Money mules have become a widespread issue, and the challenge is only expected to intensify.

BioCatch, a digital identity and fraud prevention company based in New York City, reported nearly two million money mule accounts by its customers in 2024. These accounts were identified across 257 financial institutions on five continents deploying BioCatch’s anti-fraud, scams, and financial crime solutions.

Money mules and cybercrime

A money mule, sometimes called a “smurfer”, is a person who transfers money acquired illegally, such as by theft or fraud. These transfers can be carried out in person, via a courier service, or electronically, on behalf of others, and mules typically receive a small cut of the money transferred.

Mule accounts play a key role in money laundering. In the European Union (EU), more than 90% of all mule accounts identified are linked to cybercrime, such as hacking, phishing and ransomware attacks. However, their use extends beyond online fraud. Organized crime, including drug traffickers, human traffickers, and those who fund terrorism, also depends on mule accounts to fund and launder the proceeds of their crimes.

The scale of money laundering through mule networks is staggering. In 2023, criminals laundered US$3.1 trillion through the global financial system, according to NASDAQ. The United Nations Office on Drugs and Crime (UNODC) estimates that between 2% and 5% of global GDP is laundered annually equating to EUR 715 billion – EUR 1.87 trillion (US$739 million – US$1.9 trillion) each year.

A growing issue

Money mules are expected to remain a key challenge as money laundering activities continue to grow. Between 2019 and 2023, money laundering cases in the US increased by 14%, according to the United States Sentencing Commission. In the UK, cases filed to the National Fraud Database (NFD), rose by 11% in H1 2024 compared to the previous year, according to Cifas, a UK-based fraud prevention non-profit, in collaboration with the Financial Conduct Authority (FCA).

According to BioCatch findings, young people are the most prone to becoming money mules. In the UK, nearly two-thirds of money mules are younger than 30. In the US, those 25-35 were found to be most likely to enlist, unwittingly or intentionally, often enticed by the prospect of a side hustle.

Overall, awareness of the consequences of money muling is fairly low. Research conducted by FraudSMART, a fraud awareness initiative developed by Banking and Payments Federation Ireland (BPFI), found that 25% of UK consumers were unaware that money muling helps fund organized crime. 38% did not understand they could face jail time, and 57% were unaware money muling could affect their ability to obtain international travel or work visas.

The BioCatch research also found that money mules are fairly cheap. In Australia, gangs are paying Australian money mules up to AUS$500 plus commissions for the use of their accounts, according to the country’s financial intelligence agency.

The rise of money mules among business accounts

The BioCatch report highlights the increasing presence of money mule activity within business accounts. In the UK, banks are reporting a rise in fraudulent companies facilitating money laundering and data from the NFD confirm this surge. In 2020, there was a 26% increase in the number of business accounts involved in money muling compared to the previous year.

This surge is largely driven by the ease of company registration and limited regulatory scrutiny. In the UK, one can register a new company for as little as GBP 50 (US$62). The process requires little in the way of identity checks and scrutiny of background information.

Once a fraudster establishes a legal entity, they can open multiple business bank accounts, providing both domestic and international criminals with access to the UK financial system.

Changing detection approach

Another trend outlined in the BioCatch report is the evolution of mule account detection. Traditionally, the responsibility for identifying mule accounts has rested with anti-money laundering (AML) teams, who would typically react to illicit activities after they occurred. However, there is a noticeable shift, with fraud management teams increasingly taking the lead. This proactive approach makes it significantly harder for fraud to occur in the first place.

Additionally, regulatory changes are intensifying the pressure on banks to prevent fraud. In the UK, new rules imposed by the Payment Systems Regulator (PSR) introduce shared liability, requiring payment service providers to cover 50% of scam refunds.

Similarly, in the EU, the 6th Anti-Money Laundering Directive (6AMLD) addresses the issue of money mules by holding financial institutions accountable for failing to prevent money laundering activities. Banks are required to implement robust know-your-customer (KYC) and know-your-business (KYB) procedures to detect and prevent the use of their services by money mules.

Featured image credit: edited from freepik