Money Mules Moving Illicit Proceeds from COVID-19-Related Crimes

Criminal Networks Put Mules to Work to Complicate Money Trails During Crisis

June 11, 2020 by Verafin

“In the past, money mules have been viewed as low-level offenders, transferring small amounts of cash. However, organised, sophisticated money mule schemes have evolved as a [professional money launderer] mechanism.”
Financial Action Task Force

From economic stimulus payments to unemployment benefits, criminals are thriving on unparalleled opportunities for fraud during the COVID-19 crisis, enriching themselves at the expense of thousands of Americans in need. With over $46 million stolen from consumers in the first half of 2020, criminals deploy a variety of tactics to disguise their illicit activity, including the use of money mules to launder funds from fraudulent schemes.

Money mules are individuals who transfer the profits of financial crimes on a fraudster’s behalf. The movement of these illicit funds, occurring through bank transfers and cash transactions, complicate and disguise the money trail, impeding law enforcement investigations. While some mules are complicit and financially desperate, others are unknowingly recruited through romance or employment scams and believe their actions are work-related or helping a loved one in need. Seniors and vulnerable customers may be at greater risk of falling victim to scams in times of crisis.

Once a money mule is recruited, the illicit funds are deposited into their bank account and instructions are provided on how the money should be moved. This often involves wiring the funds to a third account owned by another mule or under criminal control, where they are withdrawn or further circulated.

Money mule activity complicates financial crime management, as fraud schemes and money laundering activities intersect. With millions of dollars stolen to date and fraudsters continuing to leverage the COVID-19 crisis, financial institutions must collaborate to shut down money mules channeling funds across institutions for criminals and their networks.

Criminals Recruit Potential Mules Through Fraud Scams

As unemployment soars amidst the COVID-19 crisis, criminals are using work-from-home scams to target the growing number of Americans searching for income to recruit mules. These schemes are similar to employment scams — fraudsters advertise phony jobs, such as processing donations for COVID-19 relief, that actually involve laundering stolen funds.

Other criminals are capitalizing on loneliness during the pandemic, using romance scams to trick well-meaning victims into mule activities. While these interactions start innocently, they become financially and emotionally devastating as criminals escalate requests to open bank accounts and transfer funds.

Money Mules a Tool for Criminal Networks

“Money mules are an essential part of organized crime and international fraud schemes, whether it is a romance con, business email scam, or a work-from-home ploy.”
The Journal of Accountancy

Money mules can be the bridge between seemingly isolated instances of COVID-19-related fraud and networks responsible for crime on a global scale. Transnational criminal organizations can use mules to move money across borders to obscure the source of funds.

Recently the U.S. Secret Service warned of a Nigerian crime ring at the heart of a massive scheme to defraud U.S. unemployment benefits programs with the aid of a mule network hundreds strong. Many of these mules are believed to be unemployed individuals desperate for income, or believe their actions are helping a loved one in need.

As Elaine Dodd, executive vice president of the Oklahoma Bankers Association remarked, “it’s been unbelievable to see the huge number of bogus filings here, and in such large amounts. I’m proud of our bankers because they’ve managed to stop a lot of these transfers, but some are already gone. Most mules seem to have [been involved in] romance scams.”

Considerations for Financial Institutions

“Information sharing among financial institutions is critical to identifying, reporting, and preventing evolving fraud schemes, including those related to COVID-19.”
FinCEN Notice Related to the Coronavirus Disease 2019 (COVID-19)

With COVID-19 creating historic opportunities for criminals to steal and launder funds through sophisticated mule schemes, financial institutions must have controls in place to protect themselves and their customers from the financial and reputational risks of illicit activity. A consolidated fraud and AML platform is essential to detecting fraud scams, the laundering of illicit funds through mule accounts, and facilitating thorough investigations across an institution’s fraud and AML departments.

Real-Time Fraud Detection

The threat of fraud during the COVID-19 crisis continues to rise. Financial institutions need targeted analytics to proactively detect and prevent fraudulent activities, such as mobile deposit scams and unusual incoming wires, to protect themselves and their customers from loss.

With Verafin’s Fraud Detection and Management solution, you gain holistic insights into fraud spanning multiple channels, and the ability to halt suspicious transactions in real-time, before funds leave your institution.

Targeted AML Analysis

Through coordinated deposits to connected accounts, money mules can funnel proceeds from COVID-19-related fraud into criminal possession. To halt mule activities and the flow of stolen COVID-19 relief funds, financial institutions need a solution to identify real-world money laundering scenarios.

Verafin’s BSA/AML Compliance and Management solution alerts investigators to potential money laundering activity involving fraudulent funds, with targeted transaction monitoring to alert investigators to potential structuring activities, funnel accounts, and international transfers.

Information Sharing

Criminals are already collaborating to exploit the COVID-19 crisis, ready to outsmart siloed financial crime management programs. With FinCEN encouraging information sharing as a critical response to COVID-19-related fraud, financial institutions should consider collaborating under the safe harbor authorized by section 314(b) of the USA PATRIOT Act to combat crime spanning multiple institutions.

With Verafin’s 314(b) Information Sharing technology, you can engage in collaborative investigations with other institutions, securely sharing information to gain valuable insight into complex mule activity across multiple institutions.

Complicit or deceived, money mules are laundering funds for organized COVID-19-related crime. As the pandemic enhances opportunities for fraud and money laundering, financial institutions must act now to improve investigations and prevent losses.

Visit our Resource Center for the latest information on financial crime, including schemes exploiting the COVID-19 crisis, or register for an upcoming demo or webinar to learn how Verafin is responding to the unprecedented challenges facing the industry today.

Verafin is the industry leader in enterprise Financial Crime Management solutions, providing a cloud-based, secure software platform for Fraud Detection and Management, BSA/AML Compliance and Management, High-Risk Customer Management and Information Sharing. Over 3800 banks and credit unions use Verafin to effectively fight financial crime and comply with regulations. Leveraging its unique big data intelligence, visual storytelling and collaborative investigation capabilities, Verafin significantly reduces false positive alerts, delivers context-rich insights and streamlines the daunting BSA/AML compliance processes that financial institutions face today.

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