CBI to question bank officials under scanner in 8.5 lakh mule accounts case

One crucial laxity detected by the CBI during its two-month-long inquiry was the systemic failure to generate Suspicious Transaction Reports (STR) despite countless mule accounts exhibiting transactions that rapidly exceeded prescribed monetary thresholds, a clear indicator of suspicious activity, agency officials said.

New Delhi: The CBI will start questioning bank officials under scanner for allegedly facilitating the operations of 8.5 lakh mule accounts in a "pan India conspiracy" with cyber crime syndicates to launder crime proceeds, agency officials said.

One crucial laxity detected by the CBI during its two-month-long inquiry was the systemic failure to generate Suspicious Transaction Reports (STR) despite countless mule accounts exhibiting transactions that rapidly exceeded prescribed monetary thresholds,“a clear indicator of suspicious activity, they said.

The bank officials also failed to do Customer Due Diligence (CDD) during account opening, a paramount process for initial risk assessment and accurate customer identification indicating that the fundamental oversight meant the financial crime risks posed by customers were inadequately assessed, according to a CBI FIR registered recently.

The CBI has registered the FIR after a preliminary inquiry that showed cyber crime syndicates operating with impunity with the alleged connivance of unidentified bank officials to deliberately facilitate a clandestine network of mule accounts used to launder illicit proceeds from digital frauds.

The probe has found 8.50 lakh such accounts in 743 branches of various banks across the country that sent the alarm bells ringing about the extent of the menace. The inquiry was coverted into the FIR and raids were conducted last week during which 10 individuals were arrested.

The CBI has named 37 individuals in the FIR as accused.

The agency detected that there were two kinds of mule accounts -- cyber and money. While cyber mule accounts were small accounts, money mule accounts were exhibiting multiple transactions in a span of few days and aggregate amount was crossing the threshold to red flag them.

Existing Reserve Bank of India (RBI) guidelines unequivocally mandate the generation of an STR if an account is identified as a money mule. In case no STR is filed, it is considered a non-compliance of the RBI circular.

The pernicious fraud allegedly involved cyber criminals employing deceptive means, including impersonation, misrepresentation, and the use of forged documents to defraud and extort money from victims, the CBI officials said.

The CBI has alleged that banks also failed to do 'enhanced due diligence' in violation of the RBI circulars that stress for EDD and rigorous risk categorisation based on customer identity and business activity.

'High-risk accounts have to be subjected to more intense monitoring. However, despite certain areas having high concentration of mule accounts, it has emerged that bank officers were not adopting enhanced due diligence on the suspicious bank accounts," the CBI FIR said.

The inquiry showed that bank officials frequently neglected to procure vital information regarding the customer's source of funds, the explicit purpose of the business relationship, or other details imperative for vigilant account monitoring.

The inquiry starkly revealed instances where bank accounts were opened using forged documents, and in some cases, without the knowledge or consent of the purported account holder.

Several accounts belonging to illiterate persons were systematically exploited in the cyber fraud. These accounts were often opened through banking correspondents, circumventing traditional branch oversight, thereby granting unfettered access to UPI and online transactions, the FIR said.

The agency also found that branches displayed a significant lapse in security by not despatching acknowledgement or 'Thank You' letters post-account opening, an indirect yet critical failure in effective address verification as stipulated by certain internal banking circulars.

The role of middleman has also emerged who facilitated the opening of mule accounts into which the proceeds of cyber crime was routed from the account of a cyber fraud victim.

"The middlemen connived with the banking correspondents and bank officials for the purpose of opening of mule accounts and their operation," the agency alleged.