By Mr. Shikhar Aggarwal, Chairman, BLS E-Services Limited
Shikhar Aggarwal, Chairman, BLS E Services
The recent exposure of a large-scale mule account scam in Jammu and Kashmir has once again brought to light a critical concern that India’s banking and financial services ecosystem can no longer afford to sideline — the widening gaps in systemic vigilance and risk management. While it is tempting to view such incidents as isolated, the reality is far more complex and concerning.
What unfolded is not merely a case of financial fraud but an indicator of deeply embedded structural weaknesses that cybercriminals are continuously exploiting. This is a wake-up call, not just for banks, but for the entire financial services landscape, including Fintech companies and regulatory bodies. During the press conference, officials identified 7,200 such accounts, with estimates suggesting the number could reach 30,000.
A ‘money mule’ refers to an individual enlisted to receive and transfer funds acquired through fraudulent activities. This role is pivotal in the execution of various financial crimes. The involvement of money mules introduces an additional layer of complexity, making it challenging for law enforcement to trace the origins of illicit transactions.
As someone deeply engaged in building and strengthening digital financial services in the underserved areas of the nation, I believe it is time for us to collectively move beyond reactive measures. We need proactive, institutionalised reforms that ensure our financial inclusion journey remains secure and sustainable.
First and foremost, there is a glaring need for advanced behavioural analytics and real-time monitoring across all banking transactions. Traditional red-flagging mechanisms are no longer sufficient. Fraudsters today operate with a level of sophistication that requires AI-powered, predictive tools capable of identifying irregular patterns — such as sudden bursts of activity in newly opened accounts — and triggering immediate alerts.
Second, banks must revisit their KYC (Know Your Customer) frameworks, especially in vulnerable geographies. While we have made commendable progress in onboarding millions through simplified KYC processes, it is imperative that these frameworks evolve to include dynamic, ongoing customer due diligence rather than relying solely on one-time verification.
Third, there is a significant gap in inter-agency collaboration and information sharing. Financial crimes today do not respect institutional boundaries. Hence, banks, payment service providers, Fintech platforms, and law enforcement agencies must operate in a tightly knit, coordinated environment where threat intelligence is shared in real time.
Recently, a working group formed by the Indian Banks’ Association (IBA) has recommended that this issue be taken up with the Reserve Bank of India (RBI) for further consideration. Banks have proposed using the Election Commission database to verify individuals who open accounts using voter identification cards and Form 60—in the absence of a Permanent Account Number (PAN)—and capping the number of transactions on such accounts.
Another area that cannot be overlooked is customer education. Many individuals unknowingly become facilitators of fraud by lending their account credentials in exchange for short-term financial gains, without realising the legal and financial consequences. There is a pressing need for sustained public awareness campaigns to educate account holders about the severe risks and liabilities associated with mule accounts.
Finally, I strongly advocate for the creation of dedicated cyber vigilance units within banks, equipped with the expertise to act swiftly at the first sign of suspicious activity. Such units should not only monitor threats but also engage in regular stress testing of internal systems and protocols.
The IBA report also recommended that to effectively tackle mule accounts, a technology-driven approach is crucial. The use of Artificial Intelligence (AI) and Machine Learning (ML) in monitoring transactions can help detect suspicious activities, anticipate fraudulent patterns, and strengthen the financial system.
The unearthing of the large-scale mule account scam in Jammu and Kashmir, while unfortunate, presents an opportunity for the industry to undertake transformative reforms. We must treat this not as a singular event but as a systemic signal urging us to reinforce our digital financial architecture. Growth and inclusion are admirable goals, but they must be underpinned by trust, security, and resilience.
As we continue to expand the footprint of financial services across the nation, let this be the moment where we collectively raise the bar on risk management and set new benchmarks for securing India’s digital economy.
The writer is Chairman of BLS E-Services Limited.