Financial Fraud Alert: Identifying Money Mules

In October, the Australian Federal Police (AFP) charged seven syndicate members with allegedly laundering almost $229 million. This case, regarded as the most intricate money laundering investigation led by the AFP in Australia, emphasises the ongoing threat money mule fraud poses to Australian businesses.

In this blog, we’ll discuss the common attributes of money mules and how businesses can effectively protect themselves from becoming involved in financial crime.

What is a money mule?

Money mules are the middlemen for criminals who have obtained funds by online fraud though phishing or hacking. The criminals need a mule to launder the funds obtained as a result of illegal activities. After being recruited by the fraudsters, money mules receive funds into their bank accounts and then they withdraw the money and send it to a designated account (domestic or offshore), using a wire transfer service, minus a commission payment.

What are the common indicators associated with money mules?

Unusual financial transactions

A common money mule indicator is involvement in frequent, large financial transactions that are suspicious in nature. Funds are often received from unknown sources and quickly transferred elsewhere. Although not all individuals who receive or transfer funds from unknown sources are money mules, suspicions of money mule involvement are raised when these activities are combined with other red flags.

Unwitting, Witting or Complicit

Money mules can be classified as Unwitting, Witting, or Complicit depending on their awareness of their involvement in criminal activity. Unwitting money mules are unaware they are involved in criminal activity. Witting money mules may not be fully aware that they are participating in a criminal activity, however, they have ignored clear indicators that the activity is illegal or suspicious. Lastly, complicit money mules wilfully engage in money-muling activities despite knowing it is illegal.

Secretive or suspicious behaviour

Money mules may seem particularly secretive about their transactions and the source of their funds. They may also exhibit unusual lifestyle changes such as a significant increase in spending or making extravagant purchases, which can indicate their involvement in money-muling activities.

Real-life examples of money mule schemes

‘Work-From-Home’ Scam

This scheme lures individuals by promising easy money and the ability to work from any location. Typically, the role is related to payment processing and requires the employee to accept and send transfers. . Usually, they are unaware that they are participating in money laundering. These bogus job opportunities are often advertised on online job portals or social media platforms where they primarily target individuals looking for flexible job opportunities. Job titles could include ‘payment processor,’ ‘financial manager,’ or even more broad roles like ‘administrative assistant.’

Romance Scams

This type of money mule scam involves criminals taking advantage of their victims through bogus online relationships. Perpetrators manipulate victims by showering them with love and affection, and building trust before asking the victim to transfer money on their behalf, making up a fabricated story to justify this. They could claim to be an investor or simply convince the victim they need personal transfers done for them because they don’t have a working bank account. Romance scams are associated with significant financial losses for victims.

Reshipping Scams

Individuals involved in a reshipping scam are recruited to receive packages at their addresses and forward them to another location. Often, these packages contain goods purchased with a stolen credit card or funds obtained through fraudulent means. By using an unsuspecting individual as a middleman, scammers can conceal their criminal activities.

Prize-winning scams

Prize-winning scams lure victims in by telling them they’ve won a prize from a fake lottery or sweepstakes. Fraudsters can  exploit the victim in one of two ways; obtain the victim’s personal information to “send the prize”, however, they later use the information to take over the victim’s account. Alternatively, the fraudster may also tell the victim that they need to pay a fee or tax before they receive the prize, but then disappear after the victim pays.

How can advanced identity verification technologies help financial institutions detect and stop money muling?

Identifying money mule accounts at the onboarding stage can be difficult as these individuals often have a clean banking history. However, biometric verification not only helps to enhance remote identity verification process, it also acts as a fraud deterrent by ensuring the individual submitting the application is the same person identified on the presented document.. ‘Passive liveness’ can also be used to determine whether the selfie image being captured is a real person taking the photo in real-time or a fraudster trying to use an existing photograph or video.

To help in the early detection of fraud, solutions like GBG Alert, which is derived from millions of identity verifications, detects fraud at onboarding so organisations can apply a step-up identity process or reject an application altogether. GBG processes a large majority of identity verifications in Australia with complete coverage of sectors that are early indicators of identity fraud, including banking, wagering and telecommunications. By leveraging this unique cross-industry data, GBG can accurately detect identity theft in fraud and money laundering, preventing bad actors from entering a business.

The importance of collaboration among financial institutions , authorities

Fighting money muling requires collaboration between financial institutions and law enforcement. Financial institutions and authorities must also stay up-to-date with the latest patterns and trends in criminal behaviour. Through early detection and reporting of suspicious transactions, financial institutions play an important role in fighting money muling schemes.

To explore how greenID’s identity verification solution can be tailored to help your business identify money mules and protect itself against financial crime, visit https://gbg-greenid.com/.