Money muling, an underexposed phenomenon of money laundering

28 November 2022
Audrey Carvalho Project Consultant at TriFinance Financial Institutions Connect on Linkedin
Matthias Hautman Project Consultant at TriFinance Financial Institutions Connect on Linkedin
Key Messages
  • For banks, the fight against money muling is not an easy battle, but it should come with a combination of action and prevention
  • Money muling does not look like regular fraud or money laundering as it targets a younger audience through school and social media
  • The money mule is both a victim and an offender, and the consequences can be very impactful for all involved parties.

These past years, and in light of the big financial scandals that tainted the financial landscape, increased domestic and European regulation regarding money laundering has put incredible pressure on financial institutions to put in place strong procedures and active monitoring towards their clients' (transactional) behavior. However, If banks are trying their best to safeguard their client’s interests and the ones of society in general by creating a safer, more transparent financial space, this has proved not to come without challenges.

Criminals are becoming more inventive in their means to conduct their illegal activities by targeting a vulnerable population. By playing on their credulity, need to please, their ignorance of the financial system and contacting them through their favorite social media, youngsters become unwilling and unknowing parties to a phenomenon called ‘money muling’. The impact on their future lives, those of their guardians, but also on the financial institution hosting their account can be damaging not only financially but also legally and reputationally.

Compliance professionals specialized in money laundry experience first-hand the challenges the bank and the clients are facing with regard to this phenomenon.

It is thus crucial to explain what money mules are, how they are recruited, the consequences but also think further as to the role of financial institutions in creating a trusting environment not only through their internal monitoring systems but equally through prevention leading to safer, better markets.

What is a ‘money mule’?

By definition, money mules are people helping criminals to move their funds while the criminals themselves remain anonymous.

The first contact between both parties usually occurs over social media (Instagram, Snapchat, Facebook,..) or through their inner circle at school. With the promise of a small compensation (that’s never given) in exchange for their bank cards and PIN code, the youngster explicitly authorises a third party to transfer money (mostly originating from cybercrime) from a “friend”. The transferred money with any residues on the account is then withdrawn in cash or used to buy goods.

In and out: that’s it. By the time the victim realises the issue, the money is gone. Worst, their status from victim to criminal rapidly changes, and the consequences are potentially damning, not only for the account holder and their guardians in the case of minors (e.g. parents) but for the financial institutions themselves as well.

The consequences of money muling

As this service might seem an innocent act to gain some easy money and popularity in the schoolyard, this is, in reality, less glamorous as this is a crime called money laundering and is sanctioned by the penal code. It does not matter that the criminal was naive, a minor or that this does not look like a classical money laundry scheme, nor by the typology of the victim, nor by the type of operation where the account is used on a very short time as a transit account (unlike a tax evasion crime for example). Both the financial and the criminal consequences could have a lasting impact on the victim-turned-convict and/or their guardians, who would have to face the consequences of their offspring's misguidance in the case of minors.

Banks could be sanctioned by their supervising authorities as well for failing to put in place efficient measures to fight against money laundering: they have an obligation to monitor dormant accounts, for example, and analyse or report any suspicious activities on said accounts (most of the young accounts are unused or less used). With consideration to the risk-based approach, institutions could be considered as defaulting in their capacity of assessing and mapping their youngster population and putting in place extra monitoring measures on their accounts.

This could, of course, lead to fines and long-term financial damages but to reputational consequences as well. A publication in the press or a young victim using their social media platform to alert on their experience might even be more impactful.

it is henceforth necessary to enforce measures in response but preemptively as well.

"Young people are less receptive to messages from banks via traditional channels such as radio, advertisements on public transport, etc. As fraudsters mostly contact money mules via social networks such as Instagram, banks should do the same and create awareness using the same channels."

Matthias Hautman, Project Consultant at TriFinance

Action and awareness: key concepts to fight money muling

It is noticeable that although extensive access to information and documentation is widely available through various media, young(er) people remain rather naive and uninformed about banking or financial crime, how to recognize it and how to avoid being a victim. This is where financial institutions have a pivot role to play:

First of all, banks should, of course, be on point when it comes to their internal tools to fight money muling, and be aware of its existence and its specificity to prevent the use of their accounts as transit accounts for criminals.

In terms of KYT (Know your Transactions), banks are obliged to understand their clients' transactions. The challenge for banks could be to identify cases where their clients are being used as money mules in their transaction monitoring system. A swift identification, followed by rapid intervention, is required in such cases as the money launderers only use the card and PIN for a very short period. Instead of acting after fraudulent behaviour is reported, they could take a more proactive role by reaching out to the client when similar (possibly fraudulent) activity is discovered and have a potential transaction confirmation by the first line when the transaction meets certain criteria.

But as these operations are done in a limited timeframe, it is usually too late once the issue has been identified. This is why communication, interactions with this population and prevention are keys to fighting against this issue. Financial institutions need to continue to mention and repeat that clients should in no circumstance share their PIN or bank card, not even with employees of the bank who would never on any occasion ask for it. Even though this seems logical, the phenomenon of money muling shows the importance of never sharing these confidential details.

Know your basics

Besides that, there is a responsibility of banks, in collaboration with schools, parent associations, financial associations, youth associations, and social media, to create an environment of trust and transparency when it comes to interacting with their younger customers. By being present on social media, with short clips creating awareness on real-life situations, intervening in schools, coming to Parents' knowledge circles, and organizing workshops showcasing the following basics:

  • If an offer (through social media) seems too good to be true, comes from a person with influence, even from a friend, it usually is.
  • Never share your bank account or other personal details with anyone.
  • Secure your bank cards and keep them close to you.
  • Don't write your PIN down. Pick a code which is not obvious, and don’t share it with others.
  • Multiple cards? Take different codes for each of them.

Not only would the banks improve their image and market value, but they would also strengthen their reputation leading to the creation of long-term fruitful relationships with these future active clients and their guardians.

Banks are obliged to understand their clients' transactions (KYT or Know your Transactions). The challenge for banks could be to identify cases where their clients are being used as money mules in their transaction monitoring system.

Audrey Carvalho, Project Consultant at TriFinance

Money mules, the phenomenon in numbers

  • 16% of the young people questioned (between 16 and 30) are willing to serve as a money mule vs 14% in 2021
  • 10% of the young people questioned indicate that they have already been approached to serve as a money mule vs 6% in 2021
  • 35% of the respondents (all age groups) are aware of the phenomenon of money mules vs only 22% of the younger respondents
  • 14% of the young respondents think there are no risks involved when serving as a money mule

Research conducted by Febelfin in cooperation with IndiVille.

“As money mules are recruited over social media and most probably attracted by the financial reward - even very limited -, I believe that the statistics are even worse between the age of 14 and 23.”

Matthias Hautman, Project Consultant at TriFinance

In conclusion

The fight against money muling is of public interest, and all parties have an active role to play. Expert professionals can support financial institutions in setting up their active and preemptive measures: whether internally (man-powered or AI-applied) or externally outsourced.

For more information about the subject, or if you have additional questions about this article, don’t hesitate to contact Audrey Carvalho or Matthias Hautman.

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