Third parties can be used to launder the proceeds of fraud schemes by criminals who gain illegal access to deposit accounts by recruiting them as 'money mules'
Raising concerns that Jan Dhan accounts can be misused by 'money mules', RBI on Monday warned they are "very vulnerable" to frauds and asked banks to be on guard against such activities.
Reserve Bank deputy governor S S Mundra said banks should have a proper mechanism to monitor transactions in these accounts.
"The newly opened accounts under the PMJDY (Pradhan Mantri Jan Dhan Yojana) could be very vulnerable to fraud practises. Banks need to clearly guard against misuse of these accounts from money muling," Mundra said at an event on Monday.
He said third parties can be used to launder the proceeds of fraud schemes (such as phishing and identity theft) by criminals who gain illegal access to deposit accounts by recruiting them as 'money mules'.
Mundra highlighted a recent case where an idle account was used for receiving and transferring large funds without the knowledge of the accounts holder.
"It was an account of a daily labourer in Punjab and the account was opened as a basic one where there is limitation on number of transactions. This amount of transaction was of Rs 1 crore," he said.
The case came to light when the income tax authority served the notice to the account holder.
"This episode highlights the failure of the banks system and processes for monitoring of newly opened accounts," he said.
"What we are observing of late is that while the standard and the vigour of Know your customer (KYC) has become quite good at the time of opening of the account, but the same is not observed in the continuous surveillance or continuous watch over the transactions in these accounts," he said.
The deputy governor said at present though the banks have some alerts and exception transaction mechanism, it is mostly primitive and generally in effective.
Banks should have robust system to monitor such accounts and the transactions being made therein for taking proactive actions which entails a better customer protection, he said.
Mundra warned if banks fail to take proactive measures to stop such transactions, it could face some action from RBI as well as other enforcement agencies.
"Failure to guard against misuse of customer accounts, might result in banks incurring supervisory sanctions and enforcement action from the RBI. It can have the money laundering angles and there could be action from the various enforcement agencies as well," he added.