Money Mules Explained

For as long as criminals have been making illicit gains, methods to conceal the sources have been required. Whilst technology has benefitted law enforcement agencies, it has also inspired new money laundering techniques. The use of ‘money mules’ is one such development – its simplicity and the increasing prevalence of cybercrime is boosting adoption. Technological investment in security systems, alongside global cooperation, will be crucial in identifying and prosecuting such individuals.

 

To understand money mules and their role in financial crime, comprehension of the three stages of money laundering is crucial. The first stage is called ‘placement’, whereby illegal gains enter the financial system. It can occur through a variety of methods including wire transfer; cash deposit; or physical transportation of cash amongst others. Secondly, ‘layering’ involves obscuring the money’s origin. Methods include transferring sums between accounts; making cash withdrawals and redepositing them in other accounts; and generally moving money around the financial system to reduce attempts to track transactions. Finally, ‘integration’ sees criminals attempt to create a legal origin for the money. Typically the most complicated part of the money laundering process, it can involve shell corporations, fictitious loans, disguised ownership and more.

 

Money mules can be an integral part of the ‘layering’ stage. In essence, they are a person who, wittingly or unwittingly, illegally uses a bank account to which they have access to transfer criminal funds from one account to another. They are acting to facilitate a chain of transfers – the sole purpose is to make the money harder to trace. Because the act of making a bank transfer may not seem illegal and can’t be done anonymously (UK banks require the identities of account holders), the vast majority of money mules are not the money launderers themselves, but unsuspecting victims tricked into becoming a part of the process. Often the criminals will contact their victims on social media, offering them the chance to make money quickly. All they have to do, the money launderers say, is receive a sum of money into their account, hold it for a period, and then transfer it to another account minus a small commission. This seemingly innocuous act, despite being a crime, is usually framed as a legitimate business transaction thus some victims may never actually know what they have been a part of.

 

In order to catch money mules, and the criminals they enable, governments work closely with banks to monitor accounts and detect fraudulent activity. While the exact methods applied are confidential, the general principles are available. Banks monitor all transactions within their systems and apply computer algorithms to detect suspicious activity. If, after further checks, the bank believes the account to be involved in money laundering, they will inform the police directly. Algorithms differ between banks yet follow similar processes. At Barclays, for example, they build a profile for every account action deemed “normal” and generate alerts each time it exhibits behaviour deviating from this. Despite the fact that most money mules are not even aware they are committing a crime, the potential consequences are severe. Mules face a maximum prison sentence of up to 14 years, the possibility that their accounts may be frozen, and the knowledge that getting a loan or any form of credit will likely become much more difficult in the future, if even possible.

 

Data from Europol confirms that money mules are heavily involved in cybercrime. In 2017, Europol worked with 26 law enforcement agencies around the globe to take action against money mules. Of some 766 mules and 59 criminal organisations identified, over 90% of transactions were linked to cybercrime. With cybercrime on the rise – total fraud proceeds are relatively stable yet have seen a transition to online methods versus traditional offline scams – money mules look set to play a greater part within the process. Technology will be key to prevention; of the 1.2 billion GBP acquired through fraud in the UK last year, bank security systems prevented a further 1.8 billion GBP of scam attempts. Noting the scale of money stolen, it is clear why further investment in security systems is required. Attempts to tackle the supply of mules may also be beneficial, with money launderers often targeting young people and the vulnerable. Therefore, education on the identification of such scams and the risks associated with acting as a mule has been suggested.

 

Money launderers’ effectiveness in recruiting money mules lies in the simplicity of the tasks they are required to do and the lack of apparent illegality. Indeed, many mules are unaware that they have broken the law. The consequences are severe, however, for both those implicated in such crimes and the wider financial system as a whole. With cybercrime set to increase, outlets for these illicit gains will be required and mules are expected to be involved. Investment in technology will be crucial to combatting them. Whilst global co-operation can be difficult, the pooling of resources, as evidenced by Europol, can be an effective tool in building a more comprehensive picture of international money flows. This has potential to better enable the identification of money launderers themselves, in addition to the money mules implicated in the process.

 

By David Bendle

Sector Head: James Float

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