Banks have asked for the power to freeze bank accounts being used for cyber frauds without waiting for court or police approval, according to a report by a working group set up by the Indian Banks’ Association (IBA).
At present, banks can only block accounts based on internal alerts, but under the Prevention of Money Laundering Act (PMLA), they do not have the legal authority to freeze or block customer accounts without proper authorisation from a court or a law enforcement agency.
The IBA report said this delay often gives fraudsters enough time to escape or transfer the illegal money. “In light of this, we may propose this as a suggestion for further consideration by the RBI,” the report stated.
Mule accounts — those used by cybercriminals to move stolen or illegal money — are at the centre of this concern.
Even though banks freeze thousands of such accounts every year, fraudsters quickly open new ones by exploiting system loopholes.
To tackle this, banks are now considering ways to identify and limit accounts that are more likely to be misused as mule accounts.
The report suggested that banks could use the Election Commission’s database to verify customers who open accounts using voter ID cards or Form 60 (in cases where PAN is not available).
It also proposed capping the number of transactions that such accounts can carry out.
The report further recommended that banks adopt a technology-driven approach to deal with cybercrime.
By using artificial intelligence (AI) and machine learning in their transaction monitoring systems, banks can better predict and prevent fraudulent activities.
It added that a strong fight against mule accounts would require collaboration between banks, regulators, law enforcement agencies, and technology providers.
“Investments in advanced technology, regular staff training, and policy changes would be key,” the report mentioned.
The report said these steps could help create a safer banking system and protect customers from cyber fraud involving money mule accounts.
