In a major initiative to curb digital frauds, the Reserve Bank of India on Friday announced introducing an AI tool MuleHunter.AI to help financial institutions identify mule bank accounts.

What is a mule account?

A mule account is a bank account used by criminals to launder illicit funds, often set up by unsuspecting individuals lured by promises of easy money or coerced into participation. The transfer of funds through these highly interconnected accounts make it difficult to trace and recover the funds.

AI Solutions to Identify Mule Bank Accounts – MuleHunter.AI

“As part of the Reserve Bank’s continued efforts to prevent and mitigate digital frauds, an innovative AI / ML based model, namely, MuleHunter.AI has been developed by the Reserve Bank Innovation Hub (RBIH), Bengaluru. This will help the banks to deal with the issue of mule bank accounts expeditiously and reduce digital frauds,” RBI Governor Shaktikanta Das said after announcing the outcome of the 2024’s last bi-monthly monetary policy review.

The RBIH held extensive consultations with banks to understand the existing methods and processes employed to identify money mule accounts. The static rule-based systems used to detect mule accounts result in high false positives and longer turnaround times, causing many such accounts to remain undetected.

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The RBIH has developed an in-house AI/ML-based solution which is better suited than a rule-based system to identify suspected mule accounts. “Advanced ML algorithms can analyse transaction and account detail related datasets to predict mule accounts with higher accuracy and greater speed than typical rule-based systems. This machine learning based approach has enabled the detection of more mule accounts within a bank’s system,” according to the RBI.

Meanwhile, the RBI on December 6 again maintained status quo on its repo rate, the rate at which it lends money to commercial banks, at 6.5%. With this, the apex bank has kept the key interest rate unchanged for the 11th straight time since February 2023.

Jaya Vaidhyanathan, CEO, BCT Digital, terms the RBI’s launch of MuleHunter.AI as a significant step forward in the fight against financial frauds involving mule accounts.

“These frauds have become a significant challenge for the banking industry and the Indian economy, with some large banks reporting fraudulent transactions of Rs 400-500 crore every month. These accounts, often used to launder proceeds of cybercrimes, undermine trust in the financial system. In a notable move, the Center recently froze around 4.5 lakh mule bank accounts in the past year, showcasing the scale and urgency of the issue,” she says.