Hyderabad Police Pushes RBI for Joint Task Force to Tackle Mule Account Networks

Hyderabad Police has called for sweeping reforms in India’s banking oversight system, urging the Reserve Bank of India to spearhead a coordinated crackdown on mule bank accounts that have emerged as a critical enabler of cyber financial crimes. In a formal communication to RBI Governor Sanjay Malhotra, Police Commissioner V C Sajjanar proposed the formation of a Joint Working Group comprising regulators, banks, and law enforcement agencies to address the growing threat.

The proposal follows a series of high-impact investigations under Operation Octopus , which exposed systemic weaknesses in banking processes particularly in Know Your Customer (KYC) verification at the branch level. According to officials, mule accounts often opened using unsuspecting individuals’ credentials or fabricated documents have become the backbone of organized cyber fraud networks, enabling rapid laundering and layering of illicit funds.

The scale of the problem became evident during Operation Octopus 2.0 , where Hyderabad Police dismantled a pan-India cybercrime network spanning multiple states. The operation resulted in the arrest of 52 individuals, including 32 bank officials, 15 mule account holders, and five intermediaries. Investigators found clear evidence of insider collusion , with certain bank employees allegedly facilitating fraudulent account openings in exchange for commissions.

In his letter, Sajjanar stressed the need for strict accountability mechanisms within banks, particularly at the branch level where most onboarding processes occur. He urged the RBI to mandate comprehensive audits of account-opening procedures and enforce tighter compliance with KYC norms. The commissioner also recommended that any bank employee found aiding cybercrime be reported to the regulator and considered for blacklisting , a move aimed at deterring internal complicity.

Highlighting the depth of the issue, the police cited a case in Nashik, Maharashtra, where a KYC verifier in a private bank allegedly misused a colleague’s credentials to create mule accounts. Such incidents, officials noted, point to structural vulnerabilities especially in private sector banking operations where lapses in supervision and verification can be exploited by organized crime syndicates.

Beyond regulatory tightening, the proposal underscores the need for technology-driven intervention . Sajjanar advocated the adoption of advanced systems capable of real-time transaction monitoring , behavioural analysis, and early detection of suspicious financial activity. Experts say such tools are crucial in countering modern cyber fraud, where stolen funds are rapidly moved across multiple accounts, digital wallets, and even international channels.

The police also flagged the rise of sophisticated scams such as “digital arrest” frauds , in which criminals impersonate law enforcement or government officials through video calls to extort money. These operations rely heavily on mule accounts to receive and disperse funds, making early detection and coordinated response essential.

Authorities have simultaneously issued a public advisory, warning citizens against fraudulent online investment schemes and the illegal practice of renting out bank accounts for commissions. Officials emphasized that account holders can face serious legal consequences for any criminal activity conducted through their accounts, regardless of intent.

The push from Hyderabad reflects a broader national concern: cyber fraud in India is no longer limited to isolated incidents but has evolved into a highly organized, multi-layered ecosystem involving insiders, technology, and cross-border networks. Analysts believe that without stronger coordination between regulators, banks, and enforcement agencies, mule accounts will continue to serve as the weakest link in the country’s financial security framework.