Cyber fraud an organised crime, young adults, lawyers being drawn in: Kerala High Court

The Kerala High Court has flagged the growing use of “mule accounts” in cyber frauds, warning that “young lawyers are increasingly being used to file petitions seeking to unfreeze such accounts”. Dismissing a 21-year-old woman’s plea to unfreeze one such bank account, the court ordered the registration of an FIR against her, observing that cyber fraud has become a form of organised crime.

Justice M A Abdul Hakhim observed that persons who have just crossed the age of majority have opened multiple accounts in different banks as money mules. “The growing menace of financial cyber fraud is jeopardising our society, especially the younger generation. Its impact is also reflected among young legal professionals…certain individuals, especially those from the younger generation, consider maintaining Mule Accounts to be an easy and effortless way to make money,” the July 10 order said.

Proceeds of financial cyber fraud are generally split into multiple smaller amounts and channelled through a series of bank accounts to render the funds untraceable and irrecoverable. Such bank accounts are called “mule accounts”. They facilitate illegal money trails, and the mule account holder gets a portion of the credited money as reward.

The court said financial cybercrimes have been increasing at an alarming rate on account of the advancement of technology. While digital transactions have made the lives of citizens easier, they have also made it easier for fraudsters to commit crimes.

The woman had moved the court after her Kerala Gramin Bank account had been frozen following requests by the cybercrime police in connection with suspected financial fraud. The bank submitted that the Madurai police had sought to restrict access to Rs 3.5 lakh which had been transferred to her account.

Justice M A Abdul Hakhim observed that persons who have just turned adults have opened multiple accounts in different banks as money mules.

The woman claimed she had been trading in the share market and dealing in USDT currency through the Binance app, and the amount credited to her account was a legitimate transaction. However, she pleaded that she did not know the source of the amount.

Young lawyers, fraud cases

The court observed that the sharp rise in financial cyber fraud has led to a surge in petitions before high courts seeking to unfreeze such accounts. It observed that many of these petitions were filed by those involved in cybercrime or their associates to keep “mule accounts” operational, sometimes even without the account holder’s knowledge.

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The court noted that such petitions were filed through junior lawyers using similar pleadings, following which the court allows the account to be operated by restricting access to the disputed amount. It said that young lawyers have found it a lucrative field on account of effortless practice and assured orders, although it clarified that there are many junior advocates conducting these types of cases of genuine account holders.

Praising young law graduates, the court said they are brilliant and capable, with their moot court experiences and legal internships, and they enter the profession with theoretical knowledge and practical skills. It added that the future of our legal system is in safe hands, provided these sharp minds are nurtured with the proper guidance.

The court sought an explanation from some lawyers who allegedly filed petitions without the knowledge of the account holders or by fabricating vakalats, petitions and affidavits. It observed that some of the lawyers’ submissions revealed a lack of elementary legal knowledge. The court said it is yet to decide on the action to be taken against such lawyers.

Plea dismissed, probe ordered

The court noted that the woman did not produce any document to prove that the amount credited was through a legitimate cryptocurrency transaction. It also observed that she had no job or source of income.

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When her counsel sought withdrawal of the petition and said she did not intent to operate the account further, the court refused, holding that it has become a common practice to seek withdrawal of a petition or allow it to be dismissed for default when it is found that there is no likelihood of it being allowed.

The court dismissed the petition but directed the station house officer (SGO), Tanur Police Station, to register an FIR against the petitioner under Section 111 (organised crime) of the Bharatiya Nyaya Sanhita, 2023, and investigate the matter. The judge said that it was for the police to investigate the matter and ascertain the involvement of any other persons acting with or through her.