Money Mules in the Spotlight

I’ve often wondered how firms can effectively separate AML and fraud teams and this question comes into focus when we think about money mules. Fraudsters need mule accounts to survive; money mules are the simplest form of laundering the proceeds of crime.

In October last year, the FCA published the key findings from their review of systems and controls relating to mule accounts and the areas highlighted included onboarding, monitoring and reporting.

Their report highlighted areas of good practice:

  • Use of technology calibrated specifically to identify mule accounts;
  • Lawful intel and data sharing and engagement within the financial services industry was noted as good practice; and
  • Training was also a call out in the “good” category – providing relevant training with criminal typologies to ensure staff are aware of the signs of mule accounts.

Less good however, was a longer list and areas reported as requiring improvement which included:

  • Risk assessment, governance and lack of senior management oversight;
  • Gaps in onboarding processes and failures to investigate red flags in customer data, such as multiple customers at the same address or using the same device;
  • A plethora of transaction monitoring issues were highlighted, ranging from failure to monitor incoming payments, inappropriate (possibly immature) use of machine learning technology, through to simple failures by analysts to record their rationale for closing alerts;
  • Lack of dedicated resource focussed on money mules;
  • Poor consumer communication and awareness; and
  • Training – this time in the “room for improvement” section, with examples cited as alerts being closed with poor rationale and obvious suspicious activity not resulting in SARs being raised.  

The FCA made it clear that firms must review their own controls in light of the report, and to take a proactive approach in managing their financial crime risk and must have proportionate controls to mitigate the threat posed by mules.

More recently, the UK government published an action plan to tackle the money mule threat. 

The government report brings together a range of planned activities to tackle the mule problem, including:

  • Publication of information specifically related to money laundering related financial exploitation, designed for frontline professionals, along with development of communications to help educate industry and the public;
  • Greater cross industry sharing of information to truly understand the threat – involving CIFAS, the National Crime Agency, Home Office, Law Enforcement and financial services;
  • Action such as targeting resource and support for victims of money laundering financial exploitation;
  • Updating legislation to recognise financial exploitation; and
  • Application of new technology to identify and disrupt organised fraud.

There’s a lot going on here and to give justification, if needed, to the scale of the response required, the figures are staggering.

Recently, it’s been widely reported that almost 40% of reported crime in the UK is fraud related, however this latest government report also confirms that in 2022, over 39,000 accounts were identified as displaying behaviours suggestive of mule activity, and that the NCA estimates over £10 billion is being laundered annually though mule accounts.

The report states that money mules are the gateway to criminal gangs being able to profit from their criminal activity, and cites cases of children as young as 11, and adults at risk being recruited to move funds around the banking system. 

The criminals behind the mule recruitment are targeting some of the most vulnerable people in society, and it’s clear from the research that there’s a huge effort needed to tackle this issue.

1 in 4 people are unaware that money muling is illegal, and over a third of young people aged 16-24 did not know it was a crime. That’s astonishing when the implications can be life changing; from a criminal conviction for money laundering carrying a custodial sentence of up to 14 years, through to the day-to-day implications of having bank accounts closed and CIFAS loadings.

Let us take one of the young people surveyed as an example; the knock-on effect (even without a criminal conviction) could jeopardise future employment prospects and access to banking and credit facilities. On the brink of adulthood, the long-term implications of being locked out of employment and unable to open a bank account are catastrophic.

So, it’s clear that education needs to play a central role in tackling the threat and that government, regulators, financial services, local authorities and experts such as CIFAS need to act collaboratively to make this land effectively.

What action is being taken?

Another action in the report is for the Home Office to work with the banking industry to ensure that vulnerable or exploited people are not excluded from the banking system, and to allow firms access to information to know when someone is a victim of money laundering exploitation.

The other side of the (laundered) coin is of course the criminal gangs. What can be done to tackle them?

The National Economic Crime Centre, in conjunction with industry, will be taking the most up to date intelligence and trialling new ways to disrupt the networks in so called “intensification periods”.

The CPS is tasked with updating prosecution guidance to recognise money laundering related financial exploitation.

Looking to the future for Financial Services

Inevitably, a huge burden has to fall on financial services too. Money muling can only happen when the proceeds of crime are moved around the financial system. Whether that’s using bank accounts, crypto, cash, money service bureaus or gift cards, the ability to move and access money is the ultimate aim. So, disrupting the flow and removing access for the criminals is essential.

Accomplishing that without unduly impeding access to the system for legitimate customers is where it gets tricky, and navigating the path between fraud prevention and Consumer Duty is proving to be a challenge. UK Finance will create best practice guidance on dealing with money mules and the FCA will continue their work on firms’ fraud controls.

The forthcoming changes to APP fraud reimbursement aim to “incentivise” banks to tackle fraud, yet in my 20+ years working in financial crime prevention, I’ve yet to find a bank who wasn’t already sold on the idea that fraud is a bad thing that should be stopped.

The impacts of serious and organised crime are devastating. There’s an enormous task ahead to tackle money mules, and everyone working across the range of industries and services needs to give this everything we can.

What next?

There’re likely to be more public-private opportunities as we collaborate and innovate to find the most effective solutions to this issue. 

There are likely to be lots more consultations and publications to digest too, ultimately resulting in clearer industry guidance and increased oversight, but what action can financial crime professionals take now?

  • Ensure you are, as the FCA recommends, regularly reviewing your own controls for Money Mules and other types of financial crime.
  • Consider if you have other data you could use in conjunction with transactional data to spot money mules and other suspicious activity.
  • Keep up to date with current financial crime trends, by attending industry events and sharing peer group best practice to help you tweak your controls to keep up with the changes as financial crime evolves. 

Claire Rees is a Financial Crime Regulatory Specialist in the UK for Jade ThirdEye. Claire has over 21 years' experience working in risk management roles in financial services, 17 years of which were spent specialising in financial crime prevention in a number of senior roles including most recently as Head of Fraud and AML with a mortgage lender and service provider. She regularly speaks on regulatory and industry financial crime panels, and can be reached at [email protected].

The Institute of Money Laundering Prevention Officers trading as The Institute. © Copyright Institute of Money Laundering Prevention Officers. All rights reserved.
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