Financial fraudsters turning business accounts into mules for illicit fund transfers

Financial fraudsters are increasingly targeting small business accounts or current bank accounts for channeling large volumes of illicit fund transfers. According to top executives at fraud detection startups, initially fraudsters would typically take over retail and Jan Dhan accounts and convert them into mule accounts, but now they are increasingly looking at current accounts.

“We have seen such cases where mules are getting access to business PANs (permanent account numbers) easily and creating fake Udhyam certificates and using those to open current accounts under fake documents,” said Ranjan Reddy, founder of Bureau, a fraud and risk decisioning startup working with banks. The government issues Udhyam certificates for small enterprises and they can be downloaded online.

Rajit Bhattacharya, cofounder of Datasutram, a Mumbai-based identity verification startup, said banks are increasingly finding current accounts being taken over as mules. With scrutiny of savings accounts intensifying with the help of advanced software solutions to detect mules, fraudsters are continuously hunting for new ways of transferring illicit funds, said Bhattacharya.

Mule accounts are those where the original owner has either ceded control of the account to a fraudster in lieu of money or has misplaced credentials of the account, resulting in a takeover by a miscreant. Typically, poor people and migrant workers are targeted for such activities. But now small business owners are also falling prey to such acts, industry insiders said. Any fund taken out of a victim’s account fraudulently gets routed through multiple such mule accounts to avoid detection.

“Scamsters have started using bulk payment methods through these current accounts, which have been taken over as mule accounts,” said Jayaprakash Kavala, chief of products at Clari5. Industry insiders told ET that startups are working with banks to start monitoring unusual fund movement in business accounts going beyond the mandate of tracking retail accounts only.