Banks in India are facing a growing threat from mule accounts, as a report by BioCatch revealed that third-party account takeover fraud represents a bigger threat than social engineering scams. Mule accounts, used to launder stolen money, are becoming increasingly common, with each device found to participate in mule activity logging into an average of 35 accounts.
The report found that while 86 per cent of the first session of documented mule account activity in India came from within the country, after a month, that number fell to just 20 per cent and 16 per cent of those sessions used a virtual private network (VPN). BioCatch customers saw the most mule activity in Bhubaneswar, followed by Lucknow, Navi Mumbai, and various other cities across the country.
The report also highlighted that at one partner bank in the country, BioCatch found that nine out of every 10 mule accounts went undetected. According to Tom Peacock, BioCatch’s director of global fraud intelligence, the prevalence of mule accounts potentially represents the most under-the-radar trend in the entire fraud space.
The findings came on the heels of a recommendation by the Reserve Bank of India (RBI) that financial institutions in the country abandon text-based, one-time passcodes as a method of secure authentication. Counter-fraud expert Charanjeet S. Bhatia emphasized that the existing OTP-based authentication doesn’t protect customers against new-age frauds, including customer-initiated fraudulent transactions.
Bhatia also added that with the right technology and implementations, banks can do a lot more than what they are currently doing to protect customers. The report has sounded a warning bell for the banking sector in India and highlights the urgent need for bolstering fraud defences to combat the increasing threat of mule accounts and third-party account takeover fraud.
