Banks Seek Authority to Freeze Suspect Accounts to Combat Cyber Fraud

In an effort to curb the rising tide of cyber fraud, banks are advocating for the authority to freeze accounts suspected of being involved in illicit transactions without the delay of seeking permission from authorities. Currently, under the Prevention of Money Laundering Act (PMLA), banks lack the autonomy to freeze or block customer accounts without explicit authorization from a court or law enforcement agencies.

A working group formed by the Indian Banks' Association has proposed this measure for consideration by the Reserve Bank of India (RBI), highlighting the urgent need to address the misuse of mule accounts by fraudsters to launder illegal funds through the banking system.

Proposals to Strengthen Account Verification Processes

Additionally, banks are exploring measures to identify and restrict accounts most at risk of being exploited as mule accounts. Proposals include leveraging the Election Commission database for verifying individuals opening accounts with voter IDs and Form 60, especially in cases where a Permanent Account Number (PAN) is absent. Furthermore, there's a suggestion to impose transaction limits on such accounts to mitigate risks.

With thousands of mule accounts being frozen annually, yet fraudsters continually exploiting system loopholes to create new ones, the banking sector is under pressure to implement more robust safeguards against cyber fraud.