What Is RBI’s MuleHunter.Ai? Know How This New Tool Will Counter Financial Fraud

The threat of cyber fraud now looms larger than ever over the citizens, especially in the age of digital payments and online transactions. Reserve Bank of India (RBI) has introduced ‘MuleHunter.ai’ - an artificial intelligence tool designed to hunt down and neutralise one of the most insidious enablers of financial frauds - the mule accounts.

This AI tool will be used to identify and flag mule accounts which are commonly used in money laundering schemes. MuleHunter.AI, piloted by Reserve Bank Innovation Hub (RBIH), a subsidiary of Reserve Bank, has already been successfully demonstrated in two public sector banks.

What are Mule Accounts?

Think of mule accounts as sleeper agents in the world of banking. Such accounts are often created by unsuspecting individuals who are lured by promises of easy money or coerced into participation.

Cybercriminals would use ‘mule accounts’ to transfer and launder illicit funds. They pose a big challenge for cyber police because these are notoriously hard to track.

Funds are transferred through many interconnected mule accounts making it difficult to trace and recover money. The Mule accounts violate multiple laws such as the Prevention of Money Laundering Act (PMLA), and contravene regulatory guidelines issued by the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (Sebi).

Data from the National Crime Records Bureau (NCRB) shows that online financial frauds are responsible for around 67.8 per cent of all complaints related to cybercrime. This makes the effective provision of fraud prevention AI tools highly urgent.

MuleHunter.AI: RBI’s Counter For Financial Fraud

Recognising the need to control the growing menace of mule accounts, RBIH - in consultation with banks analysed the patterns of mule accounts and developed MuleHunter.ai - an AI/ML-based solution that surpasses the transitional rule-based systems.

Why AI? The transitional systems often produce high false positives, leading to inefficiencies and missed opportunities to catch fraudsters. This tool on the other hand uses advanced machine learning algorithms to analyse transaction patterns and account details. It flags suspicious activity with accuracy.

How Does It Work? MuleHunter.ai dives deep into the data of the transaction chain and identifies red flags that indicate a mule account activity. Whether it is an unusually large transaction in low-balance accounts or a network of interconnected transfers that seem suspicious, the AI tool uses its algorithms to pick up on patters that a human eye would miss.

By focusing on where the money eventually ends up, this tool not only identifies fraudulent accounts but can also help banks disrupt the flow of illicit funds before they can cause harm.

Is MuleHunter.Ai Enough To Fight Mule Account Menace?

Says Ashok Hariharan, CEO and Co-founder of IDfy, an identity verification platform, “While the RBI's MuleHunter AI is a powerful tool for monitoring transactions and detecting mule accounts, the real battle against fraud begins at onboarding.”

Hariharan further explains, “By implementing stringent verification measures from the start, we can significantly reduce the risk of fraud and strengthen the financial system’s security. The root causes - insufficient account authentication and lax KYC processes - must be addressed to create a safer and more reliable system for everyone."

Echoing the same sentiment, Vivek Iyer, Partner, Grant Thornton Bharat states, “The artificial intelligence solution announcement by RBI for detection of mule accounts is an indication of how the regulator is not just an institution that highlights improvement areas but also contributes to the health of the overall ecosystem by developing effective solutions for difficult problems.”

“This is also a cue to the industry to do more with emerging technology in the domain of governance and regulatory compliance,” he adds.

A Call To Action for Banks

The RBI has also invited banks across the country to collaborate on refining and scaling this technology. “Banks are encouraged to collaborate with RBIH to further develop the MuleHunter.AI initiative to deal with the issue of mule bank accounts being used for committing financial frauds,” RBI Governor Shaktikanta Das said during his post-MPC meet address today.