Blocking Money Mules Starts with Inbound Payment Monitoring

Money mule accounts are the final destination for the funds from scams. These accounts are a growing threat as criminals recruit individuals into their schemes. Recent data found that 42% of first-party fraud (fraud committed by a bank customer) is related to money mule activity.

Banks need to enhance their inbound payment monitoring to help scam victims, detect and close accounts controlled by criminals, and reduce their risk exposure from scam losses. The growing expectation that receiving banks must refund scam losses to victims makes this final point even more important

Learn how Feedzai’s innovative 3-in-1 approach, from account opening to inbound payment monitoring, uncovers money mules. Discover how our comprehensive solution addresses financial institutions’ complex challenges that money mules present.

4 Key Money Mule Detection Challenges

Stopping money mules is a challenging feat. Financial institutions and banks often face three key issues when addressing the money mule threat.

1. Mules Often Fall in the Anti-Money Laundering Silo

First, banks have traditionally treated money mules as part of their anti-money laundering (AML) efforts. Many banks still use legacy AML systems, which rely on rules designed before the rise of real-time payments. This has resulted in lower rates of intervention over long periods of time. It also limits detection and intervention in the case of money mules to a bank’s AML team while limiting the ability of fraud analysts to step in.

2. Intervention in Mule Accounts is Seen as Low ROI

Criminals need money mule accounts to cash out the proceeds of fraud. Blocking or closing a customer account is costly. Many banks want crystal-clear indicators of a breach or criminal activity before taking the drastic step of closing an account. Many banks only intervene in extreme cases because remediation is so costly and involved.

3. Rise in Money Mules and First-Party Fraud

Every fraud requires laundering illicitly obtained money. Typically, most low-value, small frauds, such as scams or unauthorized fraud, must be washed. This happens through mule accounts. 

Money mules have increasingly become a problem in recent years. The threat has increased significantly with the ease of digital account creation. 

Money mules come in three categories: 

• Complicit: These actors are connected to the criminal network behind fraud and financial crime. They play a critical role in opening accounts and recruiting other money mules.
• Witting: These actors suspect or know they are engaging in risky money mule activity. However, they are willing to act as mules due to financial strain or other circumstances.
• Unwitting: These individuals are unaware they are being manipulated as part of a money mule scheme. They often believe they are earning money from a job they found online.

Unwitting money mules are especially troublesome for banks. Criminals recruit legitimate customers and pull them into money mule schemes. They do not realize they are committing first-party fraud until too late.

4. Existing Money Mule Detection Tools are Siloed

Too often, financial institutions take a siloed approach to stopping money mules. This usually means reviewing only outgoing payments or activity on a single banking channel.

This approach limits banks’ ability to fully identify money mule activity because it only provides a partial view of relevant activity. Channel-based fraud detection systems can’t connect data from other sources. Important insights will go undetected if banks can’t pull critical contextual data to detect and prevent money mule activity effectively.

For example, let’s say a bank account experiences a series of low-value incoming deposits from different accounts. This might not seem suspicious on its own. However, a closer look at the bank’s activities shows that the bank account saw a sizeable outgoing payment after receiving the smaller sums. This is a serious red flag that a money mule controls the account.

Feedzai’s 3-in-1 Approach to Uncovering Money Mule with Inbound Payment Monitoring

Feedzai’s RiskOps platform tackles the money mules threat differently by collecting data across multiple channels in real-time. This approach offers banks three key opportunities to stop money mules before they can be used to transfer illicit funds.

Intercept Money Mules Account Opening

Account opening is the ideal way to stop a bad actor from accessing a legitimate bank account. Feedzai’s Digital Trust solution can review device intelligence, behavioral biometrics, and network identification.

Banks can use these insights to assess if this customer is too risky to onboard. Having these insights is the most effective way to stop money mules because it stops criminals at the financial institution’s front door.

Ongoing Monitoring Activity

When it comes to monitoring existing accounts, many banks simply review session data for suspicious activity. Feedzai’s solution goes a step further in understanding what users do while in session and how they navigate across different accounts. 

For example, let’s say an account is opened, immediately adds a beneficiary, and suddenly goes dormant. This could be a red flag that the account is intended for money mule activity. Adding the beneficiary at an early stage avoids detection later for transfers.

Inbound Payment Monitoring

An incoming transaction of a similar or greater value precedes most suspicious outgoing payments. Inbound payment monitoring provides banks additional contextual data that a siloed view approach doesn’t allow. 

Inbound payment monitoring will become increasingly important as some regulators expect banks to reimburse their customers for scam losses. The UK’s 50-50 liability split will mean banks that receive money from scams or fraud will be forced to share the loss with the sending institution. Inbound payment monitoring will be critical to minimizing scam losses.

Feedzai’s 3-in-1 approach offers a comprehensive solution that aligns with the evolving demands of today’s financial crime trends. New obstacles don’t deter criminals; they just find new ways around them. Banks need the same innovative attitude to enhance their fraud and scam prevention capabilities and protect their customers and bottom lines.