Identifying Money Mules Related Fraudulent Activity

Criminals often target vulnerable demographics such as students, senior citizens or individuals from low-income households facing financial difficulties to serve as mules.  These criminals contact unwitting people with bank accounts through avenues such as chat rooms, email and job websites, persuading them through extortion or a promise of benefits to receive and transfer money. This helps fraudsters evade detection by law enforcement and financial institutions, making it more difficult for authorities to track and intercept the illicit funds. Mules often partake in this conduct without fully realising the financial and legal consequences. An example of this recently came to light when innocent villagers in Odisha, West Bengal and Jharkhand were induced to open bank accounts that were used to transfer money for illegal purposes.

To address this issue, the government has taken proactive measures, with the Reserve Bank of India (RBI) directing banks to implement comprehensive measures for identifying money mules and the Ministry of Finance proposing account closures. Despite India possessing several legal mechanisms against such crimes, these protections have shown limited effectiveness in addressing fraud through money mules.

Authorities can use provisions of The Prevention of Money Laundering Act, 2002 (PMLA), Information Technology Act, 2000 and the Indian Penal Code (IPC) to prevent and punish the practice of using money mules for illicit purposes. However, law enforcement’s ability to tackle the problem is limited since it often investigates and prosecutes after the conduct has taken place and a complaint has been made. In addition to the work of the legal machinery, tackling the money mules threat requires efforts that can prevent the practice in the first place.

Effective prevention of this conduct necessitates the concerted efforts of law enforcement, coupled with technology-enabled prevention of money laundering schemes and meaningful awareness campaigns. The Indian financial ecosystem must leverage a scalable, technology-driven strategy aimed at preventing the conduct prospectively. For example, banks can utilise technology solutions to identify money mule accounts by analysing behavioural inconsistencies and intelligence gathered from device location, digital footprint, beneficiary intelligence and payment activity patterns. Early and accurate detection of mule accounts can be an effective tool in preventing fraudulent conduct.

Contemporary fraud prevention solutions throughout the customer journey substantially rely on artificial intelligence (AI), sophisticated data analytics, machine learning (ML), automated risk-based workflows and layering capabilities. Leveraging technological, data-driven solutions to track money mule transactions entails utilising continuous pattern analysis, scoring models and optimisation through ML-powered algorithms.

These techniques assist in predicting the probability of an account being used for mule activity, thereby enhancing the effectiveness of the organisation’s data-driven solutions. This strategy ensures a comprehensive approach that adapts to evolving fraud trends and effectively addresses the complexities of financial crime.

Besides law enforcement, financial institutions have a role here as well. Financial services firms can launch and amplify consumer awareness campaigns to stop mule activity.

Banking users must be made more aware of social engineering techniques fraudsters use and the legal and financial repercussions of acting as a mule. The RBI and banking institutions have often issued awareness literature on the subject. However, grassroots awareness campaigns on the subject that focus on vulnerable groups and employ novel means of awareness like vernacular literature, audio-visual content and educational workshops are still scarce.

To ensure that the perils of money mules are minimised, multiple stakeholders, including the government, the industry and civil society, need to intensify their efforts. Policymakers, especially the RBI, have made notable efforts in this regard. By implementing innovative awareness campaigns in collaboration with consumer organisations, research think tanks, and grassroots non-governmental organisations (NGOs), the government can build on its work. Further, it should ensure that banks meaningfully implement technological mechanisms to identify and close mule accounts. Lastly, it needs to incentivise the growth and adoption of new-age solutions that can assist financial institutions in the fight against money mules.

Banking institutions have a crucial role to play in curating awareness campaigns specifically tailored to engage groups at heightened risk of falling victim to financial fraud, including money mule schemes. Further, they must proactively explore new-age technological solutions that are fit for Indian financial markets and implement them in a sustainable manner. Banks, ministries, financial regulators, fraud detection solution providers and law enforcement agencies can contribute to gradually mitigating the threat posed by money mule schemes in India through the sustainable exchange of ideas.