Blasé Capital A MULE’S DAY
Forget about the bulls and bears. Do not think about the herds. Focus on the mules. India’s mule economy is on a glaring rise, and this is giving chronic headaches to the regulators, and official investigators. This story is about the mule accounts in the banking sector, which are increasingly being used to launder money, make illicit pay-offs, and fund illegal activities. Recently, there were media reports that disclosed that the banks shut down 8,50,000 such accounts across the country. An official AI-driven software trawls data, and detects 20,000 such accounts every month. Bankers and criminals seem to be in league to spread this trend. Most consumers, whose accounts are used, and misused, seem unaware of it. Recently, an ordinary fast-commerce delivery boy was told that his account witnessed inflows, and outflows, of more than Rs300 crore. Similar stories have emanated from different parts of the country.
A part of the sordid story of mule accounts is hidden in the phrase. They are bank accounts that are used to carry heavy loads of illegal money, either to launder it, hide the identities of the depositors and beneficiaries, or churn the money to escape the law. These accounts are largely unused, and not closed by the account holders. Most of us have several accounts, and most of them are old, and forgotten. Criminals use them to funnel money. In some cases, bankers and criminals can set up new accounts with fake KYCs for the same purpose. Small cities and towns are especially prone. In Australia, and other nations, which see inflows of foreign students, the latter’s bank accounts, which have not been officially closed, are used. The account holders have no clue, and are shocked when the police or official investigators come knocking on their doors.
In June this year, the Central Bureau of Investigation (CBI) issued a press release that revealed that it launched searches at more than 40 locations across five northern states of Delhi, Uttar Pradesh, Rajasthan, Haryana, and Uttarakhand. The action was called Operation Chakra-V, and dealt with the “menace of mule bank accounts being operated by organised cyber fraudsters involved in digital arrest scams, impersonation, fraudulent advertisements, investment frauds, and UPI-based financial frauds to transfer the cyber fraud amounts from the accounts of the victims. These cyber fraudsters are being helped by the commissions and omissions of certain bank officials, agents, aggregators, bank correspondents, middlemen, and e-Mitras who are facilitating in opening of mule accounts used for receiving and transferring proceeds of cyber frauds as well as enabling withdrawals from such accounts.” Of course, the CBI operation is concerned about new accounts that are opened in connivance with the banks to help the criminals.
Willing participants, or ordinary bank customers, fall prey to the spread of mule accounts. In Andhra Pradesh, an auto driver from Rajasthan received Rs10,000, and willingly opened a bank account. He handed over the passbook, ATM card, and other credentials to the criminal. The former opened more accounts in the names of his wife, mother, relatives, and friends, who agreed because of the lure of Rs10,000 each. The network spread, as other auto drivers, and delivery agents joined the group. A bank employee helped to open more accounts. In the end, the gang opened 127 bank accounts, which were used to siphon off more than Rs24 crore. When the police caught up with the criminals, a mere Rs16 lakh remained in the accounts. According to a recent media report, “The fraud was linked to at least 21 National Cybercrime Reporting Portal petitions and cases registered in Telangana, Karnataka, and Rajasthan.”
Recent investigations revealed that mule accounts are used to distribute betting proceeds by illegal websites and platforms. In some cases, the accounts helped the beneficiaries to hide the income sources. Several cricketers have become part of a probe by the Enforcement Directorate against alleged illegal betting sites. Although the cricketers were not charged with betting or match fixing, they knowingly endorsed the platforms. In some cases, the assets of the players were attached by the investigating agency. There are cases when conspicuous consumption, like big fat Indian weddings, were funded through mule accounts. In the fast-commerce case highlighted earlier, Rs 1 crore was paid from such accounts for a marriage in the family of a Gujarat-based politician. Of course, they are used to pay bribes to different sections, including civil servants. Even legitimate firms are known to use mule accounts and, hence, the practice is not restricted to willing and unknowing individuals.
The Reserve Bank of India is encouraging the banks to strengthen monitoring and detection of the mule accounts. Some of the measures include the use of AI for early detection, strengthen KYCs and customer due diligence, impose transaction limits for high-risk accounts, strengthen internal controls, and improve the cooperation between the banks and regulators. Public awareness is crucial, and banks need to regularly send SMS and email alerts to customers, apart from warnings about opening new accounts. In the case of gullible customers, they need to understand the importance of closing old accounts. The willing participants need to be made aware of the risks, including criminal charges, of becoming money mules.
