India’s Cybersecurity Overhaul: Closing Mule Accounts and Enhancing Vigilance

The Indian Finance Ministry has recently proposed several measures aimed at tightening cyber security norms and combating online financial fraud. This initiative follows a significant incident involving erroneous money transfers at UCO Bank, amounting to Rs 820 crore. The meeting to discuss these issues was chaired by Financial Services Secretary Vivek Joshi.

One of the key suggestions from the meeting was the closure of ‘mule’ bank accounts, which are often used by fraudsters to deposit money obtained through online scams. These accounts are typically bought from their original users by the fraudsters. For accounts that have been inactive for a while but suddenly show activity with significant money transfers, Joshi emphasized the need for restrictions on withdrawals. He cited instances where an account with a balance of Rs 50 suddenly receives Rs 50,000, suggesting that while deposits are not problematic, withdrawals should be restricted in such cases​​.

The meeting also highlighted the importance of increasing information sharing between various government departments to combat financial cyber fraud effectively. A common platform, the ‘Citizen Financial Cyber Fraud Reporting and Management System (CFCFRMS)’, was suggested to facilitate this. The platform currently includes 259 financial intermediaries, and there is a plan to onboard all financial institutions, including Non-Banking Financial Companies (NBFCs) and major cooperative banks. Additionally, the Telecom Secretary reported that approximately 70 lakh mobile numbers involved in suspicious activities have been blocked, and Rs 900 crore has been prevented from fraud since 2021 through the Indian Cybercrime Coordination Centre (I4C)​​​​.

The meeting also involved discussions on various other measures, such as improving response times of banks to fraud alerts, enhancing due diligence, and specific recommendations from the IT Ministry, including detailed Know Your Customer (KYC) norms for merchants. Notably, the meeting showcased a collaborative effort involving representatives from various government departments, regulatory bodies, and financial institutions to strengthen India’s defenses against digital payment frauds​​.

The Department of Financial Services (DFS) convened a meeting with banks, payment companies, and other entities to discuss online fraud in the financial sector. Attendees included major banks, payment banks, fintech companies, and various government departments such as the Ministry of Electronics and Information Technology (MeitY), Department of Telecom (DoT), Reserve Bank of India (RBI), and others. The meeting focused on facilitating coordination between police and financial entities for real-time tracking and blocking of defrauded money, developing a strategy to tackle mule accounts, appointment of regional nodal officers by financial institutions, maintaining a central registry for merchant onboarding and KYC standardization, whitelisting of digital lending apps, and more​​.

These steps represent a comprehensive approach to strengthening the cybersecurity framework and financial fraud prevention measures in India, reflecting the government’s commitment to protecting the financial interests of its citizens in the digital age.



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