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Mule Accounts and Digital Fraud: Banks Turn Cautious on Deposits

16 September 20251 min read
BANKING & FINANCEMule Accounts andDigital Fraud: BanksTurn Cautious onDeposits16 September 2025safalsetu.com

Why in the news

Banks are warier of deposits than loans as inactive accounts are turned into mule accounts for fraud and laundering.

Key facts

  • Mule accounts: dormant accounts moving illicit funds in low-value, high-volume transfers; holders may be unaware or complicit.
  • Used in fake investment schemes, lottery frauds and unauthorised digital payments, often with stolen identities or misused KYC.
InstrumentRole
Section 35A, BR Act 1949RBI directions on KYC, monitoring, risk
PMLA, 2002KYC and suspicious transaction reporting
RBI KYC DirectionsIdentification and account monitoring
Master CircularsDormant accounts, FIU-IND reporting

Exam angle

  • Money laundering law: PMLA, 2002.

Test yourself

1. What is a mule account in the context of digital fraud?

Mule accounts are inactive accounts used to route illicit money.

2. Which provision empowers RBI to issue directions to banks on KYC and risk management?

Section 35A of the Banking Regulation Act, 1949 gives this power.

3. To which agency do banks report suspicious transactions under the dormant-account guidance mentioned?

The notes cite reporting to FIU-IND.

This topic is part of Daily Current Affairs 16 September 2025 (15 topics).

All topics of the dayDay quizSeptember 2025

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