Enhancing money mule detection to reduce risk exposure

Identifying money mules is vital to ensure financial institutions reduce risk, avoid financial penalties, and enhance their reputation

In 2024, Nasdaq revealed that more than $3.1 trillion in illicit funds flowed through the global financial system. Much of this money is dispersed with the help of so-called ‘money mules’, helping criminal networks obscure the source of their funds.

As technology and methods of obfuscation improve, employing strong money mule detection processes within AML software is a must.

With financial institutions having to protect against money laundering and fraud as part of AML/CTF requirements, this blog on money mule detection aims to help institutions reduce risk exposure, avoid regulatory fines, and enhance their reputation.

What is a money mule?

A money mule is an individual that moves the proceeds of fraud on behalf of criminals. Also known as money muling, it is a money laundering technique that sees someone move money from their own account to another individual or company on behalf of someone else. To detect and prevent money mule activity, financial institutions use anti-money laundering (AML) software to monitor accounts and their transactions.

A fascinating aspect of money mules is that detecting them falls into the jurisdiction of both compliance and fraud. This means that they are one of the few instances where these teams have a shared goal and mutual responsibility.

Money mule detection is of crucial importance to banks as numbers of fraudulent accounts and illicit transactions are increasing. There were more than 19,000 cases of money muling reported in the UK in 2024, an increase of 11%. Santander reported an increase in money mule cases of 45% among those aged 25-34. In the US, money muling continues to be a problem with law enforcement taking action against 3,000 money mules in 2024 to disrupt transnational fraud schemes. As such, the American Bankers Association recently released infographics to teach consumers about money mule detection and how to avoid falling victim to the scam.

Money mule red flags

There are many red flags that help detect money mule activity. For banks and other financial institutions, these include:

• Unexpected or unexplained large deposits or transactions in a customer account
• Frequent requests for international transfers to a variety of accounts
• Accounts that primarily receive and send funds, lacking typical commercial activities
• Multiple IP addresses associated with a single online bank account
• IP addresses originating from high-risk money laundering countries such as those featured on the FATF grey or black list.
• Unwillingness or inability to pass customer due diligence (CDD) checks.

The presence of some or all these indicators warrants further investigation. Though they are not guaranteed to be linked to money mule activity, such activities may lead to an increased customer risk rating and enhanced or ongoing due diligence.

For individuals, detecting whether you may be involved in money mule-related activity could be the difference between a criminal record and prosecution and staying clean. Red flags to avoid include:

• Unexpected or unexplained large deposits or transactions.
• Frequent requests for rapidly sending international transfers to various accounts
• New contacts requesting to deposit funds for a short period before asking for the money to be sent elsewhere.
• Unfamiliarity with the source of funds moving through an account.
• Job offers promising easy money involving sending or receiving funds or packages.
• Supposed companies requesting payment in gift cards to finalize unexpected or overdue payments on an account.
• Notices of inheritance from unknown relatives.

There is no exhaustive list of money mule red flags. If it feels like it could be a scam or the offer being presented is too good to be true, it is best for individuals to remain vigilant and not accept funds into an account that they control.

Why are money mules effective?

Money mules are effective for several reasons:

Anonymity and distance: Money mules help create layers of transactions that obscure the money trail. By involving multiple individuals and moving money through various accounts and across borders, the origins and destination of the funds are obscured. This makes the money much harder to trace.

Compartmentalization: Each mule generally only handles a small part of the overall operation, and often doesn’t know anybody else involved, making it difficult for any single participant to have a complete picture of the scheme. This reduces the risk of exposure if a mule is caught, as they won’t be able to implicate other criminals.

Volume and scale: Creating a web of mules allows criminals to quickly and efficiently move large sums of money. This disperses the financial activity across many smaller transactions, making it less likely to trigger alerts.

Exploitation of legitimate channels: Mules are often recruited and told to use personal bank accounts or payment services, which make transactions appear less suspicious.

Recruitment versatility: Mules can be recruited from various backgrounds and regions via many different methods. This approach makes it difficult for banks and enforcement agencies to predict or profile likely mules.

Legal ambiguity: Some mules may not be aware that they are participating in illegal activities. This ambiguity can complicate enforcement and prosecution efforts.

Low risk for organizers: Using money mules distances the organizers from handling the money, reducing their direct exposure to law enforcement.

Easy and fast: With the advent of online banking and global connectivity, setting up mule accounts and operations can be done quickly and efficiently, often with minimal upfront cost.

Legacy technology: Many banks and financial institutions are wary of upgrading to newer systems while criminals are often agile and keen to explore new ways to exploit software. As such, it can be difficult for organizations to keep up.

Organizational approach: Because money mules sit across two different teams – compliance and fraud – detection is made more difficult. An alert in one area may not trigger an alert in another, meaning illicit payments are accidentally allowed to proceed.

The effectiveness of money mules highlights the necessity for strong financial regulations, thorough due diligence by financial institutions, and public awareness campaigns to educate potential targets about the risks and indicators of becoming a money mule.

Alongside this, banks and other financial institutions are also investing in improving their money mule detection processes by upgrading their AML systems either wholesale or by using AI overlays. With these enhancements, many more people are now being caught for their money laundering and fraud activity.

The different types of money mules

Money mules fall into three distinct categories:

• Knowingly complicit money mule: This money mule is a professional criminal who has been trained and fully understands their role within a criminal network.
• Witting money mule: This is someone who should be aware that what they are doing is illegal but does it anyway. Ignoring red flags, they are often happy to act on behalf of criminals in exchange for monetary compensation. A witting money mule is most likely to be a younger person who is incentivized by the idea of what they perceive to be ‘easy money.’
• Unwitting money mule: This is someone who has no idea they are a money mule and is engaging in criminal activity. These people have become the victims of the fraud themselves, often in the form of an online romance scam or fake job offer.

How are money mules recruited?

Money mule recruitment often occurs via a scam. This scam works in the same way as many others – via phishing, vishing (voice phishing), emails, social media, or any scenario that could involve the sharing of personal data.

Some people are taken in when job hunting, while others are told they have won a sweepstake and need to send money to claim the big prize. Other methods include criminals striking up social media friendships and then asking for help in sending or receiving money or opening a bank account in their name.

Once trust has been established, the criminal will ask the money mule to either open a bank account or use an existing one to accept money, which they then transfer for a small fee.

Excuses might be used with an unwitting money mule, such as their bank not allowing them to accept the money, fake fees being involved if they did it themselves, etc.

A knowingly complicity money mule may act as a recruiter, herding up multiple victims for use in larger money laundering operations, allowing them to further obfuscate the process.

What is the profile of the average money mule?

The average profile of a money mule is hard to accurately verify, but from multiple sources, it appears that they are more likely to be under 40, with more than half fitting into the category. In 2023, Santander UK said that their own money mule detection software had shown that more than half of money mules are under 30 (55%), with a fifth being under 20 (21%). Those aged 50 and above only accounted for 9% of all money mule activity.

Barclays corroborated the results, revealing that their AML software had detected that 40% of money mules were under 25. This tracks with the idea that students and job seekers at the start of their careers are most likely to become money mules with criminals targeting them due to the increased cost of living and their need for more income as a result.

This dovetails with other responses in the Barclays survey – 78% of those tricked into becoming a money mule wouldn’t tell their bank and the same percentage wouldn’t tell their parents due to being embarrassed, fearing their reaction, or not wanting to worry them.

The problem isn’t just in the UK either. Singapore’s police force releases an annual report into scams and money muling, reporting that 33% of victims are aged 29 or under, while international students are so commonly targeted for money muling in Australia, that a financial crime guide has been written by AUSTRAC to prevent the practice.

Consequences of being a money mule

The consequences of being a money mule are huge with a fine or jail time depending on local laws and the severity of the offense. Here are just some of the potential consequences of being a money mule in certain countries (note that all countries cite a conviction as harming career prospects and travel opportunities):

United States:

• Consequences: Individuals can face criminal charges for money laundering, which may lead to significant prison sentences, hefty fines, and a criminal record. This can impact future employment opportunities and international travel capabilities. There may also be seizure of involved funds and restitution obligations.
• Maximum sentence: Up to 20 years per violation under federal law.

United Kingdom:

• Consequences: Individuals may be prosecuted under the Proceeds of Crime Act or money laundering regulations, facing imprisonment, fines, and a criminal record. This can hinder employment prospects and the ability to open bank accounts or obtain credit.
• Maximum sentence: 14 years imprisonment.

Australia:

• Consequences: Those involved may face charges related to money laundering, leading to substantial fines and imprisonment. Inclusion in financial crime databases can affect future financial transactions and access to banking services, as well as difficulty in obtaining employment.
• Maximum sentence: Up to 25 years imprisonment, depending on the severity and amount of money involved.

Canada:

• Consequences: Being involved can result in criminal charges for money laundering, with prison time, financial penalties, and a criminal record that impacts career opportunities and international travel. Bank accounts and financial assets may also be frozen.
• Maximum sentence: Up to 10 years imprisonment.

Germany:

• Consequences: Prosecution under anti-money laundering laws can lead to imprisonment, fines, and a criminal record, which may limit career options and affect personal and professional reputation. Access to banking services might also be restricted.
• Maximum sentence: 10 years imprisonment.

India:

• Consequences: Legal action under the Prevention of Money Laundering Act can lead to fines, imprisonment, and confiscation of funds and assets. There might be travel restrictions and difficulties in securing employment, especially in fields requiring a clean legal history.
• Maximum sentence: Up to 10 years, or 12 years in certain circumstances.

Singapore:

• Consequences: Singapore enforces strict anti-money laundering laws under the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act. Individuals involved in money laundering can be subjected to significant fines and imprisonment. Authorities have the power to confiscate and seize assets linked to such activities, which can include bank accounts and properties. A conviction can also severely impact professional opportunities, potentially disqualifying individuals from certain careers and damaging their reputation.
• Maximum sentence: Up to 10 years imprisonment and fines of up to SGD 500,000, with offenders potentially facing both penalties.

These consequences highlight the serious nature of being involved as a money mule, even unwittingly. This is why it is so important for people to be aware of the risks of money muling and ensure they are not inadvertently participating in illegal activities.

Consequences of failing to stop money mules

When banks fail at money mule detection and inadvertently facilitate money laundering and fraud, they can face a range of serious consequences, both financial and reputational. Here are some key impacts on banks:

• Regulatory penalties: Banks that fail to use AML software appropriately to detect and prevent money mule activities may face hefty fines and penalties from regulators. These fines can be substantial, reflecting the severity of the oversight and the potential impact on the financial system. As such, banks are expected to have strong AML and KYC software in place to prevent such occurrences.
• Reputational damage: Involvement in money mule schemes, even unwittingly, can severely damage a bank’s reputation. Trust is integral to a bank’s relationship with its clients and stakeholders, and any association with financial crime can undermine this trust. Negative publicity can lead to loss of customer confidence and decreased market share as customers move to competitors.
• Increased compliance costs: Following an incident involving money mules, banks may need to invest heavily in improving their AML and KYC systems. This includes upgrading from legacy to SaaS technology, hiring additional staff, and conducting comprehensive staff training. These increased costs are necessary to meet regulatory expectations and to prevent future incidents.
• Legal liabilities: Banks may face lawsuits from victims of fraud who suffered financial losses due to money mule activities facilitated through the bank’s accounts. This legal action may result in additional costs and can further tarnish the bank’s reputation.

This underscores the importance of implementing comprehensive crime compliance software and risk management strategies to safeguard against financial crimes.

Money mule detection and prevention

Money mule detection and prevention generally occurs because of suspicious activity alerting financial crime investigators or law enforcement. These institutions use a variety of methods to detect and catch criminals with money mules often being caught via:

• KYC/CDD: A common first step for criminals is to request a money mule to open a new bank account. With strong KYC and CDD processes in place, money mules can be stopped before they even begin.
• AML transaction monitoring: Regulations insist that banks use AML software to monitor customers for any suspicious activity that may occur. This often includes unusual activity such as unexpectedly large cash deposits or frequent sums being deposited from new contacts. Wire transfers to foreign countries may also raise suspicion.
• Surveillance: Police and other law enforcement agencies regularly monitor communication channels for criminal activity including discussions that relate to money laundering or fraud. Emails, phone calls, text messages, and social media accounts can all be monitored to infiltrate criminal networks. Banks can also monitor negative news and adverse media associated with customers, again helping notify them of any suspicious activity.
• Informants: People working with money mules can turn into informants to avoid prosecution or reduce their sentences. They provide information about the money muling network, which can then be investigated.
• Improved staff training: Financial institutions can educate staff and improve their training to make them more aware of money mule activities and how to detect suspicious behavior.

The number of money mules getting caught is increasing due to improved AML and fraud software alongside improvements in regulations and laws, which force financial institutions to do more when it comes to cracking down on money mule activities.

This has recently been seen in Singapore where 305 scammers and money mules were investigated for their part in defrauding more than $12.8 million from victims.

Money mule detection – Example #1

Improved money mule detection means that banks will often find money mules far more quickly than was previously possible.

The following is based on a true story:

Tony, a working apprentice in his early twenties, was followed by a random Instagram account. This account promised an investment opportunity whereby people could invest a small amount of money – a few hundred pounds – and see incredible returns on their investment in a short space of time. Intrigued, Tony commented on a post asking for more information.

He was quickly messaged about making large profits in cryptocurrency, specifically Bitcoin. With the Instagram account owner acting as a ‘mentor’, Tony was instructed to download an app – which was actually a front for another bank account controlled by the mentor – and invest £200. Within a short space of time, Tony’s ‘cryptocurrency account’ had grown to be worth £4,000. Tony was told by his mentor that if he invested a bit more money – £1,000 – the app would give him an access code that allowed him to withdraw his profits.

As an apprentice, Tony didn’t have that amount of money available to him. As such, he requested that he could remove his initial investment. His ‘mentor’ had a workaround; if Tony invested another £200, his mentor would make up the difference by sending him £800 to deposit in the app.

Unfortunately, the access code didn’t come through. Realizing it was his mistake, Tony’s anonymous mentor continued to send money for him to deposit in the account with the promise that the withdrawal would be available soon. At this point, Tony realized that he had probably fallen victim to a scam and, out of embarrassment, decided to write off his initial investment and cease contact with his mentor.

But that wasn’t the end of the story. Using their AML software, Tony’s primary bank had received a money mule detection alert on his account. Within two weeks of Tony’s first payment, the bank sent him a letter to explain that his account had been frozen while they reviewed his recent activity. Unfortunately for Tony, he had been correctly flagged by his bank’s AML software as a ‘third party fraud facilitator’, more commonly known as a money mule.

Despite not knowing that he had done anything wrong, with the alert in place and the account frozen, Tony faced the threat of having a CIFAS fraud marker placed against his name for six years. This would mean that the banks he currently held accounts with would close those accounts, and Tony would be unable to open a new bank account and have no access to any lending including loans, credit cards, or mobile phone contracts.

What is a CIFAS fraud marker?

A CIFAS fraud marker is an alert placed by a member of CIFAS, a UK-based fraud prevention service, onto an individual’s credit file to indicate a suspicion of fraud. CIFAS members include all of the major banks and they collaborate to share information about potentially fraudulent activity. When a CIFAS marker is placed on an individual’s file, it serves as a warning to other members that the individual was involved in a situation that warranted further investigation for potential fraud. In the money mule example above, Tony could be essentially blacklisted by other members.

Fraud markers aren’t just used to punish criminals. A marker is also used to protect individuals and institutions from fraud. If someone has been a victim of identity theft, a CIFAS marker can help prevent further unauthorized transactions.

Having a CIFAS marker does not necessarily mean the individual has been involved in wrongdoing, but rather that there has been some suspicious activity associated with their account. If a person discovers a CIFAS marker on their file and believes it to be incorrect, they can dispute it by contacting the organization that placed the marker and providing any necessary evidence to have it reviewed or removed.

The dispute cannot be due to ignorance of the law however with Irish police recently warning that money mules “may or may not be aware of the crime, however, they are complicit if they recklessly allow their account to be used to launder the proceeds of criminality.”

Money mule detection – Example #2

The following is taken from an AUSTRAC guide aimed at preventing international students from becoming money mules.

A Melbourne woman was scammed out of nearly $300,000. A person falsely identifying themselves as a bank employee contacted the woman from an unlisted number and said they had identified suspicious transactions on her account. The woman gave the caller remote access to her online banking and security codes.

Around $300,000 was then transferred out of her account to 11 money mule accounts, with the funds being withdrawn from ATMs soon after. Most of the mule accounts belonged to Indian students who had set up the accounts with legitimate identification details. The students had returned to India at the time the money was withdrawn from their accounts, indicating someone other than the students had control of their accounts.

SymphonyAI provides advanced money mule detection software for banks

By upgrading AML software with a dynamic and forward-thinking approach, a bank can integrate the latest technologies and best practices to improve money mule detection capabilities and stay ahead of evolving financial crime threats. With the implementation of a modern SaaS system and by using AI effectively, a financial institution can significantly strengthen its money mule detection setup, minimizing risk and enhancing its ability to prevent illicit activities.

For companies seeking to elevate their AML and anti-fraud efforts further, exploring innovative solutions like SymphonyAI’s AML transaction monitoring solution or the SensaAI for AML AI overlay offers a promising pathway.

SymphonyAI provides the latest, most advanced technology that enables organizations to analyze transactions with greater precision and agility, ensuring compliance with ever-more stringent regulations.  Because the company provides software for compliance and fraud, it is possible to better facilitate collaboration across traditionally divided teams and stop money mules in their tracks.