Money mule transactions:
Banks may block your account for these fund transfers; here's how to secure your account
Apr 26, 2024
Synopsis
Bank account block: There are at least 5 Indian banks who are tracking money mule transactions conducted through their account holders. In this regard HDFC Bank has already taken an action and launched investigation too in the suspected cases. Know here how banks may block access to your account and funds if a money mule transaction is found.
Imagine waking up to a notice that your hard-earned money is no longer accessible, all because your bank account or debit/credit card has been blocked. This was the reality for a customer of an Indian bank, who took to social media to share his ordeal. His credit card had been blocked by the bank due to suspected 'money mule' transactions.
A similar incident occurred last year with an HDFC Bank customer whose bank account was blocked due to suspected money mule activity.
As per a X (formerly Twitter) post by HDFC Bank last year, "We regret the inconvenience. This is not the experience we want you to have. We note our branch official has contacted you on September 14, 2023 & inform you that account is blocked due the suspected money mule and account is under investigation…"
What is a 'money mule' account?
A money mule account refers to a bank account that is used to receive and 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 may approach prospective victims (mule account holders) with some offers and ask the victims to lend, share or rent their bank accounts/ cards. Sometimes fraudsters may cheat a person through various means and use his/her bank account for money mule transactions.
"Money mule fraud is a significant problem globally. Frauds currently account for 40% of all crime, and the ease with which fraudsters use mule accounts continues to be a challenge. Some countries such as Singapore and the UK are creating data-sharing platforms to enable data sharing between institutions to counter such problems collectively," says Anis Ahmed who is based out of UAE and advises financial institutions on Fraud and Financial Crimes domains. He is also the Chairman of MENA Chapter's for Association of Certified Financial Crime Specialists (ACFCS).
As per a 2024 report by BioCatch, a cyber security company, "At one partner bank in the country (India), BioCatch found 9 out of every 10 mule accounts went undetected."
Why do banks block bank accounts due to detection of money mule transactions?
Banking and cyber security experts have confirmed that there are at least five Indian banks, including HDFC Bank, who have been tracking money mule transactions. Banking fraud analytics experts say that banks first block the suspected money mule accounts and then launch an investigation.
A banking fraud analytics expert, who did not wish to be named, explained the reason why banks do this. "These operators move the money fast and by the time the original account holder would know what happened the money would be taken out into a thousand other bank accounts. This is why banks have to take real time action on the flagged bank account otherwise it would be too late to stop the money mule operation," the expert said.
"Our software which helps in detecting money mule identities has been used by the top 4 banks in India since the last one year. This software has detected hundreds of thousands of money mule identities which if left undetected would have cost millions in damage," says Ranjan R Reddy, founder, Bureau, a cyber security software company.
What if the software detected wrong money mule accounts?
Banks use multiple software and techniques to identify money mule transactions. According to Balaji Viswanathan, MD & CEO, Expleo India, a financial, engineering and technology consultancy company, "Indian banks employ various fraud detection software and techniques to identify money mule transactions. These methods are crucial in combating financial crimes, where individuals unknowingly or knowingly transfer illegally obtained money on behalf of delinquents."
The ultimate decision to act on the information the software provides is upon the bank. So, if an individual could prove that his/her bank account is genuine, no further action would be taken after the bank's investigation. However, if the individual is proved to be involved in a money mule operation, legal action can be taken against him/her by the appropriate authorities.
The bank is responsible for verifying whether the software has detected an actual money mule account or made an error. The banking fraud analytics expert cited above said "The software generates real-time information about suspected money mule accounts. Banks have the ultimate decision whether to take action against the flagged accounts."
What are the criteria for identifying money mule bank accounts?
According to Ahmed, some of the criteria which banks watch out for detecting money mule operations are:
Unusual patterns and Thematic Analysis: Banks monitor for sudden and significant increases in transaction volume or frequency, followed by quick transfers to multiple accounts, often across different countries or financial institutions, especially involving high-risk countries or individuals. It can also involve accessing Mobile and Internet Banking Apps from various remote locations or using a VPN to conduct transactions to a completely different location.
Static Data Change vs transaction volume: Whenever there is a static data change like mobile number, email addresses followed by an increase in the transaction frequency, it is a red flag.
Irregular deposits and withdrawals: Frequent or large cash withdrawals or deposits, particularly if they are inconsistent with the customer's usual behaviour, can raise suspicion. If the origin of funds cannot be adequately explained by the account holder, it may raise red flags.
Suspicious beneficiary accounts: Banks examine the accounts receiving funds to identify any patterns or connections with known money mule networks or high-risk entities.
Inconsistent personal information: Discrepancies in the customer's personal information or documentation can be indicators of fraudulent activity.
How can you keep your bank account away from money mule operations?
According to Ahmed, to avoid having one's bank account getting tagged as a money mule account, the following precautions may be taken:
Protect personal information: Safeguard your personal and financial information, such as account numbers, login credentials, and identification documents. Be cautious while sharing sensitive information online or with unknown individuals.
Regularly monitor account activity: Keep a close eye on your banking transactions, mobile and email change notifications, and account statements. Report any suspicious or unauthorised activity, including unknown incoming funds, to your bank immediately. They can provide guidance and take necessary actions to protect your account.
Be cautious of scams that request for money transfers: Be wary of unsolicited job offers, online earning opportunities scams, trading scams, crypto scams, prize scams, online gaming scams, fundraising scams, and romance scams that involve financial transactions or requests to transfer funds on behalf of others. Be cautious of requests to receive money in your account and forward it to someone else.
[The Economic Times]
