Indian Banks Seek Power To Freeze Fraudulent Accounts Without Court Approval

(MENAFN- KNN India) New Delhi, Apr 14 (KNN) Indian banks are pushing for greater authority to freeze accounts suspected of being used in cyber fraud operations without requiring prior approval from courts or law enforcement agencies.

This recommendation comes from a working group established by the Indian Banks' Association, which plans to present this proposal to the Reserve Bank of India for consideration.

Currently, financial institutions face legal constraints under the Prevention of Money Laundering Act, which does not grant them independent authority to freeze or block customer accounts without proper authorisation, although they can implement blocks based on internal alert systems.

Fraudsters frequently utilise mule accounts to channel illegal funds through the banking system. Despite banks freezing numerous such accounts annually, criminals have found ways to exploit system vulnerabilities to rapidly open new accounts.

The working group's report recommends that banks enhance their identification and monitoring of accounts that show characteristics making them susceptible to misuse as mule accounts.

It suggests utilising the Election Commission's database to verify identities of individuals opening accounts with voter ID and Form 60 documentation when a Permanent Account Number is unavailable.

The report also proposes implementing transaction limits on these potentially high-risk accounts.

To combat the mule account problem effectively, the report advocates for a technology-driven approach, specifically recommending the implementation of Artificial Intelligence and Machine Learning systems to monitor transactions, detect suspicious activities, and anticipate fraudulent patterns to strengthen overall financial security.

Success in addressing mule account fraud will require a coordinated effort involving technological investment, comprehensive staff training, and close collaboration between banks, regulatory bodies, law enforcement agencies, and technology providers to safeguard the integrity of the financial ecosystem.

(KNN Bureau)

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