.svg)
Money muling is an ongoing money laundering headache in the fight against financial crime. We explain how institutions can identify money mules in this blog.
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.
In this post, we explore all things money mule, looking at what a money mule is, the different types of scams and red flags to look out for.
What is a money mule?
A money mule is a person moving money that was originally obtained illegally, on behalf of another individual. Typically money mules are compensated for taking part and get a percentage of the portion they have muled.
The goal of money muling is to obscure the original funding source. Funds can be transferred in a variety of ways including:
- In person
- Digitally
- Through the mail
In a lot of cases, money mules don’t know they’re involved in money laundering:
“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 recognise the warning signs.”
Section Chief Steven Merrill of the FBI’s Financial Crimes Section.
How does money muling work?
Most money muling follows the below process in some way, whether the money mule is aware or not:
- Recruitment: The criminal looking to money launder identifies and employs a money mule. This could be through a social media ad, a fake dating profile or even a scam that makes the money mule unaware of what is taking place.
- Money transfer: The criminal deposits the funds to the money mule. The money mule is then instructed to move the money whether this be via withdrawal or wiring.
- Layering : Once the money is in their account, the money mules are instructed on where to move their funds. Layers of legitimacy are added to the funds until the source is hidden from the authorities. Some tactics include:
- Electronic transfers between countries
- Using shell companies
- Moving funds between several banks
- Moving funds between multiple accounts within an institution
- Compensation: the money mule is promised a share of the funds for transferring the money.
Common types of money muling
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.
Money mule red flags to watch out for
Money muling can be tricky to spot which is why AML software such as transaction monitoring, is essential. Below we have highlighted to the red flags that transaction monitoring software will look out for:
- Irregular transactions or deposits
- Unexplained large transactions or deposits
- Access to a bank account from various locations or while using a VPN
- Frequent international transfers — particularly if they are too high-risk money laundering countries
- Requests for rapid transactions or deposits
- Accounts that primarily receive and send funds rather than engaging in commercial activity
- Hesitancy to update KYC data
What are the challenges in detecting moneymules?
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.
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.
AML technology, such as advanced transaction screening and monitoring, 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 money 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.
