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Banking experts have acknowledged that the industry is struggling to solve the problem of money mules, with new fraud trends exacerbating the issue.
It is no secret that fraud is on the rise in Britain.
According to UK Finance, Fraud the Facts, there was a 10 percent increase in fraud during 2021, with this overall trend driven by a 39 percent jump in Authorised Push Payment (APP) fraud.
The problem is more than just a monetary issue — it is causing a major headache for financial institutions and authorities, sullying the industry’s reputation and reducing consumer trust as consumer groups and the press continue to probe.
APP in particular, utilising the UK Faster Payments system, has emerged as the largest individual category of fraud in value terms, overtaking card fraud for the first time in 2021.
Customers are expecting a very slick customer journey and experience with real time payments, said Freddy Arthur, fraud strategy lead at NICE Actimize, speaking at a recent webinar, Money mules: Shifting from detection to prevention.
“This has very much played into the hands of fraudsters, who exploit victims via scams, and social engineering,” he warned.
“Mules are a critical player in the APP fraud space. Fraudsters are able to leverage actors, whether that is wittingly or unwittingly, as a vector to effectively cash out and make it very hard for banks to trace them.”
Money muling, also known as squaring, occurs when a person transfers stolen money on behalf of others, which is usually done via their bank account.
“Mules, let’s face it, have become the facilitator and enabler to make this happen,” he said.
If banks effectively tackle the mule problem, it becomes a lot harder for fraud to happen, Arthur argued.
Money mules have become such an issue for authorities and the industry that the global crime organisation, Interpol, has recently launched a campaign to tackle the problem.
#YourAccountYourCrime, headed by Interpol’s Financial Crime and Anti-Corruption Centre (IFCACC), is a global campaign that aims to raise awareness about money mules and the consequences of those that become agents of money laundering and fraud.
In May, Interpol also published a Purple Notice warning of the growing use of money mule "herders", who regularly seek blanket authorisations to use the personal accounts of victims as their own.
“I fully subscribe to the idea that if you solve the mule problem, you solve the fraud problem,” said Jim Winters, director of economic crime at Nationwide Building Society.
This has been substantiated by past cases. For example, in November of last year, a Europol led investigation resulted in the identification of 18,000 money mules, as well as 1,803 money laundering related arrests.
Both ends of the problem need to be tackled simultaneously, said Winters. “But, if you can put financial services off limits to mules, you’d have a transformational effect on the number of victims of scams and fraud.”
“My UK colleagues will know that there is a significant focus on mules here,” he said, pointing out that many mules are used by criminals on a “churn and burn basis”, underlining the scale of the problem in the global banking industry.
“We just haven’t cracked it yet,” he concluded. “There is clearly still so much more to do.”
Part of the problem is also the change in mule profiles, he said, adding that it has transformed from something that is “quite predictable”.
“It is now something that is so vast and varied that there are a myriad of profiles and typologies,” he said. “The only way to tackle this problem is through a multi-layered approach.”
The different types of mule accounts are more difficult to detect, agreed Tammy McKinnon, senior vice president in Scotia Bank’s fraud department.
“When you have a legitimate customer involved, it makes it that much harder,” she acknowledged. “There’s an element of first party fraud there that is very difficult to detect.”
Education is a force multiplier here, she said.
“It is about upfront education, but it is also important to be engaging with customers as the fraud activity is happening,” she said. “We need to try and understand the motivation behind what is happening and the driver for some of their actions.”
For example, students will sell their account to a bad actor and fail to understand the impact on their future credit ratings, she said.
“They don’t understand and they think it will go away. Continuously engaging with customers, providing that counsel, I think is a critical role that we play.”
Tough Sanctions Out Of Vogue
“In the UK, there are some quite significant sanctions available to us,” said Winters.
This is in respect to marking mules to prevent them from opening an account with another organisation.
However, a new direction is being pursued by firms.
“We’re seeing more firms in the UK now maybe take a slightly softer approach with under-18s,” he pointed out. “I think about the decisions I was taking when I was 18. I’m glad there was no social media back then. I certainly wasn’t really thinking about my future banking experience.”
For this reason, some firms now are taking a less punitive approach, even when the younger customers have willingly engaged.
“We see all sorts of various nefarious techniques used by criminal gangs, very similar to the county lines, buying trainers and offering massive incentives to use young people’s accounts,” Winters said.
As part of our manual intervention in this problem, he advised that financial firms take into consideration the age of the mule as well as issues around vulnerability.
“I’ve seen some very difficult, extreme circumstances, maybe some sort of addiction or welfare related scenario.”
“This makes them extremely vulnerable. They aren’t making the choices they’d normally make. These people need our support.”
Another category, who Winters suggested are “clearly involved”, are customers where an account has been sold on. “Sometimes you have to decide, if you haven’t received a response, whether to treat that account as a mule and move on.”
“It is key that we do this in a balanced, direct approach,” agreed Arthur. “It is very difficult to identify mule accounts unwittingly used as mule accounts and if you’re identifying mule accounts and finding out through the technology used that they are mule accounts, you’re causing all kinds of havoc further down the line.”
This is not the way you want to go, he said.
Despite the sinister name, the approach talked up by Winters and Arthur appeared to be embraced by Interpol’s recent campaign, which had objectives including exploring how money muling worked, and how to avoid becoming a victim.
