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StCBs/DCCBs - Operation of bank accounts and money mules

RBI / 2010-11/ 334
RPCD.CO.RCB.AML.BC. No.39/07.40.00/ 2010-11

December 27, 2010

The Chief Executives of
all State and Central Co-operative Banks

Dear Sir,

Operation of bank accounts & money mules

With a view to preventing State and Central Co-operative Banks from being used, intentionally or unintentionally, by criminal elements for money laundering or terrorist financing activities Reserve Bank of India has issued guidelines on Know Your Customer (KYC) norms / Anti-Money Laundering (AML) Standards/Combating of Financing of Terrorism (CFT) vide, inter alia, circulars RPCD.AML.BC.No.80/07.40.00/ 2004-05 dated February 18, 2005 and RPCD.CO.RF.AML.BC.No.51/07.40.00/2007-08 dated February 28, 2008.

2. It has been brought to our notice that “Money mules” can be used to launder the proceeds of fraud schemes (e.g., phishing and identity theft) by criminals who gain illegal access to deposit accounts by recruiting third parties to act as “money mules.” In some cases these third parties may be innocent while in others they may be having complicity with the criminals.

3. In a money mule transaction, an individual with a bank account is recruited to receive cheque deposits or wire transfers and then transfer these funds to accounts held on behalf of another person or to other individuals, minus a certain commission payment. Money mules may be recruited by a variety of methods, including spam e-mails, advertisements on genuine recruitment web sites, social networking sites, instant messaging and advertisements in newspapers. When caught, these money mules often have their bank accounts suspended, causing inconvenience and potential financial loss, apart from facing likely legal action for being part of a fraud. Many a times the address and contact details of such mules are found to be fake or not up to date, making it difficult for enforcement agencies to locate the account holder.

4. The operations of such mule accounts can be minimised if banks follow the guidelines contained in various RBI Circulars on Know Your Customer (KYC) norms/Anti-Money Laundering (AML) Standards/ Combating of Financing of Terrorism (CFT)/ Obligation of banks under PMLA, 2002. State and central Co-operative Banks are, therefore, advised to strictly adhere to the guidelines on KYC/AML/CFT issued from time to time and to those relating to periodical updation of customer identification data after the account is opened and also to monitoring of transactions in order to protect themselves and their customers from misuse by such fraudsters.

Yours faithfully,

(B.P.Vijayendra)
Chief General Manager


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