ON DEMAND: ComplyAdvantage Webinar - The Rise of Money Muling

*** Now available on demand ***

Due to rapidly changing global circumstances, high unemployment and uncertainty surrounded the future, money muling is tragically on the rise.

It is a crime that often disproportionately affects the most vulnerable and financially illiterate. Criminals involved in money muling often survive by tricking ‘clean’ individuals with no criminal history but who is ultimately responsible for educating and helping to prevent this insidious form of money laundering: individuals, banks, governments, regulators, social media platforms?

Join our expert panel including:

• Charles Delingpole, Founder & CEO, ComplyAdvantage

• Gemma Rogers, Co-Founder, FINTRAIL

• Tom Keatinge, Director, Centre for Financial Crime & Security Studies, RUSI

• Adam Hadley, Director, Tech Against Terrorism

In this thought-provoking webinar, the panel will be exploring:

• The role that social media platforms play in recruitment, advertisement, and propagation

• Why this issue deserves urgent and serious attention now

• What the financial services sector and the regulator is and should be doing to stop money muling

How Social Media is used to Further Financial Crime - Part 2

Similarly to most 18-year-olds, “Carlos” is glued to his phone, constantly refreshing his social media feeds and scrolling through friends’ pictures. In contrast with many other teenagers though, Carlos’ uploaded photographs illustrate a level of opulence and a life of excess. Carlos and his friends are pictured holding wads of cash, draped in designer clothes, Rolex watches on their wrists, and driving around London in a Mercedes. This seems quite implausible for an individual who left school after GCSEs and is now a junior employee at a central London restaurant (1).

Is the use of social media helping to fuel this problem? The HM Inspectorate of Probation’s report, ‘The Work of Youth Offending Teams to Protect the Public’, have described social media platforms as the “catalyst for some of the most serious and violent crime offences” (2). This is of no surprise as there has been a generational shift, with youngsters now living in a progressive online world which some adults just cannot get to grips with.

In Part 1 of this series, FINTRAIL used four basic money-mule associated search terms to pre-identify social media accounts of interest and those assessed to be associated with potential mule activity. These search terms were “Legit money UK”, “Easy Money UK”, “Flip Money” and “Instant Cash UK”. This investigation now seeks to focus on the initial phase of money mule recruitment and how by disrupting this critical stage it can disrupt the rest of the money mule value chain. However, it is important to first understand the money mule life cycle  which looks like this:

Honing in on Step 1 i.e. contact over Social Media, FINTRAIL have identified a number of key indicators of which combined together likely indicate an attempt to lure someone into Money Muling; these fall into two categories, visuals and language.

Visuals: There are a combination of images used that show instant gratification; key features include cash, cars, watches and evidence that large sums have been transferred into bank accounts. Further to this, many of the pages had adverts in their “stories” asking people to DM them if they want to make money quickly and requested people with very specific bank accounts to get in touch.

Language: By doing a simple drag and drop of Facebook, Instagram and Twitter pages into a tag cloud generator, FINTRAIL identified the types of language used across all platforms; the more popular the word, the larger it appears. The language used on the accounts really highlighted three key areas; fraudsters would request a specific bank account whether Barclays, Lloyds etc, then offer free fast easy money and explain that this was only a DM or whatsapp message away.

High chance of money muling: The combination of these images linked with these words are likely to indicate and point to something unsavoury and potentially illicit. This combination of factors can be used by social platforms to limit the likelihood of false positives when monitoring behaviour on their platforms and if kept up to date with evolving typological information, would create a far more effective disruption to wholesale financial crime scams than the over reliance on the regulated financial sector, by which point the damage is already done and the act of money laundering has already occurred.

So What Next? 

For FINTRAIL our money-mule journey on the social media platforms ended with the phrases “DM me for more info” or “whatsapp me”. However, in reality we know that this is only the beginning. We know that from here, behind the scenes, bank details are exchanged and money transfers are being made. This is where law enforcement has a critical role to play, coordinated with social media platforms, so that more can be done upstream to reduce the impact and have far more effect, reducing harm across the value chain of money mule activity.

Instagram as well as Facebook, use a new AI system Deep Text to essentially deal with and counteract major issues such as cyber bullying as well as malicious posts and comments. If the Instagram algorithm detects or finds provoking content, it’s discarded immediately. This demonstrates that technology already exists that can have an enormous impact on how social media platforms are abused (3).

A robust disruption of Step 1 of the money-mule cycle that is facilitated by social platforms will have a significant downstream impact where the end result would likely amount to a positive reduction in;

• harm and exploitation of vulnerable people

• costs to law enforcement effort (investigating money-mule cases)

• the burden on the UK and global Suspicious Reporting Regimes

• the burden placed on those operating in the regulated financial service sector

Very clearly, this needs to be an industry wide coordinated effort with law enforcement at the forefront and social media platforms on board. During the fifth Europol Money Mule Action (EMMA 5) week, 3883 money mules were identified alongside 386 money mule recruiters; 228 of these were arrested. As a major catalyst of money muling recruitment, social media platforms should share the burden and play their part in the deterrence of money muling by utilising technology they already have.

Get in Touch
If you are interested in speaking to the FINTRAIL team about the topics discussed here or any other anti-financial crime topics, please feel free to get in touch with one of our team or at contact@fintrail.co.uk

(1) How teenage money mules funnel millions from online fraud

(2) Monitor social media of young offenders to prevent crime says watchdog

(3)  Instagram leverages AI and big data

How Social Media is used to Further Financial Crime - Part 1

Introduction

Facebook, Instagram and other social media platforms have created simple methods of association. This in itself is both social media’s greatest strength and greatest weakness. You can share friendships globally but those with nefarious intent also have the mechanisms to create connections and identify vulnerable individuals that can be exploited to further their criminal activity.

Over the course of one week (pre-Covid-19 crisis) and as a follow up to our last article on this topic “The Role of Social Media in Furthering Financial Crime”, FINTRAIL conducted research on three key social media platforms, to assess the exposure of the platforms to financial crime activity - specifically money muling. This exercise should be considered a basic benchmark of the problem; our analysis suggests the scale is significant and likely to be systemic to the way money mule networks operate. This is further emphasised when you consider all the available social platforms likely to be used and private/DM functionality that keeps much of the content private. 

Methodology

Research material was obtained through passive observation, some of the groups identified were joined but at no time was there any form of direct engagement. FINTRAIL used four basic money-mule associated search terms to pre-identify accounts of interest and those assessed to be associated with potential mule activity. These were then manually reviewed to assess the group activity.

For this benchmarking FINTRAIL focused on three platforms; Facebook, Twitter and Instagram. The below infographic depicts the findings. Note: there has been no formal network analysis done to identify any crossover between platforms.

Findings

Summary

Pre-Covid-19, many people were already anxious about their financial situation, making them vulnerable to exploitation by criminal gangs seeking to develop mule networks. Research completed by Barclays revealed 6 in 10 people (60%) of respondents were worried about their finances on a weekly basis. 

Since Covid-19 started to bite globally, significantly more people have become financially vulnerable with more people out of work and in dire need of money to cover living costs. These factors create the ideal conditions for criminal gangs to target the vulnerable and there is likely to be a significant increase in the number of people who fall into the trap of money muling.

We will be investigating further into this topic in Part 2 looking to provide some practical information that social media platforms (and others) could use to help in identifying and preventing this kind of activity.

If you have any comments or would like to discuss the issues in this post, or wider anti-financial crime topics, please feel free to get in touch with one of our team or at contact@fintrail.co.uk

The Role of Social Media in Furthering Financial Crime

Content warning: discussion of topics linked to suicide and child exploitation

Recently in the UK we’ve seen the suicide of a reality TV presenter, and in March 2019, the father of Molly Russell urged the government to introduce regulation on social media platforms in response to his 14-year-old daughter taking her own life. She was found to have viewed content related to depression and suicide on Instagram before her death.  While neither of these tragic instances can be solely attributed to social media, many are discussing the arguably significant role that online media played in both cases.  

Following on from these instances, in early 2020 the government announced that Ofcom - the communications regulator - was to be given the power to fine social media companies in a bid to protect children from harmful online content. Ofcom will not only be able to fine companies that fail to remove illegal content - such as the promotion of terrorism or child pornography - but online platforms will also be required to stipulate what behaviour and content is acceptable on their sites, and enforce those rules consistently and transparently. 

Clearly, the priority for Ofcom and social media firms has to be removing the most immediately harmful content - that which promotes suicide and child exploitation being critical.  However, there is also an argument for Ofcom and the social media firms to ensure that other types of content are correctly classified as illegal and are therefore removed. The other types of content that we at FINTRAIL believed should be more heavily moderated and removed pertains to financial crime.  

From our consulting experience in the FinTech sector, we have seen a multitude of financial crime cases where the schemes start on social media. In fact many of the low level criminal activities are facilitated and can only be effective due to social media.  A few examples include:

• Promoting the sale of goods on social media platforms; victims agree to purchase the goods, transfer the money to an account (often in the scammer’s own name, using their real identity) and the goods never materialise.  These are also known as advanced fee fraud.

• Money launderers recruit people - and pay them for access to their bank accounts - via social media profiles.  The launderers use the access to the recruits’ accounts to wash the proceeds of crime. This is known as money muling, and is worryingly common, even among young people.  

• Scammers can further advertise purported investments schemes online, attracting potentially thousands of users and defrauding them of large sums of money, sometimes even their life savings.

Images from social media used to entice individuals into money muling and other get rich quick scams.

Even in isolation, the results of these scams and schemes are incredibly harmful to the individuals involved; in some cases causing them to be blacklisted from banks (for having perpetrated money laundering through their accounts in the case of money mules), or in others to lose significant amounts of money.  However, it is also important to recognise the wider harm that such behaviour has on the rest of society.

Firstly, not only do many of the fraud and laundering schemes detailed above connect back into wider organised crime, involving the predicate offences of illegal drugs sales, human trafficking, corruption, arms trafficking, kidnapping and extortion (inter alia), all of which have an enormous human cost; secondly, the estimated cost of financial crime to global economy is conservatively estimated at between USD 1.6 trillion and USD 2.2 trillion. A Global Financial Integrity report from 2017 underscores how transnational crime undermines economies, societies, and governments, particularly in developing countries, often preventing those who are most vulnerable from getting the support they need, ironically, increasing the chances that they too become embroiled in a life of crime.

So, it’s with these huge human, societal and economic costs in mind that Ofcom needs to work closely not only with the social media firms themselves, but also with financial services firms, financial services regulators and law enforcement to best determine what content should be categorised as illegal and harmful, and seek to include this in their regulatory scope.  

In the same way that financial services firms are heavily regulated - because of the harm the provision of their services can cause - social media firms should also be required to take more proactive steps to prevent, deter and detect illegal and harmful content pertaining to financial crime from appearing on their sites.  

Practical steps social media firms can take mimic those applied in the financial services sector, such as Knowing Your Customer (KYC) processes  - including identity verification such that they can more effectively block repeat offenders - and more intelligent activity (transaction) monitoring, such that they can proactively identify higher risk profiles that should be subject to enhanced monitoring. This doesn’t have to be an arduous process: the FinTech sector has demonstrated that frictionless processes can exist, whilst maintaining compliance and gathering an appropriate level of customer due diligence in the process.

Clearly, any of these processes will have to be implemented proportionately, particularly to ensure the continued freedom of expression and speech.  However, considering the harm that social media appears to be, if not causing then at least amplifying, spending time, effort and money combating these issues and working to ensure proportionality is key for the ongoing success and safe utilisation of social media platforms in today’s society.

Get in Touch
If you are interested in speaking to the FINTRAIL team about the topics discussed here or any other anti-financial crime topics in an increasingly digital FinTech world, please feel free to get in touch with one of our team or at contact@fintrail.co.uk

The Money Mule Trap

by Ishima Roman (Analyst, FINTRAIL)

In mid-February 2019, the UK House of Commons Treasury Select Committee heard from UK financial services providers about the problem of ‘money mules,’ reported to be on an upwards trajectory(1). The term ‘money mule’ is very familiar to financial crime risk professionals, denoting an individual used by criminals, knowingly or not, to transport illegal funds. The term is of course fraught with value judgements; being ‘mules’, they are perceived at best naive and unwitting accomplices, and at worst willing and able conspirators. However, as those giving evidence noted, ‘mules’ although enabling financial crime, can often be victims too.

Money mules can present challenges for FinTechs, especially those offering account based services and payments, because their customer base often draws on groups targeted to become mules: the young, immigrants, the economically precarious. This post explores the mechanics and consequences of money muling, and asks what can be done to mitigate the problem. In part, we believe that the answer is robust financial crime risk management; but FinTechs can also play an important educational role in preventing the vulnerable falling into the ‘mule’ trap.

What is ‘Money Muling’?

Europol, the European Union’s (EU) law enforcement agency, defines money mules as ‘people who, often without knowing it, have been recruited as money laundering intermediaries for criminals and criminal organisations(2).’ The term is sometimes used interchangeably with ‘smurfers,’ although this latter term more precisely refers to those who deposit many small batches of illicit funds to avoid a threshold of regulatory interest.

The process of money muling usually comprises:

1. The recruitment of the mule by criminal sources;

2. The mule receives funds into their account;

3. The mule withdraws the funds; or

4. The mule wires the funds to another account(s) at the direction or request of criminals. This often includes cross-border transactions.

5. The mule receives a ‘commission’, either separately or as a cut of the funds sent to their account.

There are of course variations upon this modus operandi, and criminals have also been known to ask the mule to transfer electronically the funds to another account, without the withdrawal at stage (C). Like any money laundering typology, muling will evolve with the development of technology and institutional requirements.

Becoming a Money Mule

As noted above, criminals are often looking to target those who are in a financially vulnerable position, but can provide enough psychological ‘distance’ from criminality in the minds of financial services providers that they are less likely to generate interest. Criminals are known to use many avenues to attract or pressure individuals into money muling, but some of the most common include:

• Speculative/vague job profiles or money-making ‘opportunities’, advertised online or in local or free papers. This can often be presented as lucrative ‘home working’ and increasingly as an opportunity in a FinTech itself, often using a meaningless job title such as ‘Financial Transactions Analyst(3)’;

• Direct approaches over social media, such as Facebook and Instagram, and communications apps such as WhatsApp;

• Direct approaches in person.

Criminals will often pose as reputable organisations, in order to convince the target that what they are doing or proposing is legitimate and legal. Some may present themselves as representatives of an overseas firm whose details are difficult to verify. Other criminal gangs use techniques such as impersonation and role-playing, presenting themselves as an authority figure, such as police officer, government official or soldier, seeking help in some awkward personal circumstance, often requiring the transfer of funds overseas.

How Money Muling Works(4)

Vulnerability to Muling

The unemployed and new immigrants from developing to developed countries have been major targets for muling operations for some time; financial desperation provides a motivation in both cases, and in the second, there is likely to be a lack of cultural understanding that criminals can exploit. However, there is an increasing trend in Europe towards the exploitation of young people and students, driven by their high levels of aspiration and low incomes, perceived naïveté, and accessibility online.  According to a report in April 2018 from CIFAS, the UK-based not-for-profit fraud prevention group, 2017 saw:

• An 27% increase in the number of 14-24 year olds being used as money mules. Many of these young people were students, promised substantial payments for little effort.

• An 11% rise in the number of accounts believed to have been used by money mules (32,000 plus in total)(5).
  

In the UK, young people are also increasingly becoming the targets of identity fraud, leading to the misuse of their accounts by money launderers. At the Treasury Select Committee hearing, representatives from Santander noted that the young were particularly vulnerable to having their accounts being used for muling without their knowledge because so many of them take a lax approach to data security; according to Santander’s research, 85% of 18- to 25-year-olds had shared financial information online(6).

The Consequences of Muling

The consequences of becoming a money mule can be harsh, even if the mules are not aware of the ultimate rationale behind the transfers. Regardless of their level of knowledge, they will have played a crucial role in a financial crime, and as such are liable to criminal charges in most developed jurisdictions. In the UK, for instance, muling can lead to a prison sentence of up to fourteen years; in June 2018, the UK group Financial Fraud Action reported on a case of a 26 year old man sentenced by a London court to a year in prison for two mule transactions that totalled at £28,000(7).

Even if criminal charges don’t arise, there is still the risk of long-term financial exclusion and limitations on career prospects. In April 2018, the BBC reported on the case of an anonymous teenage girl, ‘Holly’, who had been targeted by online mule recruiters, or ‘Fraud Boys’ as they are known, on Instagram and Snapchat, but had been caught out by bank staff when depositing a large amount of cash into her account. According to the report, Holly has struggled to get a bank account since, and has had to ask her employers for payment by cheque, which can only be cashed - at substantial cost - in payday loan shops(8).

The Risk to FinTechs

Money mules are a problem for all financial services providers,. Research by Europol and Eurojust in 2016 suggests that 90% of money-mule transactions were linked to cybercrime. This included phishing and malware attacks, but also online shopping/e-commerce fraud and payment card fraud, typologies experienced by certain types of FinTech products largely due to the nature of their customer base(9):

Young people and students are attracted to products designed specifically to appeal to their needs, many FinTech products are seeing significant traction amongst this demographic. Other groups such as new immigrants or those seeking access to financial services might also be attracted to using online services which do not require lengthy verbal interactions with in-branch bank staff and offer products that are designed to address the imbalance of financial exclusion.

Criminals are aware of these developments, and it’s possible that they will focus increasingly on the recruitment of FinTech customers, particularly as other routes, via traditional institutions are closed off for them.  This highlights the increasing need for close collaboration and joint working between financial institutions of all types to combat this type of crime.

Detecting Mules

The first consideration is awareness of the issue, and factoring it into your risk assessment and appetite. If your firm is focused on building a client base in the vulnerable demographics, then you need to make sure you explicitly recognise the risks and have the right controls to manage the nuances.

Every firm and product is different, and there is no generic approach to this, but it is worth recognising that it is difficult to identify all mules at onboarding, especially as some will onboard legitimately, being recruited as mule later (if you’re offering a product aimed directly at improving financial inclusion for example). This can be made harder if ‘at risk’ groups are part of your target customer segments. However, gaining a thorough understanding of the client during the Know-Your-Customer (KYC) phase and building that customer profiling in to a tuned customer risk assessment is a key to detecting problems later on. Because it is in the context of their expected behaviours that we judge what is unusual.

Unlike legacy banks, FinTechs are not going to catch mules out ‘in branch,’ as happened to ‘Holly’, mentioned above. Transactions take place online, so it’s important to have monitoring tools in place that can alert you to deviations in normal behaviour, along with an appropriately trained team to investigate those alerts and report them through a Suspicious Activity Report (SAR) if necessary.

Utilising available data to identify and robustly investigate ‘at-risk’ accounts is a key control activity. Mule accounts are sometimes maintained through linked life-style payments to add an air of legitimacy so investigating account connections and leveraging data points such as common addresses (and others) can be a powerful way to proactively identify accounts for further review.

Additionally, building a suitable greylist or using industry databases such as CIFAS (or others) can provide a mechanism of detecting suspicious profiles at onboarding. Research suggests that accounts used during the later phases of mule activity in a network are more likely to be used by criminals more than once, presenting an opportunity to detect them via robust data sharing and blacklisting.

Increase Education and Prevent Mules

Prevention is often better than a cure so an important additional approach is to think about how FinTechs can help prevent the problem in the first instance. Reducing the pool of potential mules is a more cost effective ‘up-stream’ solution than tackling the effects of their activities. It also provides an opportunity for anti-financial crime professional to add something back to the community with clear positive social impact.

FinTechs have a unique advantage in the way they interact with their customer base and can play an important role in educating particularly vulnerable clients - especially young people - through explicit guidance during onboarding and throughout the customer lifecycle. Companies can engage in and support anti-muling campaigns, such as the EU’s European Money Mule Action (EMMA) imitative, or the ‘Don’t be Fooled’ campaign by the UK groups CIFAS and Financial Fraud Action (FFA)(10).

The young are especially in need guidance on what is ‘normal’ in the financial space, and arguably all financial providers have a duty of care in this regard. It does not take much to deliver simple key messages that reduce the risk to themselves and their clients: there is no legitimate reason to allow someone else to move their money via your account, however convincing they might be. There a three simple pieces of guidance FinTechs can give to their customers:

• If you get offered a job or income, research any potential employer

• Don’t respond to adverts offering large sums of money, for minimal input

• Don’t allow anyone to access your account or use you card/app

• And if it sounds too good to be true - it is. Walk away or ignore them.

Get in Contact

If you would like to discuss the issues in this post, or wider anti-financial crime topics in an increasingly digital FinTech world, please feel free to get in touch with one of our team or at contact@fintrail.co.uk.

1. https://www.theguardian.com/business/2019/feb/13/banks-close-thousands-of-money-mule-accounts-mps-told

2. https://www.europol.europa.eu/crime-areas-and-trends/crime-areas/forgery-of-money-and-means-of-payment/money-muling

3. https://ftalphaville.ft.com/2018/01/12/2197610/fintech-as-a-gateway-for-criminal-enterprise/

4. https://www.europol.europa.eu/activities-services/public-awareness-and-prevention-guides/money-muling

5. https://www.telegraph.co.uk/personal-banking/current-accounts/fraudsters-target-cash-strapped-students-use-money-mules/

6. https://www.theguardian.com/business/2019/feb/13/banks-close-thousands-of-money-mule-accounts-mps-told

7. https://www.financialfraudaction.org.uk/news/2018/06/06/sentencing-of-26-year-old-money-mules-from-enfield-serves-as-stark-warning/

8. https://www.bbc.co.uk/news/business-43897614

9. https://www.europol.europa.eu/newsroom/news/europe-wide-action-targets-money-mule-schemes

10. https://www.moneymules.co.uk