New Delhi/Mumbai: A New Strategy Against Online Fraud

In an innovative approach to tackle the increasing menace of online frauds, the Government of India, in collaboration with the Reserve Bank of India (RBI), is contemplating the introduction of a 'cooling off' period. This initiative aims to block funds received in bank accounts temporarily, to curb the flow of illicit money through mule accounts. Mule accounts, often used by criminals to transfer illegal funds, pose a significant challenge in the digital payment landscape.

Enhancing Customer Safety Without Hardship

The proposed cooling off facility is designed to prevent the immediate transfer of funds, thereby giving authorities a window to freeze stolen funds before they reach the scammers. While this measure is expected to enhance customer safety, the government is also keen on ensuring that it does not cause undue hardship to genuine customers. Similar facilities have been successfully implemented in some countries, offering a promising model for India.

Strengthening KYC Norms and Bank Vigilance

In addition to the cooling off period, the Ministry of Home Affairs (MHA) has urged citizens to refrain from selling or renting their bank accounts. Banks have been instructed to tighten KYC (Know Your Customer) norms to prevent the creation of accounts without proper identity verification. This move is part of a broader strategy to combat the misuse of mule accounts, which are increasingly being used in online frauds.

Banks have responded by setting up central cells dedicated to identifying and tackling mule accounts. Advanced technology is being deployed to detect suspicious activities, and accounts inactive for two years are being closed to prevent misuse. This concerted effort reflects the seriousness with which the banking sector is addressing the issue, with CEOs prioritizing measures to tackle mule accounts.

Conclusion

The battle against online fraud is intensifying, with the government and financial institutions exploring innovative solutions like the cooling off period. By enhancing KYC norms and leveraging technology, the aim is to safeguard the digital payment ecosystem and protect customers from the growing threat of online frauds.