBIH to further enhance the MuleHunter.AI model.
- Government and RBI Efforts to Tackle Mule Accounts: The Indian government has taken several steps to address the problem of mule accounts. In December 2023, the Department of Financial Services (DFS) held a meeting with officials from the RBI, Indian Cybercrime Coordination Centre (I4C), and various banks to discuss strategies for combating digital financial fraud. Banks were urged to:
- Adopt AI and machine learning solutions for real-time detection of mule accounts.
- Train staff on fraud prevention and detection.
- Collaborate with other banks to share information and best practices.
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