Illustration of how banks can catch money mules with inbound payment transaction monitoring

Stopping outbound payments that pose a high fraud risk is the cornerstone of most financial institutions’ fraud prevention strategy. However, as fraudsters' techniques change and increase in sophistication, banks are no longer just concerned with money leaving their customers’ accounts. They are becoming equally concerned about the risk of payments coming into their customers’ accounts to be moved by money mules. That's why banks need inbound payment transaction monitoring to stay ahead of money mules and financial crime.

2 Reasons Why Banks Need Inbound Payment Transaction Monitoring

Banks need inbound payment monitoring for two important reasons.

Firstly, increasing inbound payment transaction monitoring efforts can more effectively help detect and offboard money mules from your bank.

Secondly, and arguably the main driver for the industry focus on inbound payments, is regulatory change. Traditionally, fraud liability has always sat with the sending bank. This will change, and the receiving bank will become liable for 50% of the fraud in cases of APP fraud. Inbound payments will be the core technology enabler for banks to keep their overall fraud losses as low as possible once these new rules are in place.

How Inbound Payment Transaction Monitoring Detects Money Mules 

Using inbound payment monitoring gives FIs the opportunity to monitor a payment’s end-to-end journey. By embracing this approach, banks and FIs can review a payment’s beneficiary instead of just focusing on the sender. 

Inbound payment monitoring gives banks two key avenues to stop suspicious activities.

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  • Single-bank inbound payment. In the first avenue, let’s say a bank’s fraud team detects a high-risk transaction going from one of its own accounts to another account within the same bank. The bank now has two opportunities to stop the transaction. First, by performing traditional outbound monitoring, the bank can detect if something is wrong with the transaction and stop it before it reaches its recipient. Second, the bank can review the recipient’s account (at their own organization) for unusual signals. This includes determining if a device used by the recipient has been linked to suspicious activity or if there are signs of the customer falling for an authorized push payment (APP) scam or a romance scam.
  • Multiple-bank inbound payments. Now let’s look at the second avenue. Let’s say Bank A is contacted by Bank B. Bank B tells Bank A that one of their customers reported fraud and believes the funds were delivered to Bank A. Bank A reviews its inbound payment and finds the funds in question still within its system. Bank A returns the money to Bank B, which returns it to its own customer. This a positive customer experience that the individual will likely share with others.

In both scenarios, banks that perform diligent inbound monitoring demonstrate how they can protect their own customers and customers at competing banks from fraud. At the same time, by using inbound payment monitoring, banks demonstrate how their organization is inhospitable to money mule accounts and the criminal organizations behind them. 

Pushing Back Against Money Mules

Recent data indicates the number of money mules has increased significantly in the past year. Younger consumers have proven to be particularly susceptible to criminals’ money mule recruiting tactics, including get-rich-quick schemes, social media postings, and fake job listings. The non-profit fraud monitoring organization Cifas reported a 78% year-over-year increase among those under age 21 showing signs of money mule activity and a 76% YOY increase among those between ages 21 and 30.

Criminals use money mules as either witting or unwitting participants in their schemes. These actors provide criminals a foothold in legitimate banking systems, giving them a safe haven to receive funds from their scams, whether they are APP scams, romance scams, senior citizen scams, or another option. Money mules receive money from these scams into their accounts and then deliver them to the criminals. Criminals use the funds for illegal activities, including terrorist financing, illegal drugs, and other illicit activities.

Inbound payment monitoring enables banks to root out money mule accounts from their systems. Money mules soon realize that their bank is monitoring inbound payment activities and stopping their transactions linked to criminal organizations. If they can’t conduct business from their bank, they will move to a different one.

4 Reasons for Banks to Embrace Inbound Payment Transaction Monitoring

As fraudsters grow increasingly sophisticated, banks need to stay a step ahead of their tactics. Inbound payment monitoring can be a critical differentiator for keeping fraudsters in check. Here are four key reasons why banks should embrace it.

1. Inbound Payment Monitoring is Easy for FIs to Implement

The most obvious reason for FIs to practice inbound monitoring is this: it’s easy to do. After all, inbound payment monitoring is the same practice as outbound payment monitoring. It’s just flipped in the opposite direction. In other words, if your FI is already practicing outbound payment monitoring, the hard work is already behind you.

2. Get More Criminals to Offboard From Your System

If bad actors realize they can’t get away with using your FI’s system as a conduit for money mule activity, they’ll pack up shop and turn elsewhere. Inbound payment monitoring sends a message that money mules will be uncovered and their fraudulent transactions will be blocked. If they can’t conduct illicit business at your bank, they’ll be forced to try again with a different bank.

3. You’ll Keep More Bank Customers Safe

Your bank customers will feel gratitude for your efforts to stop banking fraud. As a result, they are more likely to trust your FI and extend their relationship. At the same time, your FI may even win over customers with competing institutions. If you stop a fraudulent transaction and return it to the rival bank’s customer, the customer is more likely to give your bank a second look.

4. Your FI Can Lead Industry-Wide Change 

By demonstrating the value of inbound payment monitoring, you can distinguish your organization as a market leader in fighting fraud. By demonstrating how you protect not only your own customers but also customers from other banks, your FI can set new standards for keeping fraudsters in check and stopping money mules. In other words, your bank can lead the broader financial services industry in fighting against money mule activities. 

Banks and FIs have a chance to help their own customers and stop money mules with a simple step. Inbound payment monitoring is a simple-to-embrace solution to stop a serious problem.