Illustration of a bank customer becoming a money mule and how banks can detect different categories of money mules.

Money mules refer to the accounts fraudsters use to receive fraudulent funds. Mules themselves can come in many different shapes and sizes. 

In this post, we’ll explore the different types of money mules and what steps banks can take to protect themselves and their customers.

What is a Money Mule?

A money mule is someone who transfers illegally obtained money from their own bank account to an account on behalf of another person or organization.

After committing crimes (e.g., illegal drug sales, human trafficking, fraud, and scams), criminals need access to bank accounts to clean their money and avoid detection by law enforcement. This is the stage where money mules are needed by criminals.

Recruiters can use a variety of tactics to recruit money mules. Recruitment tactics include romance scams, investment scams, fake online job ads, social media postings, and more. Once recruited, money mules transfer funds to accounts under criminals’ control, often in exchange for a fee.

In the big picture, they are critical links between criminals and their ill-gotten profits. They help criminals to profit from fraud, scams, and other illegal activity by providing access to banking services. Banks that can successfully identify and stop money mules can significantly reduce their overall risk exposure.

The 3 Types of Money Mules

Money mules fall into three specific personas: complicit, witting, and unwitting.

Complicit Money Mules

A complicit money mule (sometimes called a “purpose-opened money mule”) intentionally opens bank accounts to receive illicit funds. This person is directly connected to the criminals behind money laundering or fraudulent operations from the beginning. They might even act as a mule herder and recruit other money mules into the scheme. 

How Banks Can Stop Complicit Money Mules: This stage is where criminals exploit vulnerabilities in a bank’s onboarding operations to commit new account fraud – opening a bank account specifically for criminal purposes. Enhancing their Know Your Customer (KYC) and leveraging shared intra-bank intelligence capabilities to catch these actors before they can open accounts.

Witting Money Mules

A witting money mule provides access to their bank account even though they understand they are being asked to do something illegal. These individuals are likely under financial strain and, therefore, willing to accept the risks in exchange for what appears to be easy money.

How Banks Can Stop Witting Money Mules: Monitoring transactions for unusual patterns can help banks uncover individuals who are engaging in money muling activities. These patterns include sudden changes in user behavior, receiving funds from new sources, or making quick inbound and outbound transfers in succession. 

Unwitting Money Mules

An unwitting money mule is someone unaware that they are doing anything illegal. They are often targeted by scams such as fake online job ads or social media postings. Others may be recruited with romance scams, investment scams, or lottery scams. Fraudsters manipulate victims using any of these tactics before asking them to move money (or accept money) on their behalf.

How Banks Can Stop Unwitting Money Mules: These actors are challenging to stop because they are unaware they are being manipulated by a criminal. Banks should invest in targeted education campaigns to help customers spot the red flags of a scam before they make any large transfers. Banks can also combine advanced technologies like behavioral biometrics with early intervention and education opportunities to interject before a customer takes a dangerous financial risk.

Illustration describing the 3 types of money mules: complicit, unwitting, and witting money mules
Illustration describing the 3 types of money mules: complicit, unwitting, and witting money mules

Banks Warning Customers About Money Mules

Over the years, several banks such as Santander, Barclays, and Lloyds Banking Group have published public warning messages to consumers, alerting them to the risks of acting as a mule. Lloyds and Barclays warned consumers of the potential prosecution risks, which include up to 14 years imprisonment, and the financial repercussions of potentially struggling to obtain banking and credit services in the future. 

Age and Other Data Around Money Mules

However, despite these warnings, the data from the banks show that money muling continues to run at its highest rate of all time. The banks agree that younger generations are most vulnerable to money muling. 

For example, Santander reports that a mule’s mean age in 2022 is 31. That’s not to say that older groups aren’t susceptible to becoming money mules. Lloyds reported a 29% increase in people over age 40 involving themselves in muling – a particularly sharp rise.

So, what should both banks and consumers consider when it comes to improving the prevention of money mules? From the consumer’s perspective, the advice is pretty simple. 

3 Key Tips for Consumers to Stop Money Mules

  1. If somebody approaches you on social media or any other channel and asks you to provide a service in exchange for a small fee, ignore it. 
  2. Never give someone you don’t know access to your bank accounts. 
  3. Never provide your financial information to people you don’t know or trust. 

How Banks Can Stop Customers from Acting as Money Mules

From the bank’s perspective, the volume of purpose-opened mule accounts where false or fake identification is used to trick the bank’s onboarding systems is relatively small. The more significant risk to the banks is once-legitimate users selling their credentials to fraudsters to use as a mule account. 

The other risk is fraudsters convincing legitimate customers to allow them to transfer money through their accounts in exchange for a fee. Broader economic issues such as inflation, recession fears, and unemployment increase or decrease this risk. 

2 Things Banks Can Do to Address Money Mule Challenges

Monitor ongoing lifecycle risk propensity.

Banks must carefully look for subtle changes in account behavior. Assess if the customer starts to interact with their account differently. AI, machine learning, and behavioral biometrics detect changes in customer behavior that indicate money mule red flags. Use that as a flag for investigation.

Review inbound payment transactions

Banks should look at inbound transactions in how they have traditionally analyzed outbound transactions but from a fraud perspective. Outbound transaction monitoring has been the traditional method to check for fraud. However, this only captures a fraction of the user’s activity. Reviewing the source and the recipient of funds adds an additional layer of protection for the bank.

Think about how often someone receives transactions and their usual amount. Then, use that as a baseline to flag anomalies and potentially freeze funds. Be sure to validate the intent behind deposits before allowing customers to access them.