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Picture Courtesy: https://www.moneycontrol.com/news/business/startup/reserve-bank-innovation-hub-develops-aiml-model-to-tackle-mule-account-fraud-12825115.html

Context: The Reserve Bank of India has developed an AI-powered model called MuleHunter.AI, to help banks to tackle the issue of "mule" bank accounts.

What is a mule bank account?

A mule bank account is a bank account used by criminals to conduct illegal activities, mostly money laundering.

These accounts usually come from their original owners, who are frequently from lower-income families or have limited technical literacy. The innocent individuals, known as "money mules," unknowingly facilitate the laundering of stolen or illegal funds through their accounts.

How does a "money mule" relate to mule bank accounts?

A "money mule" is an individual whose bank account is used by criminals to launder illicit funds. The money mule is frequently an innocent victim who is unaware of the illegal activities taking place on their account.

When the crime is discovered, the money mule becomes the focus of police investigations, while the real criminals behind the fraud go undetected.

Problem of mule bank accounts

Mule bank accounts are a common component of online financial fraud in India. The government has frozen around 4.5 lakh mule accounts that were used to launder cybercrime proceeds.

Large public sector banks such as SBI, Punjab National Bank, Canara Bank, and Kotak Mahindra Bank have reported a high number of mule accounts.

Role of MuleHunter.AI developed by RBI

MuleHunter.AI is an artificial intelligence (AI)-powered model created by the Reserve Bank Innovation Hub (RBIH) to detect mule bank accounts.

It aims to support banks in reducing digital fraud by identifying and preventing the use of mule accounts in financial crimes.

A pilot project with two large public sector banks provided encouraging results, and the RBI is urging more banks to work with RBIH to enhance and broaden this solution.

Steps taken by the government to address the issue of mule accounts

The government has been actively addressing the issue of mule accounts in collaboration with various stakeholders.

The Department of Financial Services (DFS) met with officials from the RBI, the Indian Cyber Crime Coordination Centre (I4C), NABARD, and public and private sector banks to discuss strategies for combating digital financial fraud.

Banks have been advised to use advanced technologies like artificial intelligence (AI) and machine learning (ML) to detect mule accounts in real-time and to follow best fraud prevention practices. They are also encouraged to train their employees on how to detect and prevent fraud.