> How is it that people were able to create so many mule accounts in the first place? What sort of KYC was going on?

They pay a low-income/no-income person a small fee (possibly monthly) to let them borrow their account. Sadly, people who would fall into this are not hard to find in Thailand.

> What sort of KYC was going on?

There are accounts that are grandfathered in and don’t require KYC but have been able to access online banking, etc. Mine is such, and my bank (BAY) is discontinuing that particular loophole at the end of this month. (I'm in Thailand right now to do this KYC, despite having not come back here for the last 6 years.)