Financial Awareness for RBI Grade ‘B’ Officer Exam: ‘What is Money Muling?’

Sep 1, 2016 18:37 IST

It is observed that in banking examinations, terms with special reference to Banking are regularly asked. Here the banking team of Jagran josh is providing brief information on ‘Money Muling’. The term is important for RBI Grade B exam, IBPS PO Mains exam, BOB recruitment exam through Post Graduate Certificate in Banking and Finance course and other banking exams.

What is Money Muling?

Money Mule is a term used to describe innocent victims who are duped by fraudsters into laundering stolen/illegal money via their bank accounts. Whether or not the account holder is aware of it, the account is used to fraudulently transfer money to fraudsters. When such incidents are reported, the money mule becomes the target of police investigations, due to their involvement.

How do fraudsters operate?

  1. Fraudsters contact customers via emails, chat rooms, job websites or blogs, and convince them to receive money into their bank accounts, in exchange of attractive commissions.
  2. The fraudsters then transfer the illegal money into the money mule’s account.
  3. The money mule is then directed to transfer the money to another money mule’s account – starting a chain that ultimately results in the money getting transferred to the fraudster’s account.

Why is it noteworthy now?

The RBI has appealed government and state-owned banks on the dangers of money muling. The RBI has cautioned that a number of newly opened accounts under government’s flagship Pradhan Mantri Jan Dhan Yojana (PMJDY) could be particularly vulnerable to money muling and advised banks to guard against the misuse of these accounts.  Any failure to guard against misuse of customers’ accounts could result in banks incurring supervisory sanctions and enforcement actions.

What are the regulator's concerns?

According to RBI, It is a serious customer service issue for the regulator. Such episodes highlight the failure of the banking system and the processes to monitor newly opened accounts. According to them while the standard and the vigour of know your customer (KYC) is quite good at the time of opening of the account, there is no continuity in terms of surveillance or watch over the transactions in these accounts. They feel that banks have some alerts and exception transaction mechanism which are mostly primitive and generally ineffective.

How to avoid money mule scams?

Experts advise bank account holders to never reply to suspicious emails seeking personal or financial details. They advise against responding to overseas companies or contacts as these could be fraudulent. It is advisable to check the contact details carefully. One need to make sure such addresses, phone numbers, email addresses and websites are genuine.

Some experts says, the best way to counter this is by linking them with Aadhaar .