Most of the Indian banks appears to be on the quest to get the authority from the RBI as they want to freeze the accounts that are used in channelling illicit transactions.
It seems that the banks can now freeze or block accounts based on internal triggers.
Notably, the banks do not have the authority to freeze or block customer accounts without proper authorisation from a court or law enforcement agencies (LEAs), according to the provisions of the Prevention of Money Laundering Act (PMLA).
In this regard, a working group constituted by the Indian Banks’ Association said, “In light of this, we may propose this as a suggestion for further consideration by the RBI.”
Why Would This Happen?
So far money laundering remains one of the most significant threats to financial ecosystems worldwide.
It appears that the money mule accounts play a critical role in disguising the origins of illicit funds among the tools employed by criminals.
The IBA said that to minimise attempts of cyber fraud, banks should be given the authority to freeze and block fraudulent accounts.
With this permission, the authority will also allow banks to save crucial time in seeking permission from authorities.
Here mentioned mule accounts are used by the fraudsters to move illegal funds through the banking system.
Further, these accounts are being used by scammers to launder money, often without the knowledge of the person under whose name the account has been opened.
As informed by the banks, they freeze thousands of these accounts every year.
But, fraudsters quickly create new accounts using loopholes in the system.
The banks may look to verify and restrict accounts most vulnerable to misuse as “mule” accounts for channelling illicit money as mentioned in the report.
How Does This Freezing Accounts Helps?
For doing so, banks have proposed using the Election Commission database to verify individuals who open accounts using voter identification cards.
Moving ahead, they have suggested using Form 60in the absence of a permanent account number, or PAN.
Further proposing to cap the number of transactions on such accounts.
In a fight against mule accounts, they will have to be dynamic, technology-driven approach.
Banks can address existing gaps, anticipate criminal strategies, and protect the integrity of the financial ecosystem, the association suggested with the integrating of Artificial Intelligence (AI) and Machine Learning (ML) into transaction monitoring systems.
The stakeholders are likely to make a concentrated effort and invest in technology, staff training, and collaboration in order to secure a safer financial environment.
Implementing these measures will require dedication and cooperation from financial institutions, regulators, law enforcement agencies and technology providers, said IBA.
