Reserve Bank of India has unveiled a project to combat the rapidly increasing financial frauds across the country where citizens are losing their hard-earned money. The Reserve Bank of India has developed an in-house AI/ML-based solution that is better suited than a rule-based system to identify suspected mule accounts. Advanced Machine Learning algorithms are capable of analyzing transactions and account detail-related datasets to predict mule accounts with higher accuracy and greater speed than typical rule-based systems. This machine learning-based approach has enabled the detection of more mule accounts within a bank’s system.
A mule account is an intermediate bank account used by criminals to launder illicit funds. These accounts belong to unsuspecting individuals who allow this access to their accounts for easy money, or they get coerced into participation. Since criminals use a web of such mule accounts to transfer funds, these highly interconnected accounts make it difficult for agencies to trace and recover the funds. National Crime Records Bureau (NCRB) data revealed that online financial frauds constitute 67.8% of all cybercrime complaints received in Q2 2022. A significant challenge in preventing financial fraud is the use of money mule accounts.
The challenges faced by the regulatory body prompted the development of advanced algorithms that would alert banks upon detection of unusual transaction patterns and help identify fraudulent activities more swiftly. A pilot test was completed with two major public sector banks, which produced promising results. The tool uses 19 distinct behavioral patterns associated with mule accounts to spot suspicious activities in real-time.
The move seems to be well in time and a necessity to safeguard citizens from falling prey to fraud. Identifying unusual activities in bank accounts would highlight ongoing fraud and can be intercepted before completion. This collaborative effort between the RBI and fintech institutions would be kept on watch with the hope of curbing the rising count of frauds.
