Illustration showing magnifying glasses over a crowd of people and identifying money mules involved in transfer fraud

Money mules and transfer fraud are made for each other. Criminals need to transfer the money they make from fraud to a different account to avoid detection. That’s why fraudsters recruit money mules to commit transfer fraud and money laundering on their behalf.

High inflation in the US and a rising cost of living crisis in the UK work in fraudsters’ favor to recruit money mules to do their dirty work. Europol recently reported arrests of nearly 9,000 money mules across 25 countries over a three-month period. That’s why banks can’t afford to just detect money mule activity. Banks must hunt money mules to uncover broader criminal networks and prevent new transfer fraud cases. If you find all the mules, you stop all transfer fraud as the money has nowhere to go.

Here’s how banks can hunt down more money mules and stop wider criminal activities. 

What are Money Mule Scams?

In a money mule scam, criminals get individuals to transfer money on their behalf using deceptive tactics. These include fake job listings, social media offers, or romance scams. Criminals send the individuals (who may be either witting or unwitting participants in the scam) funds obtained using fraudulent means, such as phishing, identity theft, or scams.

A looming threat of a recession has left many people on edge in terms of financial security. This is only exacerbated by a cost of living crisis that is resulting in sharp increases in food prices. This level of uncertainty gives financial criminals the tools they need to launch a money mule scam.

Infographic demonstrating how money mules enable money laundering using transfer fraud by layering money in legitimate financial systems on criminals' behalf
Infographic demonstrating how money mules enable money laundering using transfer fraud by layering money in legitimate financial systems on criminals' behalf

Economic uncertainty has only increased following a series of global bank crises. These events play right into financial criminals’ hands. When people aren’t certain about their jobs or need more money to pay for food or provide for their families, they can fall prey to money mule recruitment. 

How Mule ‘Herders’ Recruit Money Mules

Some criminals act as money mule “herders” who actively recruit multiple victims. These herders can control several different mule accounts set up for a scheme.

Money mule scam recruitment works much like other scams. Criminals contact people who fit the profile of someone in need of money using phishing emails, vishing, social media, or other personal information. Criminals direct victims to open a bank account (or more than one) using their personal information.

Some are unwitting recruits who believe they can make easy money by opening up a bank account at their new “employer’s” request. Others are witting participants who suspect something shady is afoot but are willing to act as a money mule for income. Young people are proving especially vulnerable to mule recruitment, with schools and colleges becoming hotbeds for mule recruitment.

After a criminal commits fraud, they transfer this money to an account created by a money mule. The money mule receives the money and transfers it to a different account. The layering process gets repeated several times. This makes it difficult for law enforcement to track or recover funds. Unwitting money mules may realize too late that they are vulnerable to criminal money laundering charges.

Banks Launch Money Mule Hunting Teams to Stop Transfer Fraud

In the early days of digital banking, sending banks and recipient banks often found themselves pointing fingers over who should be responsible for stopping money mule activity. Fortunately, those early disputes appear to be over. Some financial institutions are embracing initiatives by forming money mule-hunting teams to disrupt financial crime rings.

The creation of money mule hunting teams is proving to be highly effective at stopping financial crime. Lloyds Bank, for example, launched an internal team devoted to rooting out money mules in 2018. The mule-hunting team successfully uncovered 190,000 mule accounts and blocked the transfer of £91 million to criminals as of late last year.

Lloyds Bank’s effort may sound like something out of an old-school action movie. “A band of ragtag financial professionals is faced with the impossible task of rooting out financial crime rings from their organization.” Is Colin Farrell available? 

But putting the Hollywood pitch aside, this approach is a highly effective way for banks to uncover money mule activity, protect their customers from serious financial harm, and help law enforcement break up financial crime operations. 

3 Steps for Banks to Stop Money Mules

Other financial institutions can learn a lot from Lloyds Bank’s example in their own effort to catch money mules and stop transfer fraud. Here are three key strategies money mule hunting teams need to be effective.

1. Focus on Identifying a Money Mule

The first step in stopping money mules is to understand which accounts are money mules. To do this, banks should keep an eye out for suspicious account activity, such as a sudden increase in incoming and outgoing transactions, particularly if they involve international transfers, or if the transactions are inconsistent with the customer’s normal activity.

If a bank believes a transaction is fraudulent, fraud analysts can look at the destination account. The recipient is the money mule. If it’s an internal account, the bank can freeze the funds and block any new transfers. 

Beyond identifying the mule account, banks can also look at the account’s specific attributes. This includes devices, IP addresses, and other identifiers that may have interacted with it. By gathering this information banks can prevent the account holder from accessing or opening an account using a different guise. 

2. Use Link Analysis to Identify More Mule Accounts

Gathering relevant information that identifies a money mule account is just the first step. Once your bank has collected this information, fraud, and AML analysts can apply it to other accounts. Your bank can use machine learning link analysis tools to identify more money mules by connecting vast amounts of data and identifying patterns of behavior that may indicate the use of money mules. Link analysis tools can look at other attributes like devices, IP addresses, emails, and more to see if there are links to other accounts at the bank. In other words, identifying one mule account is just the first step in uncovering a broader money mule herder network. What’s more, banks can share this information with other financial institutions to bolster their own money-mule-fighting efforts.

3. Use Machine Learning to Stop Financial Crime

Steps one and two of this list are reactive approaches to combating money mules. The third and final step takes a proactive approach to stop fraud and financial crime. Now that your bank understands the profile of a money mule, you can use this knowledge to train a machine learning model that can uncover more money mule activity. Data scientists can build machine learning models that flag accounts based on known attributes of money mules (e.g., locations, age of the customer, or transaction patterns). Machine learning can model accounts for normal activity, such as making purchases or paying bills. If the account only appears to be receiving and transferring funds, the bank can investigate it further for money mule activity. 

With machine learning models alone, false positive alerts may remain high when purely using it for investigation purposes. Machine learning model alerts can be combined with other strategies to prioritize other events such as when an inbound transaction arrives that is unusual. The investigations team is primed and ready to immediately stop withdrawal or the funds moving to another account.

Collaboration is critical to stopping money mules and the criminal networks behind them. Criminals shouldn’t be the only ones focused on collaboration. Banks should be working together to use the best strategies and technologies to stop money mule operations and transfer scams in their tracks.