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Mule accounts: How they impact digital banking initiatives

Worldwide, it is estimated that between $800 billion and $2 trillion is laundered annually. A mule account is often in the path of every dollar laundered. Therefore, any initiative to reduce laundering has a huge focus on identifying and blocking mule accounts.

Mule accounts are accounts used by criminals to launder money or move illicit funds. The criminals typically use these accounts to receive and transfer funds, which can be difficult to trace back to the original source of funds and hold them accountable. Common methods include using online payment services, and digital currencies to transfer funds in a short span of time from receipt. Current accounts, savings accounts, nodal accounts, and even credit card accounts have been used as mule accounts and therefore are a significant concern to banks.

As banks increase their focus on digital banking initiatives including digital onboarding, it has become easier for launderers to obtain and use such accounts. The growth of digital banks and neo-banks has meant that we need to act on preventing money laundering in real time to ensure we prevent the movement of funds.

Leading global banks including Credit Suisse, Santander Bank, and HSBC were fined recently for money laundering by Global regulators. In 2022, the FIU-India (Financial Intelligence Unit) fined multiple Indian banks for breaching prevention of money laundering rules and for the failure of the bank to implement a system to detect suspicious transactions and submit suspicious transaction reports (STRs). In 2022 RBI had penalized many banks for noncompliance. Neo banks and new-age digital banks have also faced their share of challenges. Monza, a UK-based neo bank was investigated by the FCA for potential breaches of AML rules creating a negative impact on the bank’s financial position.

Drona Pay can help mitigate the impact of money laundering through enhanced screening and transaction monitoring. Drona Pay can help implement enhanced customer due diligence at onboarding and on a defined frequency with integration to multiple leading national & international databases. Drona Pay offers a range of rules and ML models that help identify laundering typographies. The laundering typographies include real-time and batch-based modes of detection and reporting.

Our case management module provides flexible APIs to integrate with leading regulatory platforms for SAR & STR filing. Complying with regulations is not an easy task for even big banks. Following a traditional approach does not work in today's fast-paced digital world. Hence, Drona Pay brings forth real-time automated Machine Learning models to minimize money laundering and helps banks comply. Know More about Drona Pay.

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