Banks Urge Action Against Cyber Fraud: Request Power to Freeze Suspect Accounts Without Court Order

Given the spectacular increase in cyber fraud all over India, the Indian Banks Association (IBA) has suggested that banks be given the authority to freeze suspect accounts at once without the sanction of any court or police. The suggestion is viewed as a significant move to curb illegal money transfers and cut down on the abuse of the banking system by cybercrooks.

The Increasing Abuse of Mule Accounts

The biggest concern expressed by the banking community is the increasing abuse of “mule accounts” that thieves open to launder ill-gotten money. These are usually opened in the names of unaware or economically struggling individuals who are promised a modest incentive in exchange. Although banks do freeze thousands of such accounts annually, the current process under the Prevention of Money Laundering Act (PMLA) holds up swift action. The existing legal requirement of seeking permission from courts or law enforcers provides criminals with an opportunity window to take advantage of this time lag and move funds quickly.

Call for Immediate Freezing Powers

A working group of the IBA has suggested that banks should be allowed to freeze suspicious accounts at once. The group had also suggested that this proposal be placed formally before the Reserve Bank of India (RBI) for consideration. Besides this, the utilization of advanced technologies such as artificial intelligence (AI) and machine learning (ML) has been suggested to detect and block mule accounts even before any fraudulent transaction is attempted.

In the direction of strengthening checks further, the banks also suggested cross-verifications of voter ID details from the database of the Election Commission and restriction of transactions through accounts opened without PAN cards (under Form 60). This would be to prevent the abusiveness as well as forward tracking of funds.

Cyber Fraud on the Rise

The latest statistics present a dismal picture, with cyber-cheating in India translating into losses of approximately Rs 1.5 lakh per minute. Private sector banks, the top ones among them, are said to be disproportionately hit as compared to public sector banks. Even in the States, Maharashtra alone accounts for over 25% of the overall financial losses through cyber fraud in the nation.

Technology as a Key Enabler

The IBA underscored the need for a tech-savvy, collaborative method of combatting cybercrime. Real-time transaction monitoring through the use of AI and ML could be a good deterrent against fraudulent transactions. Banks are being encouraged to invest in staff training, enhance relations with regulators and police, and enhance collaborative relationships with technology companies.

The report emphasizes the need for a concerted effort in combating cyber fraud. Through mutual coordination between financial institutions, regulators, and other stakeholders, the financial landscape of the country can be effectively shielded from cyber attacks.