What's needed to fight rising threat of money mules in digital age

India is tackling the menace with collaboration, information sharing, technology, stringent monitoring of accounts, and consumer education

Imagine you are sipping a cup of tea and scrolling your phone, when a message pops up. “Earn easy money from home! No experience needed. Just help process payments,” it says. It’s a tempting offer but it is likely a ruse to recruit money mules.

 

Money mules are people who unwittingly help criminals move illegal funds, or are intentionally lured by friends or accomplices to make a quick buck. This phenomenon is growing globally and it has grabbed the attention of governments, regulators and banks.

 

India has seen a surge in digital payments, with services like Unified Payments Interface clocking over 16 billion transactions monthly. But with the ease and speed of digital services, risks have increased as well. 

 

Indian financial institutions are stepping up to tackle the growing threat of money mules. The adoption of government-backed initiatives, such as a Central Know-Your-Customer (KYC) Registry, is a key move in creating a unified identification standard across financial services. Awareness is also a priority, with banks and regulators ramping up customer education campaigns. Here are some global capabilities India can adopt:

 

> Monitoring: Using artificial intelligence (AI) to flag unusual transactions. For example: small amounts being moved frequently or large sums moving through multiple accounts.

 

> Enhanced verification: Adopting more stringent KYC and anti-money laundering procedures for enhanced customer verification and tracking their financial behaviour over time.

 

> Using new technologies: Banks in Australia are using behavioural intelligence, AI and machine learning to detect and shut down mule accounts. Banks are collaborating to build a new system for identifying and blocking suspicious payments before initiation.

 

In India, regulators and the government are working together against mule accounts. The Reserve Bank Innovation Hub, a subsidiary of the central bank, has developed MuleHunter.ai, which uses algorithms to alert banks about unusual transaction patterns, helping identify fraud swiftly.

 

The Securities and Exchange Board of India has sharpened its anti-money laundering guidelines, mandating robust KYC procedures for securities market intermediaries, and called for the immediate reporting of suspicious activities. Government bodies like the Financial Intelligence Unit are working closely with banks to track suspicious activity.

 

Technology is helping fight financial crime in other ways. The Digital Payment Security Controls directive of the central bank in 2021 asked banks and non-bank payment system operators to implement strict security steps.

 

In the battle against money mules, fintech can also prove to be a powerful ally. Fintech companies are working on innovative tools to monitor transactions, detect fraud, and secure authentication processes.

 

The key to tackling the menace of money mules lies in collaboration and information sharing: Between banks, fintech companies, regulators, government and customers. The warning signs to watch out for include heightened account activities like a spike in transaction volume, locational mismatches of transfers from and to centres known for money mule activities, irregular transaction behaviour, large deposits followed by quick withdrawals, customer accounts getting frequently opened and closed, large transactions in new accounts, and accounts having a history of unusual behaviour.

 

A vital enabler for success against this menace is customer education and awareness. Individuals should keep themselves informed on common risks and threats such as disguised job offers, fake digital investment advice and offers of illegal money transfers. Leveraging communication channels will strengthen customer vigilance, improve reporting of suspicious activities, reduce fraud risk and protect banking.

 

The writer is executive director, Bank of Baroda. The column has been edited.