Banks Raise Alarm Over Rising Cyber Frauds
As India witnesses a sharp spike in digital payment frauds, banks across the country have demanded legal authority to freeze mule accounts—those used to transfer or launder stolen money—immediately upon detection of suspicious transactions.
Banking officials believe that quick action is critical to block stolen funds from being siphoned off across multiple accounts and countries.
What Are Mule Accounts?
Mule accounts are bank accounts operated by individuals (often unknowingly) used by fraudsters to divert and launder illicit money. These accounts are key tools in phishing, UPI frauds, and SIM swap scams, which are on the rise with the surge in digital payments.
Once money lands in a mule account, it is quickly transferred through a series of other accounts, making recovery difficult.
Banks Call for Legislative Support
In recent industry-level discussions, leading public and private sector banks have jointly submitted recommendations to the Reserve Bank of India (RBI) and the Ministry of Finance, seeking statutory backing to immediately block or freeze such accounts.
Currently, banks can act only after receiving police orders or judicial instructions, which causes crucial delays.
Rising Frauds Prompt Industry-Wide Concern
Reports indicate that cyber frauds in India crossed ₹1,200 crore in reported losses in 2024 alone. Most scams involve UPI-based frauds, phishing links, and social engineering tactics, with stolen money being routed through multiple mule accounts.
Banks say the current system is “too slow to respond” to real-time cyber fraud threats.
Why Banks Need Real-Time Blocking Power
According to security experts, fraud detection systems can now flag unusual transactions within seconds. However, by the time banks obtain legal approval to act, the funds are often withdrawn or routed to foreign accounts.
Banks want the same power that enforcement agencies enjoy—to freeze accounts instantly based on real-time risk flags, and notify authorities post-action.
Regulators Working on Draft Guidelines
The RBI, in collaboration with the Indian Cyber Crime Coordination Centre (I4C), is said to be drafting new guidelines that may allow banks to act faster in blocking high-risk transactions. The guidelines may introduce a centralized alert mechanism for mule account activity detection.
Public Awareness and KYC Measures Needed
In parallel, banks are strengthening KYC protocols, AI-based fraud detection, and customer awareness campaigns. However, experts say unless banks are empowered to act instantly, technical solutions alone won’t be enough to stem financial losses.
Banks also recommend that repeat mule account holders be blacklisted across all banks and their digital activity be tracked under a central fraud registry.
Conclusion
With cybercrime evolving rapidly, the demand by Indian banks for legal power to freeze mule accounts in real-time is gaining momentum. Experts and regulators agree—without swift legislative reforms, India’s digital payment ecosystem remains vulnerable to escalating fraud risks.
