A money mule is someone who transfers money on behalf of or at the direction of another person.
Criminals who obtain money illegally must conceal or launder the source of their funds. They look for people to transfer money for them. These individuals become money mules and are used to launder the proceeds of the criminal’s illegal activities or crimes (such as online scams, frauds, drug trafficking, etc). By doing so, the money mule generates layers of distance between victims and criminals.
Scammers commonly approach people online, but they can also call them directly. Whatever method is used, the goal is the same: to use consumers to move money so that law enforcement cannot easily track it. Whether or not it is being done intentionally, acting as a money mule is illegal and might even be funding serious crime, as well as making it difficult for the mule to access credit in the future.
Money mules make it challenging for law enforcement to accurately track criminals’ money trails.
Money mules are often reimbursed for their services in a variety of ways, including:
- Physical money (cash)
- Bank transfers (wires, Automated Clearing House or ACH, Electronic Funds Transfer or EFT)
- Prepaid cards
Or they may be providing financial assistance because they assume a trusting or romantic relationship with the person seeking assistance.
Types of money mules
Primarily 3 types of money mules have been identified. They are:
Individuals aren’t aware that they are a part of a larger criminal conspiracy.
- Solicited through an online romance scheme or job offer
- Requested to use their existing personal bank account or open a new account in their true name to receive money from someone they haven’t ever met in person.
- Motivated by faith in the reality of their romance or job position
Individuals who overlook obvious red flags or act willfully ignorant to the financial activity that they’re involved in
- Dormant accounts with multiple banks showing sudden high credits and instant debits.
- They might’ve done it unintentionally at first, but kept communicating and participating.
- Motivated by monetary gain or a refusal to admit their role.
Individuals are mindful of their roles and actively engage in them.
- Open multiple bank accounts to receive money from a variety of people.
- Advertise their services as a money mule, including the actions they provide and the prices they charge. This may also include a review and/or rating of the money mule’s speed and dependability by other criminal actors.
- Travel to different countries to open financial accounts or register businesses.
- Use funnel accounts to receive fraud proceeds from lower-level money mules.
- Recruit other money mules.
- Motivated by monetary gain or loyalty to a well-known criminal organization.
Some scams on how mule accounts are created
Millions of people are searching online in the hopes of finding love and companionship. However, seeking romantic bliss online can have a serious downside: cyberspace is rife with scammers eager to inflict harm on lonely hearts.
The con goes as follows: you create a dating profile and match with a promising potential mate. He/she claims to be from another corner of the country or to be away for work or military duty. However, he or she seems infatuated and inquisitive about you. They suggest moving your connection to a private channel e.g. email or a chat app.
Love is in the air
And romance scams are everywhere
You might feel yourself inching closer over a few weeks or months. You make plans to meet the individual, and then something comes up for your new romance. Then you get a last-minute request: an emergency (perhaps a business crisis) where your online companion asks you to transfer funds for them typically via prepaid debit cards or a wire transfer.
You might keep doing the transfer favors until you realise it’s a scam and pull away from them. Far too many people have been a part of this tragic romance that never ends in a happily ever after.
Scammers sometimes use a dodgy “make money from home” or “#easymoney” job listing to coax people to become a money mule. The job advert with no job description assures quick cash for little or no effort.
Hashtags that can put you in jail
The “employer” communicates via web-based email (such as Gmail, Yahoo, Hotmail, Outlook, etc.). They instruct the mule to open a bank account in their name or in the name of a fictitious company they create to receive and transfer funds. The mule’s job as an employee is to receive funds in their bank account and then transfer them via wire transfer, ACH, mail, or money service business (such as Western Union or MoneyGram).
Many people have also received unsolicited emails or other cues requesting them to open a bank account, cryptocurrency wallet, or business in their name. Gullible people are swayed to work as ‘money transfer agents’ to route illegal money. All of these transactions guarantee the mule a portion of the money transacted in exchange for the service provided by them.
The bank accounts of money mules are used to transfer money via phishing, a web scam that steals information such as account numbers and net-banking passwords. What is deeply worrying about the entire incident is that the account holder is frequently oblivious of the transfer of funds to their account. Therefore, they end up becoming the target of a police investigation without committing any crime intentionally.
Lure of money/financial illiteracy
People who are financially illiterate are more susceptible to scams that collect their personal information (e.g., bank account information, logins, and passwords). We’ve recently seen an increase in UPI-related scams that deceive victims via social media. Individuals who are reckless while disseminating their personal information may serve as a springboard for this multi-stage fraud, which includes layering and multi-level laundering. They might give in their credentials for a few hundreds of rupees and end up falling prey to the money mule chain. What they don’t realise is that allowing someone to open a KYC account in their name or providing a simple OTP might push them into legal hands.
For financial institutions (FI’s)
By routing the money via mule’s personal account, the criminals avoid raising red flags in the banking system. They easily launder illegally obtained funds while erasing any traces of their criminal history. Before the bank determines that the check or funds deposited into the accounts are fraudulent, the check or funds are withdrawn or transferred.
Regulators have set strict guidelines for FI’s to aid recognising money launderers and potential attempts at lundering. Money muling not only impedes FIs but also has serious economic consequences. Banks with lax preventative controls can jeopardize the financial stability of the country. An increasing number of money mule activities subvert public trust in the transparent operation of financial institutions. They harm the soundness of a country’s financial system and overall reputation.
Acting as a money mule is illegal and punishable, even if the individual is unaware they are committing a crime.
A mule can be prosecuted and imprisoned as part of a criminal money laundering conspiracy. Federal charges such as mail fraud, wire fraud, bank fraud, money laundering, and aggravated identity theft can be levied against them.
Aside from the legal consequences of acting as a money mule, they may be susceptible to identity theft. All of their personally identifiable information is prone to theft and misuse by the criminals for whom they work.
Working as a money mule can also impair a person’s credit and financial standing. It may make it difficult to open bank accounts or seek employment in the future. Furthermore, if they stop working as a money mule, criminals may threaten to harm them and their families.
How to stop mule accounts
Regulators, governments, and financial institutions should all raise awareness about money mule schemes, and each FI should implement preventative/remediation controls. Here are some ways to help detect potential mule account activity:
- There should be mechanisms in place to continuously monitor accounts and transactions. An alert system can be built to highlight whenever transactions of high monetary value take place. At the same time, transactions originating from risky countries or tax havens should be inspected further to flag potential laundering activity.
- In case fraudsters have access to dormant accounts opened in the past, a solution that takes historical activity into consideration can be used to track sudden instances of credits and debits from the account.
- Similarly, an unusually high number of small cash influxes to one account can be indicative of potential mule activity and should be probed accordingly.
- As part of an initiative accessible to the entire banking ecosystem, bureaus can institute and actively maintain central lists consisting of CASA accounts operated by customers so that customers can know if any fake accounts have been opened in their name. Simultaneously, banks can know if customers are maintaining multiple accounts with them. Higher the number of accounts, higher the chances of a particular customer being a money mule.
- Likewise, central lists containing details of suspected money launderers can be created. Financial institutions can search these lists for potential matches every time a new account is opened. Accounts which return positive hits can be monitored with higher scrutiny.
- Financial institutions should use modern AML (anti-money laundering) solutions that provide relevant results on a real time basis. For example, a solution that searches global databases to ascertain whether an individual is a PEP (politically exposed person), involved in adverse media, holding ongoing sanctions/warnings against them, etc. can be useful to identify potential fraudster activity at the onboarding phase itself.
If an opportunity sounds too good to be true, it probably is.
A comprehensive plan must identify the conmen. As a first barrier, it must be capable of identifying typical fraudster activity during the account onboarding phase. Doing so will prevent criminals from opening illegitimate new accounts in the first place.
Following this, the criminals have only one option for transferring funds: hire money mules. This is where a solution must trace the typical characteristics of known fraudsters in order to track and halt their money laundering process.
To conclude, the fraudsters can be identified. Given that, link analysis can be used to identify the other mule accounts they control, thereby blocking all of the scams and money laundering committed by that same criminal.