Some 194,084 money mules were ‘offboarded’ by 25 firms between January 2022 and September 2023. Of these money mules, only 37 per cent were reported to the UK’s National Fraud Database (NFD), hosted by Cifas, the not-for-profit fraud prevention trade association. That’s according to a review by the UK regulator the Financial Services Authority (FCA) of firms’ use of the National Fraud Database (NFD) and money mule account detection tools.
Background
Money muling is a money laundering technique whereby someone – the ‘money mule’ – moves the proceeds of crime on behalf of criminals, maybe unwittingly. In the jargon, first-generation mules receive money directly from the fraud victims, the subsequent recipients are referred to as second-generation mules. Indicators might include: unexpected or unexplained deposits into the accounts, such as customers receiving large deposits shortly after opening accounts that exceeded, or nearly exceeded, their stated annual income or turnover; rapid dispersal of funds through networks of accounts, often within minutes of receipt; the movement of funds to international jurisdictions; and rapid withdrawal of the funds from ATMs. As the review pointed out, ‘the NFD is a reciprocal data sharing arrangement, and its strength is in the collective intelligence of all its members’.
Review
The FCA reviewed multiple cases across 13 firms where accounts suspected of money muling were identified. Using the NFD, and detection tools designed to trace the proceeds of fraud across payment networks, is critical in tackling mule activity, according to the FCA. Among the questions for the regulator; how do firms respond to alerts raised through the tool, to prevent mule activity and disrupt mule networks?
The FCA found that the evidential standard for reporting a money mule to the NFD is high. The regulator says it was ‘encouraged to find that where firms are filing customers’ details to the NFD, the standards were met supported by thorough investigations’. Firms, however, were not automatically declining new account applicants flagged as a risk on the NFD.
That proportion of identified money mules being reported to the NFD varies among firms, whether banks or building societies or businesses that provide payment accounts, the review found. Some are reporting far fewer cases than their competitors, despite having similar overall numbers of accounts. One firm reported only 6pc of their offboarded money mules to the NFD between January 2022 and September 2023, while some firms reported most. The reviewers found cases of customers identified as a money mule and their accounts closed, yet a form was not filing that customer’s details to the NFD. Some firms defended their decisions, pointing to internal policy to exclude types of cases, such as attempted fraud, customers of specific age groups, or cases below a fraud loss value.
A standard of proof for filing cases to the NFD includes that the ‘mule’ knew what they were doing. If protecting unwitting mules and vulnerable customers is a barrier to filing, in the FCA’s words ‘we invite industry to help drive forward improvement’.
Detection tool
As for use of a detection tool, the review stated: “When firms did act on alerts, the quality of the investigation into suspected mule account activity varied.” Nor might judgments be well documented. Overall, firms were alrgely reporting Suspicious Activity Reports (SARs) to the National Crime Agency (NCA) after an investigation of suspected mule accounts.
More reading
The review stresses that financial firms should educate consumers about the risks of money muling. Visit the NCA website.
