RBI Draft Rules on Suspicious Transactions: If suspicious transaction is seen in the bank account, your money can be stopped for 60 days

The Reserve Bank of India (RBI) has issued a new draft of stringent regulatory guidelines to dismantle the network of online financial frauds, illegal gaming apps, fake investment syndicates and money mule accounts that are rapidly growing across the country. In this draft circular, prepared with the aim of making the country’s banking system secure and protecting the hard-earned money of common citizens from falling into the trap of cyber criminals, it has been proposed to give extraordinary powers to the banks.

According to the new proposed rules, if any suspicious transaction or sudden flow of huge amount of money completely different from the normal pattern is found in any savings account, current account or wallet, then banks will be able to temporarily hold (hold/freeze) the concerned funds for a maximum of 60 days. This proposed arrangement is being considered very important for all the scheduled commercial banks, regional rural banks, cooperative banks and payment banks across the country including Delhi, Mumbai, Lucknow, Patna, Jaipur, Bengaluru or Kolkata.

According to the RBI draft circular, if an adverse alert is received in respect of an account from a bank’s internal Fraud Risk Management System or from central investigative agencies, Financial Intelligence Unit (FIU-IND) or National Cyber ​​Crime Reporting Portal (NCRP), the bank will have to take prompt action.

The key points of the proposed rules are as follows:

• Temporary Lien: Instead of sealing the entire account, banks will be able to freeze only the suspicious or disputed amount, so that the customer’s remaining valid balance and daily transactions are not affected.

• 60 day time limit: This restriction can be imposed on doubtful amounts for a maximum period of 60 days. During this period, a detailed internal or forensic investigation will be conducted into the past transactions of the account and the actual source of funds.

• Show cause notice and opportunity: Immediately after placing the funds on hold, the Bank will have to give official notice to the account holder through SMS, registered email or written letter and he will be asked to submit valid justification and documentary proof of the said transaction.

RBI has directed banks to strengthen real-time transaction monitoring systems through Artificial Intelligence (AI) and Machine Learning (ML) tools. Any account may come under scrutiny in the following circumstances:

• Sudden Heavy Transactions: An account that had a normal flow of only ₹10,000 to ₹20,000 a month suddenly had lakhs of rupees being credited in a single day and transferred to multiple smaller accounts instantly.

• Sudden activation of dormant account: Sudden deposit of large amount without any prior notice in an account which has been inoperative/dormant for a long time.

• Login from multiple different IPs or geographic regions: Money can be transferred through internet banking or UPI from different states or through dubious VPN networks in a matter of minutes.

• P2P Crypto or Gaming Transactions: Funds coming from suspicious accounts linked to unauthorized peer-to-peer (P2P) platforms, betting or online lotteries.

While on one hand this step of RBI will break the back of cyber criminals and Mule account holders, on the other hand there is a worry in the minds of common and legitimate customers whether their money can also get stuck in case of any emergency. Clarifying its position on this, the Central Bank has said that there is no need for common citizens doing legitimate transactions to panic:

• Entire account will not be closed: Earlier many times the entire bank ID used to be frozen, but in the new rules there is a provision for proportionate action. If you have ₹1 lakh in your account and there is a dispute on an entry of only ₹15,000, the bank will hold only ₹15,000, the remaining ₹85,000 can be used by the customer as usual.

• Quick solution option: If the account holder submits a valid challan, salary slip, property sale agreement or proof of gift by a relative within 60 days, the bank will be required to remove the hold within 48 hours.

• Grievance Redressal System: If a customer feels that the bank has withheld his funds on malicious or false grounds, he will be able to file a complaint with the bank’s Internal Ombudsman and then directly with the RBI Banking Ombudsman with a claim for damages.

Through this draft circular, RBI has warned banks that they should not just become a medium for transferring money from one place to another like a post office, but should keep a 24×7 monitoring of their digital gateways. If a bank allows withdrawal of funds from a suspicious account when there was already a system alert on it, a punitive penalty will be imposed on that bank under financial negligence. Suggestions and objections have been sought on this draft from all stakeholders, industry experts and general public, after which final guidelines will be issued and it will be implemented compulsorily in the banking network of the entire country.