RBI cautions banks on ‘money mules'

Source :BL Bureau:Mumbai, Dec. 8.2010

Money laundering and terrorism financing concerns have prompted the Reserve Bank of India to caution banks to be on guard against their depositors falling prey to ‘money mule transactions'.

In a money mule transaction, an individual with a bank account is recruited to receive cheque deposits or wire transfers and then transfers these funds to accounts held on behalf of another person or to other individuals, minus a certain commission payment.

Money mules, according to a RBI notification, could be recruited by a variety of methods, including spam e-mails, advertisements on genuine recruitment web sites, social networking sites, instant messaging and advertisements in newspapers.

Potential loss

The RBI had a word of caution for depositors acting as ‘money mules'. When caught, these money mules often have their bank accounts suspended, causing inconvenience and potential financial loss, apart from facing likely legal action for being part of a fraud.

Many times the address and contact details of such mules are found to be fake or not up to date, making it difficult for enforcement agencies to locate the accountholder, the RBI said.

Pointing out that it has been brought to its notice that ‘money mules' can be used to launder the proceeds of fraud schemes (e.g., phishing and identity theft) by criminals who gain illegal access to deposit accounts by recruiting third parties , the RBI said in some cases these third parties may be innocent while in others they may be in complicity with the criminals.

The operations of mule accounts, the RBI said, can be minimised if banks follow the guidelines on Know Your Customer (KYC) norms /Anti-Money Laundering (AML) standards/ Combating of Financing of Terrorism (CFT) /Obligation of banks under Prevention of Money Laundering Act, 2002.