Emerging ‘digital hawala’: Security agencies uncover mule-account network in J&K

Warn of new-age terror finance threat.

Srinagar: Security agencies probing financial crime in Jammu and Kashmir have uncovered an expansive network of “mule accounts” — bank accounts used to channel and launder proceeds from online scams — and warned that the system’s rapid growth could be exploited as a new-age terror-funding conduit.

Over the past three years, investigators have identified and frozen over 8,000 such accounts in the Union Territory, a senior official said, underlining how cyber fraud syndicates layer stolen money through multiple accounts before converting it into cryptocurrency to mask its origin.

Mule accounts are typically controlled by intermediaries — locally recruited “mulers” — who offer access to account holders in exchange for a cut of the illicit proceeds. Once funds from fake investment apps, phishing scams or illegal gaming platforms land in these accounts, they are rapidly dispersed into others or funnelled into crypto wallets often set up using VPNs, complicating traceability.

A coordinated operation by the Counter Intelligence Kashmir (CIK) wing of the Jammu and Kashmir Police in early January saw raids at 22 locations across the Valley and the detention of 22 suspects as part of a broader financial crime and cyber-terror probe. Seized materials included digital devices and financial records linked to alleged laundering via mule accounts.

Officials describe the emergence of such digital networks as symptomatic of a broader shift in terror financing patterns in the region. Since the National Investigation Agency began targeting traditional hawala and cross-border funding channels linked to militancy in 2017, conventional cash routes have shrunk significantly.

Among its high-profile actions, the agency raided 15 locations in Jammu and Kashmir in February 2024 in a terror-funding case connected to the proscribed Jamaat-e-Islami Jammu and Kashmir, seizing documents, digital devices and over Rs 20 lakh in cash.

The JeI was banned under the Unlawful Activities (Prevention) Act in 2019, and the ban was extended in 2024, with government records citing continued involvement in activities prejudicial to national security, including alleged fund diversion to banned militant outfits such as Hizbul Mujahideen and Lashkar-e-Taiba.

In parallel, state agencies such as the Jammu and Kashmir State Investigation Agency and police units have seized immovable properties and assets suspected of being used to finance secessionist and terror acts, part of a sustained crackdown that also involves freezing accounts and dismantling funding conduits.

Security planners caution that while overt militancy has declined in the Valley over the past decade, the financial landscape has become more complex, with cyber-enabled mechanisms like mule accounts and crypto-linked “digital hawala” networks posing fresh challenges to law enforcement. Officials say disrupting these shadow financial chains is now as critical as kinetic action in counter-terror strategy.