RBI warns NBFCs of 'money mules' using funds for money laundering

The Reserve Bank of India (RBI) has warned non-banking finance companies (NBFCs) of fraudsters or their agents who may use fund schemes to launder the proceeds of fraud (raised through phishing and identity theft) by criminals who gain illegal access to deposit accounts by recruiting third parties to act as "money mules."

RBI has asked NBFCs to strictly follow guidelines on `Know Your Customer' (KYC) in order to prevent their schemes being used, intentionally or unintentionally, by criminal elements for money laundering or terrorist financing activities.

"In some cases these third parties may be innocent while in others they may be having complicity with the criminals," RBI noted.

In a `money mule' transaction, RBI said, an individual with a deposit account in a bank or NBFC 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, after payment of a certain commission.

`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 deposit and loan 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, RBI noted.