Mule Accounts Case: CBI Finds Banks Ignored Address Verification, Breached KYC Norms

The Central Bureau of Investigation's (CBI's) probe into the use of 8.5 lakh mule accounts opened in more than 700 branches of various banks across India by cyber frauds, has further revealed that the bank branches involved in the case had not sent acknowledgement or Thank You letters after opening of the bank accounts, which is an indirect form of address verification of account holders, even though circulars in respect of the same have been issued by some banks.

According to the CBI, the said mule accounts were being used by cyber frauds involved in digital arrest scams, impersonation, fraudulent advertisements, investment frauds and UPI-based financial frauds to transfer the cyber fraud amounts from the accounts of the victims. CBI had initially registered an enquiry to unearth the entire conspiracy of opening of mule accounts, the role of the bankers and the middlemen and to understand the existing bank’s rules and guidelines.

The CBI stated that these mule accounts were opened either without proper KYC norms or Customer Due Diligence or Initial Risk Assessment. The branch managers of the banks have also failed to conduct Enhanced Due Diligence in respect of certain suspicious transaction alerts generated by the systems. The guidelines issued by the RBI and certain internal guidelines issued by the banks were also violated.

"Probe had also revealed that certain bank accounts were opened on the basis of forged documents and the account holder in whose name the account was opened was not aware of the opening of account in his name. Enquiry has further revealed that the branches were not sending acknowledgement /Thank You letter after opening of the bank accounts, which is an indirect form of address verification even though circulars in respect of the same have been issued by some banks," a CBI official said.