RBI Governor Das warns banks against mule accounts

There is a need for banks to ensure robust cybersecurity controls and effectively manage third-party risks, Das said.
Reserve Bank of India (RBI) Governor Shaktikanta Das.
Reserve Bank of India (RBI) Governor Shaktikanta Das.(File Photo | PTI)

MUMBAI: Reserve Bank of India governor Shaktikanta Das has warned banks against mule accounts and asked them to set up their security measures against such accounts so as to curb digital frauds.

Addressing the heads of public sector and private sector banks here at the Mint Road headquarters, as part of the central banks’ continuing engagements with the top management of the regulated entities, the governor said, there is “a need for banks to ensure robust cybersecurity controls and effectively manage third-party risks… Banks must step up their efforts against ‘mule accounts’ and also intensify customer awareness and education initiatives, among other measures, to curb digital frauds.”

A mule account refers to a bank account that is used to receive/transfer funds acquired illegally on behalf of others. A person may become a money mule intentionally or unintentionally and receive illegally acquired funds and help in its transfer to others. A fraudster can approach his prospective victims (mule accountholders) with some offers and ask the victim to lend, share or rent his bank accounts/cards details.

Addressing the top bankers, the Governor also said noted the continued improvement in banks’ asset quality, loan provisioning, capital adequacy, and profitability.

While acknowledging the higher resilience and strength of the banking sector, he also highlighted the importance of further strengthening the governance standards, risk management practices and compliance culture in banks.

These interactions are part of the Reserve Bank's continuous engagement with the senior management of its regulated entities. The meetings were also attended by deputy governors M Rajeshwar Rao and Swaminathan J, along with executive directors in-charge of regulation and supervision functions. The previous such meeting was held on February 14, 2024.

In a post event statement, the RBI said the meeting also discussed at length other issues in the credit market such as  the persisting gap between credit and deposit growth, liquidity risk management and asset liability mismatch-related issues, trends in unsecured retail lending, cybersecurity, third-party risks, and digital frauds, the need for strengthening of the assurance functions, credit to MSMEs,  increasing the usage of the rupee for cross-border transactions; and banks’ participation in innovation initiatives of the Reserve Bank.

According to media reports, at least five leading domestic banks are tracking money mule transactions and blocking such accounts. HDFC Bank was said to be the first to investigate and take action on suspected cases in September 2023.

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