India eyes AI-Driven Detection of Mule Accounts and Cyber Financial Frauds

The memorandum of understanding (MoU) between the Indian Cyber Crime Coordination Centre (I4C), Ministry of Home Affairs (MHA), and the Reserve Bank Innovation Hub (RBIH) is set to provide a fresh impetus to India’s efforts to crackdown on cybercriminals, especially committing financial crimes. 

One of the focus areas is to curtail mule accounts across the banking and digital payments ecosystem. As per the understanding, three bodies will work towards cooperation in the areas of fraud-risk intelligence sharing, analytical support, and operational coordination for strengthening proactive fraud detection and prevention mechanisms.

“Modi govt is tirelessly working for cyber secure Bharat. Mule accounts are big hurdles in curbing cyber crimes. Today, the I4C under MHA signed an MoU with Reserve Bank Innovation Hub (RBIH) unleashing the power of Artificial Intelligence to combat cyber fraud. The move will swiftly detect and cull hidden mule accounts by feeding the data from the I4C’s Suspect Registry to the AI-driven fraud detection system and serve the citizens as their next gen shield against cyber crime,” Union Home Minister and Minister of Cooperation Amit Shah said in a post. 

The announcement comes months after the RBI announced its Financial Fraud Risk Indicator (FRI) helped prevent losses worth INR 660 crore cyber fraud losses in just six months of rollout in May 2025.

The FRI is essentially a live risk thermometer for money movement. Every transaction leaves signals: who initiated it, from where, at what time, on which device, and how it compares to past behaviour. FRI continuously reads these signals, scores the risk, and flags what looks abnormal before damage is done.

ALSO READ: India’s Financial Fraud Risk Indicator Helps Prevent INR 660 Crore Cyber Fraud Losses in Just 6 Months

Back in 2024, the RBIH had launched an artificial intelligence (AI) model named ‘MuleHunter.ai’ which essentially aims at cracking down on mule accounts. The AI model aims to assist banks in identifying fake bank accounts and monitoring their operations. It is expected to significantly reduce fraud cases.

It’s worth noting even as digital payments have become easier through payment methods such as UPI, financial crimes are on the rise. India suffered a loss of INR 22,845.73 crore to cyber criminals in 2024, a whopping 206% surge from Rs 7,465.18 crore reported in 2023, according to the MHA. 

One up

There have been calls to make the financial structure more robust and sturdy to deal with the shift in sophistication of scams. While older versions like poorly worded phishing emails still exist, the new wave of threats are automated and personalised, making it difficult for everyday people to spot it easily. 

Just recently, Finance Minister Nirmala Sitharaman held meetings with several top bankers and financial sector executives to discuss the risks from AI models like Claude Mythos.

The conversation, according to reports, revolved around cybersecurity preparedness for banks and critical financial infrastructure against new-age threats. Reports add that the Reserve Bank of India and the Indian Computer Emergency Response Team (CERT-In) also participated in the meeting.

According to an IBM report, the global average cost of a data breach is USD 4.4 million, which is down by 9% from the previous year as systems become better at identification and containment. Interestingly, 97% of organizations reported an AI-related security incident and lacked proper AI access controls. Moreover, 63% of organizations did not have AI governance policies to manage AI or contain the proliferation of shadow AI.

ALSO READ: Anthropic Claude Mythos: The Dawn of the Autonomous Cybersecurity Era & Risks To SMEs

Ritwik Batabyal, CTO and Innovation Officer at Mastek, notes the changing nature of these digital crimes. “Cybercriminals are becoming far more sophisticated as AI lowers both the cost and technical skill required to run scams,” Batabyal said. “Modern phishing attacks are now highly personalized, using social media data, leaked information, shopping history, and employment details to create convincing messages targeted at individual victims.”

Criminals are able to succeed in deceiving users through deepfakes. Batabyal notes: “Deepfake technology has made these scams even more dangerous by enabling criminals to clone voices and faces using just a few seconds of audio or video. Cybercrime networks are also becoming more organized. Fraud gangs now use ‘mule-as-a-service’ networks on Telegram to rent bank accounts for laundering stolen funds.”

Shield 

The partnership between I4C and RBIH could help pave the way for a long-term fraud defence ecosystem. 

Santosh Kumar, a cybersecurity researcher, tells Entrepreneur India this could very well further improve digital trust. “In the future, the government can even introduce something similar to a CIBIL score for fraud risk, where UPI IDs, phone numbers, bank accounts, or devices get flagged based on cybercrime complaints, scam reports, and AI-based analysis of national fraud databases,” Kumar suggests. “This can help identify repeat offenders and suspicious networks early. Like we have CIBIL for credit cards.”

Kumar emphasizes, “The partnership between the Indian Cyber Crime Coordination Centre and Reserve Bank Innovation Hub has potential because it brings together law enforcement, banking, fintech, and technology under one ecosystem. If they build a real-time intelligence sharing system, India can move from only reacting to fraud after it happens to preventing scams before people lose money.”

Investor Climate

A secure digital financial structure also helps strengthen the investor climate. Jeet Mukesh Chandan, Group Managing Director at BizDateUp, views the collaboration as a vital move for the startup and fintech sectors. 

“The collaboration between the Indian Cyber Crime Coordination Centre (I4C) and the Reserve Bank Innovation Hub (RBIH) is a much-needed and forward-looking step at a time when India’s digital payments ecosystem is expanding at an unprecedented pace,” Chandan states.

While AI has made scams “faster, more scalable and far more convincing than before,” the institutional response would help determine market stability, according to the founder. 

“From our perspective as an investor ecosystem player, this partnership… could play a much larger role in strengthening confidence across India’s digital economy. Investors today are not only evaluating growth potential, they are also closely assessing how secure, resilient and trustworthy digital platforms are, especially in sectors like fintech and digital banking where consumer trust is critical,” he said.

“Stronger cybersecurity infrastructure will become equally important for attracting long-term capital and sustaining innovation,” Chandan adds.