Banks to use AI based system to detect 'mule' accounts

New Delhi: In a major push to check online fraud and money laundering, the Reserve Bank of India (RBI) is set to make artificial intelligence-based verification of bank accounts mandatory in all banks. The RBI will soon issue guidelines to this effect, sources in the government said.

The RBI has carried out a pilot using an AI-based system in a bank to identify scam accounts known as “mule accounts" and block them. During the pilot, 13 lakh such accounts have been identified and blocked in one public sector bank alone.

Mule accounts are those bank accounts which are used by fraudsters to transfer the amount of fraud from one account to another.

Sources in the government said that after the guidelines come into effect, all banks, including private as well as public sector banks have to identify and block mule accounts so that any form of illegal transfer is curbed. Sources said that the system will be able to identify any sort of two-way transaction so that fraudsters cannot target innocent people.

Sources said that once the guidelines come into effect, banking licenses and their renewal will come under the ambit. Banking operations, too, will be carried out as per these new rules. To ensure compliance, the government will also mount a massive campaign across the country, sources said.

During the pilot, the RBI studied how effective AI could be in spotting suspicious activity and preventing misuse of the financial system. Sources said that mule accounts are opened either with false identities or in the name of unsuspecting individuals and are later misused by fraudsters to route illegal funds.

Minister of state for home affairs Bandi Sanjay Kumar informed the Rajya Sabha in a written response earlier said that the Indian Cyber Crime Coordination Centre (I4C) has shared details of more than 800,000 suspects and more than 2 million mule accounts with banks, financial institutions and law enforcement agencies since its ‘suspect registry’ was launched on September 10, 2024.

The total amount involved in digital financial frauds reached ₹4,245 crore in the first 10 months (April–January) of 2024-25, involving 2.4 million incidents, according to data tabled by the Ministry of Finance in the Rajya Sabha (RS).

This marks a 67 per cent increase from the ₹2,537 crore recorded in 2022-23, which involved 2 million cases. In 2023-24, financial frauds adding up to ₹4,403 crore were identified across 2.8 million cases.