Why Banks Want Immediate Power to Freeze Suspicious Accounts in India
In response to the growing threat of cyber crimes and illegal transactions, banks in India have urged the Reserve Bank of India (RBI) and the government to grant them the authority to immediately freeze suspicious accounts. The aim is to curb fraudulent activities and prevent misuse of the banking system.
Why Are Banks Making This Demand?
Banks have raised concerns over the time-consuming process currently in place for dealing with suspicious mule accounts. At present, financial institutions must obtain permission from enforcement agencies or the court before they can seize or freeze such accounts. This delay allows fraudsters to move illegal funds, making it difficult to trace and stop these transactions.
To tackle this, banks have formally requested that they be given the power to instantly freeze accounts as soon as they detect suspicious activities. By doing so, they believe it would be possible to halt fraudulent transactions and prevent criminals from exploiting the system.
What Are Mule Accounts?
Mule accounts are bank accounts used to carry out criminal activities such as cyber fraud, money laundering, tax evasion, and digital scams. These accounts are often opened in the name of a third person—who may either be unaware or a willing participant. Fraudsters use mule accounts to transfer illegal money from one place to another, effectively concealing its source. The funds are either withdrawn in cash or sent to offshore accounts, making them difficult to track.
Current Legal Provisions
Under the Prevention of Money Laundering Act (PMLA), banks currently need to obtain approval from enforcement authorities or a court to seize accounts involved in illegal activities. This process is not only time-consuming but also gives criminals enough opportunity to complete their transactions before action can be taken.
Recommendations from the Indian Banks’ Association (IBA)
The Indian Banks’ Association has also backed this proposal, suggesting that banks be empowered to take immediate action against mule accounts. Additionally, the association has recommended stricter implementation of Know Your Customer (KYC) norms and more rigorous verification processes to prevent such accounts from being opened in the first place.
Technology-Based Solutions Proposed by Banks
To improve the detection of mule accounts, banks have suggested leveraging advanced technologies like machine learning and artificial intelligence. By using AI-driven tools to monitor banking transactions, financial institutions can quickly identify unusual patterns and flag suspicious accounts before they’re used for fraudulent activities.
Conclusion
With cyber crimes and financial frauds rising sharply in India, giving banks the authority to instantly freeze mule accounts could play a critical role in safeguarding the financial system. Along with stricter KYC protocols and the use of technology, this move could help in effectively curbing the misuse of bank accounts for illegal transactions.
