Money Mule Red Flags and How to Spot Them

They may seem like small players. But a closer look reveals an important truth: money mules are essential cogs in the fraud and financial crime cycle. Without these actors, criminals lose access to legitimate banking services that can help them profit from their crimes and disguise the source of their funds. 

If banks stop money mules, they’ll make significant strides in preventing financial crime. Learn how money mules operate, their different tactics, and the steps banks can take to uncover and stop these critical financial crime actors.

Key Takeaways

• Money mules are individuals who open bank accounts to receive money on behalf of criminals to disguise the source of illicit funds from money laundering, illegal drugs, human trafficking, and other crimes.
• Money mules can be recruited through various methods, including fake job offers, romance scams, and investment scams.
• There are three key categories of money mules: witting, unwitting, and purpose-opened money mules.
• Stopping money mule networks requires a comprehensive approach that includes AI, behavioral analysis, collaborative intelligence, and other security layers.

What are Money Mules & How Do They Work?

A money mule is a person who, wittingly or unwittingly, opens or provides a bank account (or multiple accounts) with financial services institutions specifically to receive money from criminal activity (e.g., money laundering, illegal guns or drug sales, or fraud and scams). By providing access to a legitimate financial institution, money mules help obscure the source of funds, making it harder for law enforcement or investigators to determine where the money originated or where it’s going. 

Once they receive the money, mules may be instructed to transfer money to different accounts, withdraw it as cash, or buy expensive items. These actions enable criminals to profit from their illicit activities. Some money mules are instructed to keep a portion of the money for their work. 

In other cases, money mules agree to receive shipments to their address. When they get the packages, they repackage them and ship them to different addresses, sometimes internationally. 

What Does the Money Mule Process Look Like?

Here’s how the money mule process works in practice. 

1. Criminals obtain money illegally. Bad actors can get money from illegal activities like illegal gun sales, drugs, or human trafficking. Other digital-first avenues include money from scams, fraud, account takeover, or phishing attacks. 
2. Money Mule Recruitment: To facilitate the transfer of funds, criminals recruit unwitting money mules through job boards, dating platforms, or social media sites. In some cases, money mules are known associates of the criminal and play a willing and knowing role in the crime.
3. Money Movement: Once recruited, mules are used by criminals to facilitate the transfer of their money. This may involve the mule opening new bank accounts with their own credentials or providing access to an existing account. 
4. Money Layering: When the mule receives the money, they next “layer” it to make it harder to trace. This may include breaking down the received money into smaller amounts and transferring them to different recipients or sending it to a crypto wallet.
5. Criminals Profit: With the last step complete, criminals can reap the benefits of their crimes. They may withdraw the money as cash or spend it on high-priced items, such as cars or jewelry.  
6. Repeat: Once completed, criminals start the process again, either with the current mule or begin again with a new recruit.

How Do Criminals Attract Money Mules on Social Media?

When recruiting money mules, criminals often exploit key emotions, such as desperation, trust, and even love. They may target individuals facing  financial hardship, others who are looking for romance or companionship online, or those who believe they can make a quick fortune. Here are some of the most common tactics:

• Fake Job Listings: Bad actors post job listings that promise applicants a chance to earn a substantial amount of money for easy work. They describe the job as moving money to different accounts and promising the applicant a “commission” for efforts.
• Romance Scams: Some money mule recruits begin as romantic or social connections online. After convincing a target that they have strong feelings for them, they invent a fake emergency, such as a medical issue, to gain sympathy. Then, they ask the victim to either send money to them or an associate.
• Investment Scams: In some cases, fraudsters and criminals pose as savvy financial experts who claim to have inside knowledge that can yield high returns with minimal risk. They employ high-pressure tactics to persuade their targets to make “investments” that are redirected to other accounts.
• Open Recruitment: In some cases, criminals openly acknowledge their intent. Communication may come from social media, email, or a message sent on the dark web. These messages communicate that mules are expected to process money through a legitimate bank account in exchange for a fee for their services. 

What Are the Types of Money Mules?

Money mules fall into three different categories. What sets each type of mule apart is their knowledge and level of involvement in the illegal mule activity. 

• Purposely open mules: Also known as complicit money mules, these individuals are closely involved in the criminal scheme. They may offer their services as professional money mules or even act as a recruiter for others (also known as a mule “herder”).
• Witting mules: These actors are not involved or connected to the criminal enterprise. However, they understand they are engaging in illegal activity and do so knowingly, in many cases, out of financial desperation. 
• Unwitting mules: Finally, some individuals are unaware that they have been recruited into a criminal scheme. Instead, they believe they have landed a well-paying job or that they are giving financial aid to a friend or loved one.

Regardless of how they are recruited, money mules can face serious consequences for their involvement in a criminal scheme. In recent years, Interpol has launched an awareness campaign to educate the public about the legal risks associated with participation in money mule activities, which may include prosecution, asset forfeiture, and damage to one’s financial reputation.¹

Types of Businesses Impacted By Money Mules

Money mule activity can touch multiple sectors and businesses. Each sector can be impacted differently.

• Financial Institutions: Both traditional and newer challenger banks are heavily targeted by money mule operations. This is where ill-gotten money is legitimized into the financial system, allowing criminals to ultimately profit. The consequences for banks and financial institutions can be devastating, including but not limited to regulatory investigations, fines, and a damaged public reputation. 
• Payment Services Firms: Payment service companies (including Fintechs and payment processors) are targeted by money mules to use their platforms to transfer and conceal the source of funds. Uncovering mule activity on these platforms can be challenging due to the high volume of activity and real-time nature of payments.
• ECommerce Platforms: ECommerce services are sometimes directly involved in illegal activities through money mules. However, they are often part of the “layering” stage in which mules buy valuables. In some cases, criminals may infiltrate eCommerce marketplaces to facilitate exchanges using fake buyer and seller accounts. 
• Job Listing Companies: Companies that provide legitimate job listings are frequently used by mule recruiters to post phony job openings, targeting individuals who may be vulnerable to becoming money mules. This can include platforms specifically designed for employers and job seekers, as well as social media sites that offer similar services. This abuse of employment sites can undermine trust in these platforms and carry legal or financial consequences for anyone involved.
• Cryptocurrency Platforms: The untraceable nature of cryptocurrency makes these platforms top targets for criminals’ money mule activities. Criminals recruit mules to transfer money between cryptocurrency wallets or exchanges, making it more difficult to trace the funds. 

Feedzai’s Approach to Money Mule Fraud Prevention

Financial institutions that rely only on rules-based systems to uncover money mules will struggle with the complexity of money mule detection. Rules can successfully flag money mules that demonstrate known patterns. But these systems will fall short when new, more sophisticated money mule patterns emerge.

Rules alone can’t catch money mules. Organizations need to support their rules-based systems with AI to rapidly analyze data, identify money mule patterns, and quickly adjust their strategies in response to new threats. Feedzai recommends a detailed blueprint to detect money mule networks. 

Inbound Payment Monitoring

It’s not enough to look at money leaving an account. It’s just as important to look at money coming in. Banks and organizations can use inbound payment monitoring to identify potential red flags, such as a series of high-value deposits from different entities. This insight can bring mule networks to light and disrupt future criminal activities. With initiatives like the UK’s PSR, which requires sending and receiving institutions to share liability for scam losses equally, banks should be highly motivated to embrace inbound payment monitoring.

Behavioral Profiling and AI Analytics

Ensure you’re using behavioral biometrics and advanced AI-based analytics to differentiate between normal customer activity and patterns characteristic of mule accounts. This includes monitoring for changes in user behavior and cross-channel analytics to spot collusion and networked fraud.

Device Intelligence

Monitor a customer or applicant’s device intelligence for red flags of a money mule attempting to open an account. For example, if an applicant appears to have been generated by a bot, it’s a sign that someone has created a synthetic identity to onboard. Check for automation patterns and if the user’s device is connected to multiple accounts. These are signs that the device is linked to money mule activities.

Analyze Address Information 

Verify the addresses of applicants as well as the device information. If multiple customers are using the same address (e.g., a small business or a private mailbox), it’s a sign that this location is being used as a front for criminals. After flagging these addresses, you can add them to “high-risk” profile lists for extra scrutiny, disrupting money networks and offering an opportunity to investigate suspicious activity. Adding a hold period for these accounts could also deter more activity and may lead to mules abandoning the accounts.

Anomaly Detection and Machine Learning

Machine learning models can rapidly review and analyze data for more informed decision-making. As models consume more data, they become smarter and can identify fraud more quickly. It can also spot new fraud patterns and alter detection methods accordingly. This means as criminal behaviors change, AI and machine learning can pick up on new patterns and catch mule operations even when criminals adjust their tactics. 

Transaction Risk Scoring

Implement dynamic risk scoring for both account holders and individual transactions. High-risk scores should trigger enhanced due diligence, additional verification steps, or temporary holds on suspicious payments.

Collaboration and Intelligence-sharing

Our new solution, Feedzai IQ™, empowers financial institutions to combat money mules with AI and collective intelligence by leveraging insights from over 70 billion annual transactions. Using privacy-preserving federated learning, Feedzai IQ™ shares critical fraud insights without compromising customer data or privacy. This enables comprehensive mule detection across the entire fraud lifecycle, empowering banks to stay ahead of evolving criminal tactics.

Omnichannel Profiling of Mule Behavior

Money mule activities are not limited to bank transfers. Once they have infiltrated a bank’s system, they can expand their activities across multiple channels, including online transfers, ATM withdrawals, or commit check fraud. When viewing these activities in a single channel, suspicious behavior may get overlooked. But when seen collectively, a pattern of money mules becomes more obvious. Make sure to use an omnichannel view of fraud to check the blind spots that criminals often exploit.

Connecting the Dots: Visual Link Analysis

Seeing is believing in fraud and financial crime. Using visual link analysis tools can help draw visual connections between different accounts. This can create an easy-to-understand visual network of various accounts, phone numbers, devices, and networks linked to a suspected money mule network. Having this level of clarity is vital for fraud teams to understand how money moves from one account to a central account.

Protecting the Financial Ecosystem from Money Mules

The fight against money mules is constantly shifting. Armed with the right tools, financial institutions can stay ahead of the curve and uncover mule activity in their networks. By embracing advanced AI, machine learning, and collaborative intelligence, banks can move beyond traditional rules-based detection methods to proactively identify and disrupt money mule networks. 

A comprehensive approach helps organizations disrupt money mules. It also helps prevent fraud and financial crime by removing safe havens for money launderers and other financial criminals. Reactive measures are no longer adequate solutions. Investing in robust, AI-powered fraud strategies focused on early detection and a holistic view of financial activity is key to keeping the financial ecosystem secure for customers and unwelcome for mules.

Resources

• Blog: Money Mule Detection Blueprint for Banks
• eBook: AI and the Fight Against Money Mules 
• Solution Sheet: Accelerate Account Opening with Feedzai’s Orchestration Platform
• Solution: Account Takeover Fraud Solution