The economic business model of online fraud is evolving. A steady rise in digital banking services has increased the options of illegal money moving through multiple mule accounts, offering new opportunities for cybercriminals to turn to money mule fraud for their scams.

How do cybercriminals use mule accounts?

A mule account can be set up using a stolen identity. These “money mules” – individuals who are either witting or unwitting participants – are then used to transfer illicit funds to other accounts. They become part of a logistical network that moves money to the pockets of criminals.

Money mule scams have always been one of the most popular forms of criminal activity. But recently, it has become more aggressive and widespread than before.

Why are your online customers an easy target?

The COVID-19 pandemic came out of nowhere and spurred a quick shift towards digital payments. Most financial institutions did their best to handle the sudden changes, but not all banks were ready for the big technological jump. 

This disruption opened several loopholes for cybercriminals to exploit. These criminals used the same digital channels to transfer and steal money. For instance, billions of dollars dedicated to relief programs gave rise to new types of money mule scams.

This means there is an increased risk of money mules in banking systems and for your online customers to become “mules” and allow others to use their accounts for illicit purposes or conduct transactions on their behalf.

Unfortunately, the worst is yet to come

With rising unemployment in the Asia Pacific (APAC) region, people are looking to make money, even if it means doing something criminal.

Cash-strapped students are turning to money laundering. Cybercriminals use them to move funds through their bank accounts. That is why the number of young people suspected of being money mules has soared in recent times.

The writing is on the wall. Unfortunately, many financial institutions will be caught off-guard. We must do more to disrupt money mule scam activity and land a big blow to organized criminals.

3 questions to consider as you tackle mule fraud

1. How are you tracking mule activity?

Without tracking, financial institutions can not disrupt the mule activity on a large scale. The numbers prove it. Over 80% of fraud executives interviewed believe there’s still room for improvement.

2. Are you safeguards capable of stopping mule fraud?

Prompt action can mean the difference between major regulatory and reputational consequences, as well as a financial blow due to non-compliance fines from which many institutions might never recover.

3. What are the loopholes that let criminals get away?

  • Are you aware of customers who are offering mule accounts to criminals? 
  • Can you detect if someone uses a compromised identity to establish a new account?
  • Can you detect money mules pretending to be “good” customers?

Mule frauds can have a devastating effect on the company’s bottom line from fines, harm its public image, and increase the operational overhead. One big mule scam case and the company share prices will drop.

More importantly, a higher number of mule frauds will hurt your reputation. Your consumers trust you because you are the custodian of their financial investments. When you lose their trust, you lose them as customers.

However, stopping mule accounts is difficult

It would help if you had a mechanism to prevent the creation of mule accounts without compromising legitimate customers. It is a delicate balance.

Additionally, the mechanism should also identify accounts opened by cybercriminals and provide law enforcement with enough information for fast prosecution.

The only answer – create a better mechanism

Start by finding the current loopholes in your fraud detection system. Then invest in the latest technology to uncover missing links. Finally, create a flexible process to save your customers (and yourself) from the disaster.

The threat is here, and it will not go away unless you take action. It is time to recognize the realities of the money mule threat and find permanent solutions.

Banks will face significant regulatory fines if they enable criminal activity. Download our eBook Anti-Money Laundering: How to Protect Your Bank’s Brand & Bottom Line to learn more.