RBI Innovation Hub develops MuleHunter.ai to combat mule account frauds

The RBI has taken several measures to prevent and mitigate digital frauds in the financial sector, including the issuance of cybersecurity and cyber fraud prevention guidelines, among others

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Reserve Bank of India (RBI) Governor Shaktikanta Das said on Friday the central bank has developed an innovative artificial intelligence and machine learning (AI/ML) based model MuleHunter.ai to address the growing issue of mule bank accounts that are often used for committing financial fraud.

 

Developed by the Reserve Bank Innovation Hub, the new initiative is piloted with two public sector banks.

 

“As part of the Reserve Bank’s continued efforts to prevent and mitigate digital frauds, an innovative AI/ML-based model, MuleHunter.ai has been developed by the Reserve Bank Innovation Hub (RBIH), Bengaluru. This will help the banks to deal with the issue of mule bank accounts expeditiously and reduce digital frauds,” Das said during his Monetary Policy Committee (MPC) speech.

 

The RBI has taken several measures to prevent and mitigate digital fraud in the financial sector, including the issuance of cybersecurity and cyber fraud prevention guidelines, among others. According to RBI, fraudsters use money mule accounts to channel the proceeds of fraud.

 

To counter it, the RBI is also currently running a hackathon on the theme “Zero Financial Frauds”, which includes a specific problem statement on mule accounts, to encourage the development of innovative solutions to contain the use of mule accounts.

 

Deputy Governor Rabi Sankar said the platform will use the databases from all the banks and other payment system operators.

 

“Its AI engine will be trained based on this wide set of data to be able to identify frauds much more effectively in the financial system. If you look at frauds, the number of frauds is increasing, and the amount involved in frauds is increasing, although the number of frauds per transaction is coming down over the years. But the number is increasing fast enough for us to be concerned about it,” Sankar said at a press conference after MPC.

 

Bank frauds have more than trebled to 32,363, amounting to Rs 2,714.64 crore in FY24 compared to FY22, when 8,752 frauds were reported, amounting to Rs 9,298.4 crore, according to data given by Minister of State (MoS) Finance, Pankaj Chaudhary in a response to a query in the Lok Sabha. These are frauds in commercial banks and AIFIs with amounts involved Rs 1 lakh and above in each case.

 

“I just wanted to clarify one point with respect to MuleHunter.ai, any payment system operator, any bank, any credit card network, every entity is free to use their own fraud detection systems,” Sankar said.

 

“They will probably be used over and above this and every individual is free to innovate based on their own expertise, their own AI engines, and so on. Reserve Bank's idea of introducing this MuleHunter is to create an infrastructure level facility which others can use with many participants, many small banks that cannot devote enough resources to develop such systems can use this,” Sankar added.

 

Jaya Vaidhyanathan, CEO, BCT Digital said the launch of the new platform marks a significant step forward in the fight against financial frauds involving mule accounts.

 

“These frauds have become a significant challenge for the banking industry and the Indian economy, with some large banks reporting fraudulent transactions of Rs 400-500 crore every month. These accounts, often used to launder proceeds of cybercrimes, undermine trust in the financial system. The Center froze around 4.5 lakh mule bank accounts in the past year, showcasing the scale and urgency of the issue,” Vaidhyanathan said.

 

HP Singh, CMD, Satin Creditcare Network said for customers who are less technology-savvy and more vulnerable to fraud, such innovations become even more critical and essential.

 

“The tool transcends fraud detection, it ensures customers are protected, and reflects on RBI's role as a bulwark in protecting customers against financial fraud and reinforces their trust in the financial ecosystem,” Singh said.