Banks, FIU-IND work on sharper framework to flag money mule accounts

New Delhi: Banks are collaborating with the Financial Intelligence Unit, or FIU-IND, to strengthen the Suspicious Transaction Report (STR) framework for and further standardise early markers to detect patterns in syndicated cases. Currently, banks must file an STR when fraud is reported.

“We are aiming for better reporting than simply filing STRs, which apparently clog the system. The idea is that an STR should be based on a detailed risk assessment and analysis done by the principal officer with a focus on identifying patterns,” said an official aware of the developments.

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‘Money mules’ are used to launder the proceeds of fraud schemes. The government, along with the Reserve Bank of India (RBI), has already done focused thematic assessments in major banks, with a high number of money mule accounts to assess any gaps in the systems.

Banks have been further directed to use artificial intelligence/ machine learning tools in detecting suspicious and fraudulent transaction patterns as well as use of network analytics in identifying mule networks.

A bank executive said that mandatory STR filing in every identified money mule account case leads to a pile-up of cases rather than some actionable intelligence. “The existing mandate with penalty for non-filing leads to bank officials mostly passing on the details rather than making a detailed assessment,” he said, adding that the issue has been brought to the attention of the banking sector regulator, the RBI.

Under existing regulations, if it is established that an account opened and operated is that of a money mule, but STR was not filed by the bank, it is in violation of the RBI guidelines on the ‘Operation of Bank Accounts and Money Mules’.

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Last month, a parliamentary committee flagged systemic failures that enable laundering of crime proceeds through the formal banking system.

It had further recommended that the government and the RBI should implement a “Penal Framework for Negligent Branches”, which penalises banks for hosting multiple “mule accounts” and holds them responsible for lapses in know-your-customer (KYC) compliance.

It had advocated that the Department of Financial Services and the RBI should deploy an automated 24/7 API interface between reporting portals and Core Banking Systems for Golden-Hour fund recovery, accompanied by mandatory transaction safeguards and strict branch-level accountability for KYC lapses.