Even if money mules are not directly involved in criminal activities, they are accomplices and help criminal syndicates remain anonymous, which further exacerbates the problem. By adding layers of distance between criminals and their crimes, it becomes harder for law enforcement (and financial institutions) to trace the kingpins between these schemes.
How Does Money Muling Work?
Money mules move funds through bank accounts, cryptocurrencies, prepaid debit cards, cashier's checks, or even through service businesses. The goal of using a money mule is for criminals to avoid customer due diligence procedures and obscure the source of their funds.
The modus operandi used to recruit money mules is fairly straightforward and rarely changes. Criminals recruit mules through online jobs or dating sites and instruct them to either open a bank account or use their existing account. Money is sent to the mule's account, such as a fake company, or they are provided with cash. These mules may make several small deposits to avoid triggering internal monitoring systems. Once the money has been moved to the account, criminals provide instructions to the mule detailing where and when to move the money, e.g. via wire transfer. Money mules are paid for their participation.
Some money mules enter into this agreement fully aware that they are supporting criminal enterprises; others are duped into these activities believing that they are carrying out legitimate duties for an employer or because they have been led to believe that they are helping a romantic partner. It's often much harder to track illegal money movement when unknown individuals are involved, as they probably have verified accounts that have already been deemed low-risk and thus are subject to less monitoring.
Newcomers to a country, unemployed or economically pressed individuals, students and the elderly are most often recruited by money laundering operations.
Different Types of Money Mules
It's possible to distinguish between three groups of money mules: unwitting participants, knowing participants and complicit participants.
Unwitting participants are unaware that they are part of a larger scheme. They are often solicited as part of an online romance scam or a fake job offer. They may be told to keep a portion of the money transferred as a commission or cover their expenses.
Knowing participants ignore red flags and may even be warned by bank employees that they may be involved in fraudulent activity. They open multiple accounts with multiple banks in their true name and may even become aware that they are involved in a scheme over time. Unlike unwitting participants that believe their romance or job is genuine, these participants are motivated by financial gain or simply believe that they are participating in a victimless crime.
Complicit participants are fully aware of the role they play in financial crime. They open a number of bank accounts to receive money for criminal reasons and may even promote their services as a money mule online. These professional mules may travel to different countries to open funnel accounts or register fake companies, receiving proceeds from multiple lower-level mules. Many of these money mules may even recruit other money mules to assist them.
It's important to note that acting as a money mule is both illegal and punishable, whether the person is acting knowingly or unknowingly. Charges may be brought against them, including charges of mail fraud, wire or bank fraud, money laundering and identity theft. Being found guilty or being suspected of working as a money mule will also damage the mule's credit record and financial standing, and they may have some liability for repaying the money lost by victims.
Common Warning Signs
There are several warning signs the public should be aware of that indicate that a criminal enterprise may be attempting to recruit them as money mules, including:
- Supposed employers sending unsolicited emails or social media messages promising easy work-from-home opportunities that require very little effort. These employers may raise red flags, e.g. using Yahoo or Gmail accounts and having no known address. They rarely furnish employees with job descriptions or titles and allow employees to keep a portion of the funds they are asked to transfer. This employer may ask the target to open a bank account either in their own name or the name of the business in order to receive and transfer money for the enterprise.
- Online romantic partners who met on dating sites will ask their partners to receive money and forward the funds to individuals they do not know, usually stating that they are in some form of distress and need to pay a lawyer or a criminal that's threatening them. They may put forward many seemingly plausible reasons why they cannot pay the person directly.
It's important for members of the public to always perform online searches to verify the legitimacy of any company that approaches them. Never open a bank account on behalf of a company to transfer or receive funds and never give out banking details to people you have met online.
How Financial Institutions Can Prevent Money Mules
Money mules aren't always highly visible, which is why financial institutions like banks should set screening processes in place before onboarding any new customers, known as a Know Your Customer (KYC) process. Banks should also use Customer Due Diligence applications to determine the risk of doing business with each customer and take preventative measures accordingly.
Onboarding may not be sufficient to detect money muling throughout every stage of your customer relationship. Banks should perform regular scans and checks of transactions to determine whether there are any activities that raise red flags, such as sudden and large transfers to a customer's account that aren't in line with their regular activities.
Any questions about your AML and Sanctions compliance? Feel free to reach out to our sanctions.io team or book an obligation-free demo right away.