The Kerala High Court has ruled that mule accounts have become the backbone of organised cyber crime networks, declaring cyber-enabled financial fraud has evolved into a structured form of organised crime rather than isolated wrongdoing. The observation came as the Court dismissed a 21-year-old woman’s plea to unfreeze her bank account and directed police to register an FIR against her under Section 111 of the Bharatiya Nyaya Sanhita, the provision governing organised crime in India’s new criminal code.
A Frozen Account and an Unexplained ₹3.5 Lakh
The case, heard by a single bench of Justice M.A. Abdul Hakhim, arose after the petitioner sought permission to operate a bank account frozen at the request of Madurai Police, who suspected ₹3.5 lakh credited to it was linked to cyber financial fraud. The petitioner claimed the funds stemmed from legitimate stock market and USDT cryptocurrency trading conducted through the Binance platform, but was unable to produce documentary evidence establishing the actual source of the money, nor could she demonstrate any regular employment or identifiable income to support the claim.
Faced with the gap between her explanation and the evidence on record, the Court declined the request to withdraw the petition once it became apparent the case was unlikely to succeed, noting a growing tendency among such petitioners to abandon proceedings only after realising the odds had turned against them.
Why the Court Reached for the Organised Crime Provision
The Court’s reasoning rested on a broader diagnosis of how cyber fraud proceeds move through the banking system. It observed that stolen funds are routinely split into smaller amounts and layered across multiple accounts to obscure their origin, with account holders frequently paid a commission for allowing their accounts to be used this way. Young adults who have recently attained majority, the Court noted, are increasingly opening accounts that are then allowed to function as mule accounts, drawn in by the promise of easy money, whether knowingly or otherwise.
Invoking Section 111 in an individual mule-account case is notable given how the provision has generally been interpreted since the Bharatiya Nyaya Sanhita came into force in July 2024. Kerala High Court precedent in the 2024 Muhammad Rasheed ruling had held that establishing organised crime under Section 111 typically requires evidence of continuing unlawful activity, generally read as more than one chargesheet filed against a syndicate within the preceding decade, rather than a single instance of suspicious fund movement. The provision’s inclusion of “economic offence” and cyber-crime within its definition, however, gives courts considerable latitude in applying it to financial fraud networks operating at scale, and legal commentators have separately noted that the section’s broad language risks pulling conventional financial misconduct into a framework designed for entrenched criminal syndicates, carrying markedly harsher minimum sentences and non-bailable conditions.
A Judicial System Increasingly Wary of Unfreezing Petitions
The Court flagged a related concern with wider procedural implications: petitions seeking to unfreeze suspicious accounts have risen sharply in recent years, and it suspects some are filed by cybercrime suspects or their associates specifically to keep mule accounts operational. More troublingly, the Court noted instances where such petitions appeared to have been filed without account holders’ knowledge, or relied on fabricated vakalatnamas, petitions and affidavits, and has sought explanations from the lawyers involved, with further action to be considered separately.
This judicial caution echoes a broader institutional shift. A separate Kerala High Court ruling earlier this year referenced a Standard Operating Procedure issued by the Indian Cyber Crime Coordination Centre governing how banks and police must handle suspected mule accounts, tying such freezes to specific provisions under the Bharatiya Nagarik Suraksha Sanhita and the Prevention of Money Laundering Act, suggesting courts are increasingly treating mule account cases as procedurally distinct from ordinary banking disputes.
The Future Crime Research Foundation has described mule accounts as one of the most critical links in cyber-enabled financial crime, cautioning that individuals, particularly young adults, who allow their accounts to be used by others for financial transfers can themselves become subjects of investigation, regardless of whether they personally profited or claim ignorance of the underlying fraud.
