Banks Seek Authority to Freeze Fraudulent Accounts Without Court Approval
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Synopsis
In a recent report, banks have requested the ability to freeze accounts involved in cyber fraud without needing court or police approval, as part of measures to combat increasing cybercrime and protect customers from money mule accounts.
Key Takeaways
- Banks want immediate power to freeze fraudulent accounts.
- Current laws delay actions against cyber fraud.
- Mule accounts are a significant concern for financial institutions.
- Technology like AI can help in identifying fraudulent activities.
- Collaboration among banks and law enforcement is crucial.
New Delhi, April 13 (NationPress) Banks are seeking the authority to immediately freeze bank accounts implicated in cyber fraud without the need for court or police intervention, as revealed in a report from a working group established by the Indian Banks' Association (IBA).
Currently, banks can only block accounts based on internal alerts; however, under the Prevention of Money Laundering Act (PMLA), they lack the legal power to freeze or block customer accounts without formal authorization from a court or law enforcement.
The IBA report highlighted that this delay often grants fraudsters sufficient time to escape or transfer illicit funds. "In light of this, we may propose this as a suggestion for further consideration by the RBI," the report noted.
Mule accounts—those utilized by cybercriminals to transfer stolen or illegal funds—are the focal point of this issue.
Although banks freeze thousands of such accounts annually, fraudsters quickly establish new ones by exploiting system vulnerabilities.
To combat this, banks are now exploring methods to identify and restrict accounts that may be more susceptible to misuse as mule accounts.
The report recommended that banks could utilize the Election Commission’s database to verify customers opening accounts with voter ID cards or Form 60 (when PAN is unavailable).
Additionally, it proposed limiting the number of transactions that such accounts can perform.
The report further urged banks to adopt a technology-driven approach to combat cybercrime.
By implementing artificial intelligence (AI) and machine learning within their transaction monitoring systems, banks can enhance their capability to predict and thwart fraudulent activities.
It emphasized that a robust effort against mule accounts necessitates collaboration among banks, regulators, law enforcement, and technology providers.
"Investments in advanced technology, consistent staff training, and policy adjustments are essential," the report stated.
These initiatives could contribute to a safer banking environment and safeguard customers from cyber fraud linked to money mule accounts.
