Money mules are key players in the money laundering process, helping criminals move and conceal illicit funds. Europol reported a 34% increase in money mule cases in 2021, with criminals also targeting young people through online job scams.
Financial institutions, such as banks, catch mules by monitoring for suspicious activity, such as rapid transfers after large deposits. For compliance to AML regulations, businesses must always be on the lookout for money mules.
What is a Money Mule?
A money mule is a person who transports illegally obtained money on behalf of criminals, often trying to conceal the source of the money. This person acts as an intermediary to transfer money between accounts or even across borders. This money is often associated with fraud, identity theft, or scams, causing financial loss to the intended victims.
Money mules may receive a small commission for their participation, but they face serious legal consequences, such as money laundering or fraud charges. Criminals often recruit vulnerable individuals, such as job seekers or people targeted through online ads, to recruit money mules into participating in illegal activities.
In short, money mules help launder stolen money and enable scammers to avoid detection.
How Does Money Muling Work?
Money mules are part of a broader money laundering process that involves three stages. Criminals use money mules to conceal the origins of illicit funds through various transfers. The process works as follows:
- Placement: Illicitly obtained money is introduced into the system by depositing it into a bank account or other financial service through a money mule.
- Layering: The mule moves the money through a series of transactions, often between multiple accounts, to conceal its source. This step makes it difficult to trace the source of the funds.
- Integration: The now "clean" money is returned to the criminal, appearing legitimate and ready to be used.
What Are the Different Types of Money Mules?
The FBI categorizes money mules into three categories based on their goals and degree of involvement:
- Unknowing/unwitting money mules
- Witting money mules
- Complicit money mules
Unaware money mules are unaware they are part of a broader criminal enterprise. They could also fall prey to romance scams on dating sites or be recruited online using social engineering because they are typically driven by the confidence they have in the person asking them to do this.
Participants in witting are assumed to be somewhat conscious that what they are doing is suspect. Most people are worried about what they are asked to do. For example, to create several bank accounts. They may also have been warned that they are most certainly engaging in an illegal plan, which they ignored. They are, therefore, regarded as being "willfully blind" to the scam.
Money mules that are complicit in crime know what they are doing and voluntarily participate. They might promote their expertise and experience with mules. They frequently operate fraud rings, recruit new members, and run funnel accounts where they get cash washed by lower-level mules. Due to their active participation and awareness of the illicit nature of the activity, complicit mules are typically charged with more serious charges. This is one of the most common methods to launder money.
What Industries Do Money Mules Target?
Money mules can be found in a variety of industries, but they are most commonly found in industries involving large amounts of money transfers, such as banking, finance, and e-commerce. Criminals using money mules as a way of washing money may target people who work in these industries or have access to bank accounts or financial systems.
All companies subject to anti-money laundering legislation are required by law to take precautions to avoid money mule behavior and money laundering in general. For instance:
- Building societies and financial entities
- Investment firms and fintech
- Forex and cryptocurrency brokers
- Estate brokers
- iGaming businesses
Local legislation determines whether an entity must adhere to AML regulations. This relates to entities that store, move, or assist in the movement of huge sums of money by people or enterprises. This is not limited to banks. For instance, money laundering scammers frequently target iGaming websites.
Who are the Most Targeted Victims?
The most frequently targeted groups, according to Europol, are foreigners, the unemployed, financially disadvantaged students, and young people. Europol said that organized crime groups and mule recruiters began to target younger generations (those between the ages of 12 and 21), who were typically under the age of 35. Even if authorities find and remove these posts, it is simple for crooks to repost false advertisements.
What are the Red Flags of Money Mules?
To prevent becoming a money mule, follow these suggestions:
- Never consent to receiving or sending money for someone you don't know or haven't met in person.
- Never accept a job that offers quick money, especially one that includes shipping or receiving cash or goods.
- Don't follow someone else's instructions while opening a bank or cryptocurrency account.
- Even if an internet love interest sends you money first, don't pay money to them.
- Never pay to claim a reward or transmit money to someone else using your "winnings."
Red Flags For Businesses
- The customer refuses to submit KYC verification checks
- Money deposited/withdrawn in an unusually short period of time
- The user continues to log in from various distant geolocations.
- Large unplanned transactions.
- Hundreds/thousands of small sums deposited and withdrawn in large quantities.
How are Money Mules Selected?
Recruiting for money mules typically takes place on social media platforms like Facebook, Instagram, Snapchat, and even dating websites. Nevertheless, it can also happen through word of mouth and phony recruitment websites. Criminals may post job ads online, promising easy money for a job involving money transfers from one account to another. They may use enticing job titles such as "money transfer agent" or "financial agent" to entice unsuspecting people. These offers, which carry an ambiguous employment title, advertise a large financial reward from home for little work and little effort, and there is no requirement for relevant expertise or specialized financial education. The tasks that money mules typically get by email from their "employer" are straightforward:
- Create a firm in their name or the name of one they already own, and open one or more bank accounts;
- Get the funds from the bank account, transfer them to the financial services, and take a percentage as a commission.
What are the Risks and Consequences for Money Mules?
Money mulling for third parties, usually belonging to organized crime organizations for their financial crime scenarios, may be viewed as aiding and abetting serious crimes by relevant authorities. As a result, money mules can put themselves in danger even if they are unaware of the overall scheme. So, they may still be charged as accomplices in a crime and face fines and/or prison sentences.
According to the FBI, any money mule may be prosecuted and imprisoned on various charges such as wire fraud, bank fraud, money laundering, and aggravated identity theft.
In the United States, the federal agency adds that working as money mules can harm a person's credit score and financial standing. According to police in the United Kingdom, money mules may result in the following penalties:
- Closure of the bank account used for money laundering;
- Difficulties obtaining credit or student loans;
- Difficulties obtaining a phone contract;
- A maximum prison sentence of fourteen years.
How Do Money Mules Get Caught?
- Suspicious Banking Activities: Banks and financial institutions monitor for unusual or suspicious financial transactions, such as large cash deposits followed by immediate wire transfers.
- Law Enforcement Investigations: Police and other law enforcement agencies may launch investigations into money mule networks, tracking down and apprehending individuals involved in illegal money laundering activities.
- Company Reports: Companies targeted by money mule schemes may report suspicious activities to law enforcement, leading to the identification and capture of the money mules involved.
- Electronic Paper Trails: Electronic trails, such as IP addresses used in online transactions, can be used to track down money mules and gather evidence of their involvement in illegal activities.
- Tips and Informants: Tips from informants or whistleblowers can also lead to the identification and apprehension of money mules involved in criminal activities.
Can You Go to Jail For Being a Money Mule?
Money Mules who are caught in these criminal activities find it difficult to obtain credit, such as for phone contracts, student loans, and future loan applications, since all of their bank accounts (fraudulent and non-fraudulent) are frequently closed or frozen. Furthermore, being convicted is not uncommon; individuals can face up to 14 years in prison.
Such actions leave a mark on criminal records, which has additional consequences - they can also make it more difficult to find work, particularly in the field of data protection. It is critical to emphasize this, especially since almost every job nowadays involves data protection, such as payments.
Sanction Scanner can help businesses detect and prevent money mule activities by providing comprehensive AML solutions. Our real-time transaction monitoring and sanction screening tools can identify suspicious behavior, such as unusual transfers and patterns commonly linked to money mules. To learn more, contact us today or request a demo to see how Sanction Scanner can protect your business from money laundering threats.
