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Identifying money mules is difficult by design

Money muling is an ongoing money laundering headache in the fight against financial crime. We explain how intuitions can identify money mules in this blog.

Julian Dixon
August 4, 2020

Money muling is an ongoing money laundering headache in the fight against financial crime. The appeal to both organised criminals and blissfully ignorant victims is mutual, as victims appear to earn cash easily, while criminals move their illegal proceeds effortlessly.

The Covid-19 crisis has served to only further increase an already significant upward trend in the use of mules to launder dirty cash.  

Earlier this year, the FBI published a press release to warn the American public about the increased dangers of being targeted as a mule during this time, stating that money mules are often found through online job schemes or dating websites and apps.

Before the pandemic hit, research showed a 73% two-year rise in the number of 14-18 year old money mule cases. Older people with no criminal history were also targeted, with a sharp rise (circa 26%) in those over the age of 40, in the nine months up to September 2019.  

Now, in the wake of the pandemic we subsequently see a further widening of the money mule pool and increasing numbers of criminals seeking to exploit the crisis. With millions of people out of work and under financial pressure, the appeal of quick cash for little effort has never been greater.

“The tragic thing about a lot of money mules is they’re normal, law-abiding people, who have been tricked into doing something illegal. That’s why it’s important for the public to recognize the warning signs.” Section Chief Steven Merrill of the FBI’s Financial Crimes Section. 

How do money mule scams take place?  

The most common type of money mule scam is where victims allow an unknown individual to transfer money into their personal bank account; and then subsequently transfer it into another account, while keeping some of the cash as payment for their efforts.  

This may be a simple online banking transaction, or be more complex, involving withdrawing funds and even remitting the criminal money via Bitcoin ATMs.

Mules are often taken in by advertisements and job postings on social media or even via dating websites, lured by the promise of romance.

There are also other types of mule scams:

The stolen identity scam

Criminals use stolen customer information, and even blend this with fake data, to open a new bank account. This gives them full, untraceable account control. The fraudster is freely able to transfer money through the account and ‘wash’ it in doing so.

The fake loan company scam

Criminals set up illegitimate or fake companies offering loans. They then send out a larger loan than was required to successful applicants, putting the overpayment down to an administrative error. Customers are then asked to return the excess sum, unknowingly paying it into a different account. By following the company’s instructions, the customer, or mule has unknowingly cleaned ill-gotten gains.  

What are the challenges in detecting money mules?

Criminals are attracted to money muling because it can be very challenging for banks to detect these transactions.  

Many money mules have no history of crime and are therefore classified as low-risk and in typical financial institutions, low risk accounts are subject to less monitoring than medium- or high-risk customers, which increases the chance of fraudulent transactions going unnoticed.  

Find out how to build a holistic view of your clients in our eBook
Client Activity Review: The Missing Link Between AML and KYC.

How can AML technology be used to help detect mules

The challenge in detecting these behaviours is that all too often low-risk accounts are not reviewed on an ongoing basis – precisely because they are low risk. And this is how the criminal by-passes scrutiny.

However, with technology that is purpose-built to review all accounts including low-risk accounts on an ongoing basis, it is possible to seriously hamper criminal money mule efforts.

This process starts with understanding both typical behaviours of the criminal and how money mule scams work. The job is then to ensure client accounts are reviewed regularly, crucially comparing expected behaviours to actual behaviours. Although technology can’t stop money muling from happening, it can alert the bank that it has happened.

Advanced AML technology can enable banks and financial institutions to detect suspicious transactions more efficiently, by reducing the number of false positives. And by leveraging machine learning it’s also possible to start making predictions about what could be potentially suspicious behaviour.  

What are the implications for mules

When a mule account has been detected, the consequences are serious. Those who do agree to help out in this way are usually unaware that they are laundering money or that it is a criminal offence, and sometimes a serious one. The bank account can be frozen for six years and can even result in a prison sentence of up to 14 years.

Find out how we can help identify suspicious activity on low risk accounts

For information, advice or to book a demo on any Napier product, please get in touch with our expert team.

Julian has more than 20 years of financial services experience gained at major investment banks including Deutsche Bank, JP Morgan and Commerzbank. His roles have ranged from front-office sales leadership to private equity. Julian has extensive knowledge of financial services processes and technology.
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