Financial-inclusion infrastructure such as customer service points can become conduits for money laundering. Analyse, and suggest regulatory safeguards.

Customer service points (CSPs) and mini-ATM counters run by bank business correspondents (BCs) extend banking to villages that have no branch. The Enforcement Directorate (ED) recently ran searches under the PMLA, 2002 in Myanmar-linked drug cases. It found that drug cash had entered banks through mini-ATM/CSP counters in Churachandpur (Manipur). Here a tool built for financial inclusion became the entry point for laundered money [1].

How CSPs become laundering conduits

• Placement point: cash from drug sales in Manipur, Mizoram, Assam and Tripura was deposited through CSPs. It reached the same set of accounts in Champhai, Aizawl and Lawngtlai and was then settled with Myanmar suppliers through hawala [1].
• Design that favours ease: CSPs exist to make deposits easy, not to question them. Splitting cash into many small deposits makes each one look normal ("smurfing").
• Agent-level weakness: BC operators work on commission and get little AML training. KYC checks are done by the agent, not by bank staff [2].
• Border geography: these counters sit in remote districts along a porous frontier. Poppy area in Chin State, which borders Mizoram, rose 26% in 2025, so the drug money keeps growing [3].
• Weak tracking across agencies: the State police, NCB, ED and banks each see only part of the chain. Funds that have already crossed into Myanmar are beyond PMLA attachment.

Regulatory safeguards

• Watch account networks, not single deposits: banks should apply the risk-based approach in the RBI's KYC Master Direction [2]. They should flag accounts that receive many small cash deposits from distant CSPs.
• Mandatory STRs: suspicious transactions must be reported to FIU-IND whatever the amount. Bank penalties for failing to report should be enforced [4].
• Make agents accountable: require due diligence on BC operators, licensing, and deposit caps or frequency limits in sensitive border districts.
• Tighter rules at CSPs: biometric authentication for depositors, plus real-time analytics that flag unusual patterns.
• Joint investigations: build NDPS cases (Section 27A, financing of illicit traffic) and PMLA cases together, since the PMLA case depends on the predicate drug offence [5].
• Regional cooperation: exchange financial intelligence with neighbouring countries and adopt FATF-aligned hawala controls.

Financial inclusion and financial integrity can work together if CSPs carry risk-calibrated checks rather than blanket restrictions. Smart supervision of the BC network will protect the poor's access to banking while closing the gaps that narco-finance exploits. This advances SDG 8.10 (access to finance) and Article 47's mandate to curb harmful drugs.