The Reserve Bank of India (RBI) has proposed a uniform procedure for banks, including Urban Cooperative Banks (UCBs), to deal with suspected money mule accounts and transactions linked to cyber-enabled financial fraud, including temporary debit holds on suspected amounts or accounts.
The proposal is part of the Draft Reserve Bank of India (Know Your Customer) Amendment Directions, 2026, formulated in compliance with the Supreme Court’s August 4, 2026 order directing the RBI to adopt and circulate a Standard Operating Procedure (SOP) for dealing with money mule activity and cyber-enabled financial fraud. The proposed SOP covers commercial banks and UCBs.
Under the proposed framework, when a UCB identifies a suspected money mule transaction or account through its transaction-monitoring system or internal policy, it would have to immediately place a temporary debit hold on the suspected transaction or, where the entire account is suspected, on the account itself.
The account holder would also have to be informed of the hold, the reasons for it, the removal process and the concerned officer’s contact details.
The draft defines a “Suspected Money Mule Transaction” as a transaction of ?1,000 or above flagged by the bank’s transaction-monitoring systems, including AI/ML-based tools, based on indicators such as being unusual or disproportionate to the customer’s declared profile or being linked to an account already reported as a money mule or fraudulent.
The account holder would get 20 days from the date of the temporary debit hold to submit an explanation or justification regarding the genuineness of the transaction or account.
The bank would then examine the explanation or conduct due diligence where no explanation is received. If satisfied, it would remove the hold; otherwise, it could continue the hold and report the matter to the jurisdictional police authority through NCRP-CFCFRMS, while notifying the account holder.
The proposed SOP provides for a maximum temporary debit-hold period of 60 days, in the absence of a contrary instruction from a Law Enforcement Agency or Competent Authority.
The RBI has invited comments on the draft, while the proposed directions are to come into effect from April 1, 2027, or on an earlier date if a bank chooses to implement the SOP sooner.
