Hyderabad Police Push RBI for Action on Mule Accounts Fueling Cyber Fraud Epidemic

India's financial crime fighters are calling for a fundamental shift in how banks combat the sophisticated networks of "mule accounts" that serve as the lifeblood of cyber fraud operations. During a high-level meeting with Reserve Bank of India leadership in Hyderabad on December 19, 2025, Police Commissioner V.C. Sajjanar warned that these illicit banking channels are allowing criminal enterprises to move billions of rupees through India's financial system with impunity.

The urgent appeal comes as cyber fraud losses across India continue to escalate, with law enforcement agencies struggling to keep pace with increasingly sophisticated criminal operations that exploit gaps in banking oversight and cross-border payment systems.

Background and Context

Mule accounts have become the critical infrastructure enabling digital fraud networks to thrive across India. According to RBI's annual fraud report, financial fraud cases increased by 74% between 2022 and 2024, with a significant portion facilitated through compromised or deliberately opened fraudulent accounts. The problem has intensified as India's digital payment ecosystem expands, with Unified Payments Interface (UPI) transactions exceeding 11 billion monthly volumes in 2024.

Previous investigations by Indian authorities have revealed organized criminal operations specifically targeting vulnerable populations—particularly students and low-income workers—to open bank accounts for nominal commissions. These accounts then serve as temporary holding facilities for funds siphoned from victims of phishing scams, investment fraud, and other digital deception schemes.

Key Figures and Entities

Commissioner V.C. Sajjanar, who has gained recognition for his aggressive stance against cybercrime in Hyderabad, led the delegation that included Additional Commissioner of Police (Crimes) M. Srinivasulu, DCP (Central Crime Station) Shweta, and DCP (Cyber Crimes) Aravind Babu. The police team presented evidence to RBI Governor Shaktikanta Das and Deputy Governor M. Rajeshwar Rao during their visit to the central bank's Hyderabad regional office.

According to court records reviewed by investigators, criminal networks typically pay commissions between ₹2,000 and ₹5,000 to recruit account holders, who are often unaware they're participating in money laundering schemes. These intermediaries then provide their banking credentials to fraudsters, who use the accounts to rapidly transfer stolen funds before banks or law enforcement can intervene.

Legal and Financial Mechanisms

The current regulatory framework relies heavily on KYC (Know Your Customer) norms, but enforcement remains inconsistent across India's banking sector. Police officials argue that existing due diligence procedures fail to detect patterns indicative of mule account activity, particularly when accounts are opened legitimately but later compromised or deliberately misused.

Sajjanar proposed implementing a sophisticated "mule hunter tool" that would use artificial intelligence and machine learning to analyze transaction patterns across banking networks, identifying suspicious account behaviors that warrant investigation. The system would integrate with existing Financial Intelligence Unit-India databases to cross-reference accounts against known criminal networks and suspicious activity reports.

The police commissioner also emphasized the need for standardized banking procedures that would require all account statements to include complete transaction metadata, including device information, IP addresses, and geographical location data—elements that are currently inconsistently recorded across different banking platforms.

International Implications and Policy Response

The proliferation of mule accounts in India has international implications, as these channels are frequently used to move proceeds from global cybercrime operations, including ransomware attacks and business email compromise schemes targeting international corporations. The Financial Action Task Force (FATF) has repeatedly highlighted India's need to strengthen its mechanisms for detecting and disrupting financial flows associated with cyber-enabled crimes.

The RBI Governor acknowledged these concerns during the meeting, noting that India's central bank had already implemented several measures to enhance payment system security, including mandatory two-factor authentication for online transactions and real-time fraud monitoring systems. However, Governor Das indicated that the specific recommendations regarding mule account detection would require further technical evaluation and potential regulatory amendments.

International experts suggest that India's approach could serve as a model for other developing economies grappling with similar challenges, particularly those that have recently experienced rapid digital payment adoption. The proposed centralized database and AI-driven detection tools represent an evolution from traditional, siloed banking security measures toward a more integrated, intelligence-led approach to financial crime prevention.

Sources

This report draws on official statements from the Reserve Bank of India, interviews with Hyderabad Police Commissioner V.C. Sajjanar, and court records from cyber fraud investigations in Telangana. Additional context was provided by the Financial Intelligence Unit-India annual report and FATF evaluations of India's anti-money laundering framework.