Money Mules & AML/KYC
Money Mule
A money mule is someone who transfers or moves illegally
acquired money on behalf of someone else.
A money mule transaction is when someone transfers money on behalf of another person that was acquired illegally. Money mules are often recruited to launder money from crimes like human
trafficking, drug trafficking, and online scams.
Criminals recruit money mules to
help launder proceeds derived from online scams and frauds or crimes like human
trafficking and drug trafficking. Money mules add layers of distance between
crime victims and criminals, which makes it harder for law enforcement to
accurately trace money trails.
Money mules can move funds in
various ways, including through bank accounts, cashier’s checks, virtual
currency, prepaid debit cards, or money service businesses.
Some money mules know they are
supporting criminal enterprises; others are unaware that they are helping
criminals profit.
Money mules often receive a
commission for their service, or they might provide assistance because they
believe they have a trusting or romantic relationship with the individual who
is asking for help.
Types
of Money Mules
Unwitting or unknowing money
mules are unaware they are part of a larger scheme.
- Often
solicited via an online romance scheme or job offer
- Asked to use
their established personal bank account or open a new account in their
true name to receive money from someone they have never met in person
- May be told
to keep a portion of the money they transferred
- Motivated by
trust in the actual existence of their romance or job position
Witting money mules ignore obvious
red flags or act willfully blind to their money movement activity.
- May have been
warned by bank employees they were involved with fraudulent activity
- Open accounts
with multiple banks in their true name
- May have been
unwitting at first but continue communication and participation
- Motivated by
financial gain or an unwillingness to acknowledge their role
Complicit money mules are
aware of their role and actively participate.
- Serially open
bank accounts to receive money from a variety of individuals/businesses
for criminal reasons
- Advertise
their services as a money mule, to include what actions they offer and at
what prices. This may also include a review and/or rating by other
criminal actors on the money mule’s speed and reliability.
- Travel, as
directed, to different countries to open financial accounts or register
companies
- Operate
funnel accounts to receive fraud proceeds from multiple lower level money
mules
- Recruit other
money mules
- Motivated by
financial gain or loyalty to a known criminal group
Through a process of Certification and Accreditation, an IT
system can be granted an Authority to Operate (ATO)—sometimes called
Authorization to Operate—a status that approves an IT system for use in a
particular organization. The government uses ATOs to manage risk in their
networks by evaluating the security controls for new and existing systems.
Authorization certifies that the organization explicitly accepts the benefits
of using the system outweigh the operational risks it introduces.
Targets
of Account Takeover (ATO) Attacks
1.
Financial. When accessing financial accounts, an attacker can steal
money or use the account to make purchases. This can be easily done with a bank
or credit card account. Another option they have is to manipulate investment
portfolios.
2.
Travel. A hacker can try to steal your frequent flyer miles.
3.
Retail. Hackers may try to take over online retail accounts so
they can purchase products while pretending to be you and either send them to
themselves or to someone else who can then sell them for profit.
4.
Government
benefits. If a fraudster is able to take
over an account that provides government benefits, such as Medicare, they can
route the benefits to themselves or sell the account information to another
hacker online.
5.
Retail
loyalty rewards. Hackers can use your loyalty
points rewards either for their own benefit or as an asset they can sell to
other fraudsters online.
6.
Cellphone
contracts. Some hackers will use your cell
phone account credentials to make phone calls, send text messages, or use your
data to avoid paying for it themselves.
Account Takeover
When a hacker tries to execute an
account takeover (ATO), their goal is to take control of your account and use
it to steal information or for their own personal profit. In the context of
this account takeover definition, the end objective is typically to benefit the
hacker or their organization.
However, account takeover fraud can also be used to execute
a vandalism scheme designed to hurt the reputation or the operational capacity
of a company. Fortunately, there are several things you can do as part of an
account takeover protection plan. All organizations, regardless of size, should
have tools and protocols in place for account takeover prevention.
AML/KYC for Money Mules
Mule
accounts play a critical role in the fraud supply chain infrastructure and are
a mechanism to cash out fraudulent transactions, launder money, and support
criminal operations. Money mules come in many forms, each with different goals
and behaviors that require unique approaches to detect. In addition to AML for
AO and ATO, some softwares have features like Mule Account Detection that detects
sold accounts, accomplices, and misled mules. These personas often go
undetected with standard fraud detection measures.
Some Mule Operations
The account peddler
Buying and selling of established
bank accounts is a common tactic for money laundering teams.
The accomplice
Catching the accomplice decreases
illegal operations and reduces criminal growth.
The misled mule
Mitigating misled mules can protect
financial institutions and their customers from unknowingly breaking the law.
Identity theft
Early detection is critical when
preventing money laundering activity.
Credential Stuffing
Detecting credential theft and
account break ins can prevent the use of victim accounts for money laundering
purposes.
a). Money Mules
Inaccessible
bank accounts – During an investigation, law enforcement officials may freeze a
money mule‟s bank accounts. Being unable to access funds may create a
significant financial burden. These activities may also have a long-term impact
on credit scores.
Prosecution
– Money mules may be prosecuted for their participation in these schemes.
Accountability
for charges – In some cases, money mules are found personally responsible for
repaying the losses suffered by the other victims.
Vulnerability
of personal information – As described in the typical process, criminals often
collect personal information from the money mules. It is possible that the
criminals may use this information for other malicious purposes.
b). Targeted
Individuals
If
the fraud is designed to extract money from individuals, those individuals
could experience the following consequences:
Financial loss – An individual may pay for
undelivered goods or have money deducted directly from one of his or her
financial or credit card accounts. Depending on the forum used for the
transaction and whether the scheme is identified, the individual may be able to
recover at least a portion of these losses.
Significant
hassle to resolve issues – Identifying and reporting the fraud may require
numerous steps, and the process could take a long time
The Reserve Bank of India (RBI) said on
Friday (December 6, 2024) that it has created an artificial intelligence (AI) powered
model that could reduce digital fraud by helping banks deal with the increasing
problem of “mule” bank accounts. The model, called MuleHunter.AI, has been
developed by the Reserve Bank Innovation Hub (RBIH), Bengaluru, a subsidiary of
the central bank.
The financial sector landscape, is witnessing paradigm shifts with the advent of frontier technologies.
Technologies like Artificial Intelligence (AI)/ Machine Learning (ML),
tokenisation, Cloud Computing hold transformative potential for the financial
sector as they can handle enormous volumes of data, automate complex processes,
enhance decision-making, and bring in unprecedented efficiencies.
While
the benefits are many, the attendant risks like algorithmic bias,
explainability of decisions, and data privacy, are also high.
Robust AML/KYC framework and continued monitoring is essential to keep Money Mules from making use of institutional networks.
Happy reading,
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