IDFC First Bank has announced plans to implement a mechanism to obtain transaction data of new customers from other banks through payment aggregators.
This move aims to enhance the bank’s understanding of its customers’ financial behavior and preferences.”As of now, for new accounts we don’t have transaction data with us, but through payment aggregators, we will get transaction data with other banks and soon we are going to implement it,” said V. Vaidyanathan, Managing Director and Chief Executive Officer of IDFC First Bank, during the Global Fintech Fest 2024.
Combating Mule Accounts
In addition to accessing customer data, IDFC First Bank has also taken steps to avoid the creation of mule accounts within the bank. Mule accounts are created by one person but operated by another, often used for money laundering and tax evasion purposes.
RBI’s Intervention and Emphasis on Cybersecurity
Last month, RBI Governor Shaktikanta Das held meetings with the MDs and CEOs of public sector banks and select private sector banks in Mumbai, urging them to intensify efforts against mule accounts. Das emphasized the need for customer awareness initiatives and robust cybersecurity controls to curb digital frauds.
Mule Accounts: A Violation of Rules and Regulations
Mule accounts are in violation of several rules and regulations, including the Prevention of Money Laundering Act (PMLA) and tax laws. The RBI and Sebi have also stated that such accounts should not be used, as they are illegal arrangements.
Emphasis on Third-Party Risk Management
Governor Das also stressed the importance of banks effectively managing third-party risks, which includes the risks associated with payment aggregators and other service providers. This highlights the need for banks to conduct thorough due diligence and implement robust risk management practices when engaging with third parties.
Conclusion
IDFC First Bank’s move to leverage payment aggregators for customer transaction data and its efforts to combat mule accounts demonstrate the bank’s commitment to enhancing customer understanding and strengthening its risk management practices. As the banking industry continues to evolve, the RBI’s guidance on cybersecurity and third-party risk management will be crucial in maintaining the integrity and stability of the financial system.
