Explained | Key aspects you should know about mule bank accounts used by cybercriminals

Due to mule bank accounts, there is low chance of ever tracking the cybercrime suspects and bringing them to justice.

Despite challenges faced during the Covid-19 pandemic-induced lockdowns in mid-2020 and 2021, technology companies were able to quickly introduce ingenious productivity tools to enable employees and even school children be able to finish their work sitting at home.

However, very few are aware of cyber frauds and the threat actors preying on naive users. There is a drastic surge cases of digital arrests, particularly in India, where criminals posing as police officers of the Central Bureau of Investigations (CBI), Delhi Crime Branch and other investigative agencies.

Dressing up neatly in police uniforms and caps, they have even mastered to confidently speak in an officer's tone and bit some rashness.

Thanks to the leakage of Aadhaar cards and other personally identifiable credentials on the darknet, cyber criminals target those people. They accuse the victim that the Aadhaar ID was used to procure a SIM card to carry out drug smuggling, hawala money transfer, human trafficking and other illegal activities. The voice of the fake officer makes the victim very nervous.

They then ask the victim to transfer their money, including the fixed deposits, to a particular account (mule accounts) to verify it is white or black money. They even send a fake certification of receiving the money, and it is being verified.

They hold the victims hostage for days, weeks and even months. We have seen reports of people- senior citizens and young software professionals-- losing several crores of money.

By the time victims realise they fell prey to a scam and file a police complaint, a significant percentage of the money will be lost forever. It is very difficult to track the bank accounts as criminals never use their own accounts in the crime, instead use mule accounts.

What are mule bank accounts?

To avoid detection, cybercriminals go to rural regions of India and lure people with paltry cash rewards for sharing their Aadhaar cards. They are also known to masquerade as government officials or bank executives and are here to do the Know Your Customer (KYC) process to include in the government welfare scheme.

They unknowingly give away their ID, and with the help of corrupt bank officials and telecom company executives, the criminals create multiple bank accounts and also procure SIMs. This way, without any fear of law, they can make threatening calls and transfer ill-gotten money to multiple accounts. And, without wasting much time, cash them at the nearest bank or an ATM.

In Karnataka alone, 65,000 mule bank accounts were opened in 2024, fifth highest in India. Maharashtra, Rajasthan, Haryana and Uttar Pradesh are the top four states with higher numbers.

These mule bank accounts are a dead end for cyber police. Also, there is a lack of coordination between investigating agencies and banks to flag them. This is the primary reason why there is low chance of ever tracking the suspects and bringing them to justice.

Solution for early detection of mule accounts is on the horizon

Reserve Bank Innovation Hub (RBIH) in Bengaluru has developed an Artificial Intelligence-powered innovative model called ‘MuleHunter.AI' for early detection and elimination of mule accounts.

Banks have been advised to collaborate with RBIH to further improve the MuleHunter.AI model, bringing an end to online fraud, particularly digital arrest scams.

Last month, the Department of Telecommunications (DoT), to thwart such online fraud, announced to share Financial Fraud Risk Indicator (FRI) data with banking institutions and UPI service providers.

FRI is a risk-based metric that classifies a mobile number as having been associated with any financial crimes. Each number will be categorised under three groups-- medium, high, or very high risk of financial fraud.

With FRI data, financial institutions will get first-hand information about phone owners and assess the risks before they give the nod for opening bank accounts or allowing digital transactions on their UPI app. They can also flag these mule accounts to the cyber police as well.

Already, PhonePe has used FRI data to thwart online scams on its UPI app. If the number gets flagged in its database, the app displays an on-screen alert to the user to decline transactions linked to Very High FRI mobile numbers. For Medium FRI numbers, PhonePe is reportedly working on displaying a soft warning before allowing the transaction.

Google Pay and Paytm are also upgrading the UPI service and soon will offer protection to their app users in India.

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