What are mule accounts in banks? All you need to know

The Central Bureau of Investigation (CBI) arrested a bank manager of a private bank in Mumbai for his active role in facilitating the opening of mule accounts, it said in a release on November 12. 

The investigation revealed that the manager was abusing his official position to process the account opening forms, creating channels for the movement and layering of cybercrime proceeds, and accepting illegal gratification in return. 

What are mule accounts?

Mule accounts are bank accounts used by criminals to receive, transfer and launder illegal funds while hiding their origin. These accounts are used in crimes like financial fraud and human trafficking, among other things. 

A ‘money mule’ provides their account for this purpose, often in exchange for a commission (gratification). Sometimes, individuals are tricked into becoming money mules unknowingly through job scams, phishing emails, or other means, such as social media messages that claim to offer money in exchange for sharing bank details. 

How do mule accounts work?

This makes it difficult for authorities to track the money back to the original criminal activity. 

How do people become money mules?

People are unknowingly tricked into becoming money mules in various ways, including:

Sometimes, people also do this knowingly for money and other forms of gratification. 

How to prevent this?

To prevent falling for a scam that ends up making you a money mule, you can take these precautions:

• Don’t share your bank account information with anyone, even if they claim to be employers, friends of friends or institutions offering income opportunities.

• Verify job opportunities that offer huge amounts of money for minimal work, especially those that require money transfers.

• Keep a check on your bank accounts to identify any suspicious transactions.

Mule accounts in India

Earlier this year, the CBI revealed that it detected 8.50 lakh mule bank accounts in over 700 branches across the country, which are being used by cyber criminals to launder proceeds from scams involving digital theft, fraudulent investments, UPI-based frauds, etc. 

"We have observed that mule accounts are being used only once in most cases. Once the money comes into the account, it is distributed to other accounts, and the mother account is closed, making it difficult to catch the criminal," a PTI reported an official as saying. 

Mule accounts are a serious threat to the financial ecosystem of the country. In this digital era, scammers have found advanced ways to trick people into becoming money mules. In many cases, even if the account holder is unaware of the illegal activity, they can be investigated and face legal consequences for their involvement. 

"Enquiry revealed that more than 700 branches of various banks across India have opened around 8.5 lakh mule accounts. These accounts were opened either without proper KYC norms, customer due diligence, or initial risk assessment. The branch managers of the banks have also failed to conduct enhanced due diligence in respect of certain suspicious transaction alerts generated by the systems," CBI's spokesperson said.

Be cautious, protect your personal information and report suspicious activity if you are contacted with an offer that sounds too good to be true. Banks are implementing technology to monitor for unusual transaction patterns, including artificial intelligence (AI) tools that identify suspicious activity in real time.