Money mule activity is a huge issue that many countries face, with millions laundered yearly. Unfortunately, you can become a victim of money muling unknowingly, especially if you fall for traps and scams laid out by smart, tech-savvy fraudsters. Latest trends show that cross-border money-laundering cases have doubled over the past few years, with the average amount per mule account reaching €4,000. Many money mules are young individuals, some only being 15.
Ultimately, a money mule is the middleman, used to move dirty cash and stolen funds illegally between multiple accounts, often across borders, to avoid getting caught. Both individuals and companies can be used for money muling, which makes it very important to use the right tools and anti-money laundering (AML) software that would be able to detect red flags and illegal transactions on time to prevent your company from being used by criminal organizations.
So, how exactly does a money mule operate? Who’s most likely to fall for a money mule trap, and how can financial institutions prevent this crime? We answer the most burning questions and provide our expert take down below.
What are Money Mules?
Money mules are people who transfer illegally obtained money for someone else, often a criminal organization, in exchange for a small commission. Sometimes, a money mule can sell their bank account so that the criminals can use it to launder funds. In general, money mules can transfer the money both knowingly and unknowingly. They are asked to wire the money to other accounts, as per the criminals’ instructions.
Criminals often use various tactics to recruit money mules, often targeting vulnerable groups that are more susceptible to scams due to economic uncertainty, such as young specialists who don’t have enough money to pay college debt, etc. Certain factors make it harder to detect money mules, for example, constantly handling large transaction volumes. That’s why regulators impose fines and penalties for non-compliance and missing AML red flags and not reporting suspicious activity through the Suspicious Activity Report (SAR) system.
Is Money Muling Illegal?
Yes. In most jurisdictions, money muling is considered a criminal offence, and the consequences can be severe. That’s because becoming a money mule means funding organized crime and money laundering. Even if you facilitate such transactions unknowingly, you can be held accountable and end up with a criminal record. For companies, the same principle applies. Consequences include tighter scrutiny, restricting operations, etc.
What are Mule Accounts?
Mule accounts are bank accounts used by the mule to move the stolen or illegal funds, which work as a vital piece in the money muling chain. Often, the money mule opens the account themselves to avoid suspicion, helping the criminal organization hide their involvement in fraud. This shields the criminals and adds another layer of complexity when it comes to detecting illicit transactions.
For example, a mule account can be the one that shows:
🔴 Sudden or Unexpected Account Activity
This includes atypical bank account activity, such as if the account has been used only for small transactions or has been inactive for a while but starts receiving large amounts of transfers, often from other countries. Afterwards, the money mule, or the account holder, is asked to quickly withdraw the funds and transfer them to another account.
Why is that suspicious? The customer’s profile and typical behavior suddenly change, and the transaction patterns signal potential fraudulent activity.
🔴 Strange Behavioral Signals
This includes suspicious cases where fraud detection systems identify multiple users and linked devices, like using the same IP address to log in to different bank accounts. Such signs often suggest identity theft, multi-accounting, or simply show that the bank account is being misused and shared by multiple people.
Why is that suspicious? Log-ins from different regions, especially high-risk locations, are often related not only to money muling but also other types of illicit activity, such as account takeover fraud and unauthorized transactions.
How Can You Describe a Money Mule?
A money mule is anyone who transfers illegal money through their bank account on behalf of criminals. This is done to hide the true origin of the funds. To lure you into this scam, fraudsters offer quick and easy money.
For example, money mules are often:
- Unemployed people and students who are attracted to “quick money” scams and flexible jobs online.
- Newcomers to a country who are specifically approached soon after arriving in a country and still lack knowledge about legal nuances or general awareness.
- Young adults and teens with limited financial experience, often recruited through social media.
- Unaware people and those who generally don’t know the risks or severity of money muling and the consequences that come with it.
So, for instance, you can describe a money mule as someone who accepts a payment processing role, believing it’s a legitimate job. In reality, they’re accepting cash from criminals and moving stolen funds through their personal accounts. That’s why it’s relatively hard for authorities to trace money muling activities, which are linked to severe legal and financial repercussions.
How Do Criminals Approach Money Mules?
The initial step to money muling is the recruitment stage, where criminals try to find people who will be willing to become money mules. This is achieved through multiple scam-like tactics. For example, fake job offers with vague explanations or suspiciously high earnings for little to almost no actual work. Another popular approach is using social media or dating sites to find targets via promises like “only for a short time” or as a “simple favour to help a friend”.
After the money mule is found, criminals continue to approach them and guide them through the process. This is a common process flow:
- Account opening (the mule uses their existing bank account or is asked to open a new one)
- Money transfers (the bad actors use their illegal funds, for example, gained from other money laundering activities, drug sales and front businesses)
- Further instructions (the mule is asked to move the dirty money by receiving concrete instructions; for example, transfer it to another bank account or withdraw a sum of cash)
Once that’s done, the money mule receives a small share of the funds and earns a commission for their participation in this scheme. Money mules are often chosen if they have low-risk profiles and existing accounts on financial platforms that do not require extra scrutiny and are considered low risk. That’s how they don’t ring any alarms. As a result, criminals are able to succeed if they find loopholes, disguising the funds by making the money appear legitimate.
Are All Money Mules the Same?
No. Money mules can be categorized into three main types:
1. Unwitting or Unknowing Money Mules
These are the people who fall for a scam but don’t understand the severity of their actions and that they are involved in organized crime and money laundering. They are often targeted via fake ads or romance scams and are motivated by trust since they act out not on criminal intent but rather their belief in the romantic relationship or the job ad.
2. Witting Money Mules
These are the people who might sense that they are getting themselves into something illegal, but still choose to ignore the red flags and agree to transfer dirty money. That’s because they want to earn a cut, often showing suspicious signs of repeated transfers. For example, a witting money mule might receive warning signs from their bank of detected suspicious activity, yet still continue playing their part. They can start unwittingly but stay involved and accept their role, which is motivated by profit.
3. Complicit or Professional Money Mules
These are the trained people who sign up to be money mules with full knowledge of what they are getting themselves into. Often, they come from professional backgrounds and have ties with financial institutions or at least knowledge of how to move large amounts of dirty cash without hitting reporting thresholds.
That means they know how to create and open multiple bank accounts within a reasonable time that benefits the criminal organization. Sometimes, complicit money mules help attract new mules, welcoming them to this scheme. They also know how to set up legal entities or accounts abroad, among other tactics that help succeed with money muling. Different from other money mule types, they can act out not only due to financial benefits but also as a way to show loyalty and determination to the criminal organization.
What are Some Common Examples of Money Mule Scams?
Various techniques lure money mules in. For example:
Fake Job Offers
This can be a fake message sent by a front company claiming they’re looking for new staff, as well as a simple message via a messaging app from an unknown number, offering a one-time-only deal that you can’t resist. For example, the job offer might include details like “flexible working hours” or “no experience is required”. Often, the pay is also too good to be true, and the only requirements are to have an open bank account and be of a certain age.
Threat and Penalty Scams
This is a sort of scam where the criminal uses fear and false threats as the main weapon to scare the victim into becoming a money mule. The principle is the same; the criminals use the victim’s account to launder stolen funds.
For example, John receives a call from an unknown person. Then:
- The caller claims that they work for the national immigration enforcement unit.
- The caller says John’s identity was used in a cross-border fraud case.
- They warn John that he faces immediate detention unless he pays a “processing fee” and transfers funds to a secure account.
In such a scenario, the criminals can call multiple times, stalk the victim on social media, gather personal details, and threaten them further if they don’t comply, intimidating the victim into becoming an unwitting money mule. That’s how scammers maintain control through fear and deception, pressuring victims into moving stolen money.
Fake Business Opportunities
This type of scam happens when criminals pose as employers, partners, or investors, creating a sense of a new business opportunity and tricking the victim into moving illicit funds through their account.
For example, a person might run a small AI startup. Then:
- They receive a message on LinkedIn that claims that an international investor is interested in funding the company in its next growth stage.
- The sender tries to make it appear as legitimate as possible, using professional branding, pitch decks, signed NDAs, and a corporate email domain.
- The supposed investor asks to handle “test” transactions before finalizing the deal, claiming that this would prove the company’s ability to manage international transfers.
Since the person treats this fake test as part of a standard practice and unknowingly transfers the funds to overseas accounts, they put their business in danger. In this case, money muling can take a toll on the entity’s credibility, compliance, and overall trust among other investors and customers.
How Big of an Issue is Money Laundering Using Money Mules?
A recent survey reveals that nearly €9.4 million was laundered through money mule accounts within a single year. While a huge part of the money muling activity is linked to cybercrime, such as phishing, it’s also a much bigger problem than most think.
Money mules are tied to organized crime, which automatically means the money comes from illicit sources, such as drug sales or human trafficking. Criminals find new channels to commit money laundering and use mules to move money via cashier checks, cryptocurrency, standard bank accounts, money services businesses (MSBs), prepaid cards, etc. — all to avoid due diligence and hide the real source of the money.
Common Money Muling and Money Laundering Methods
Other money laundering techniques used by organized crime groups and money mules include:
- Using third-party services, such as MSBs, to route money
- Using shell companies and faking business to justify the transfers
- Using offline cash-outs, which means converting online transfers to cash
- Using structuring, also known as smurfing, to split large sums into smaller transactions
- Using layering to “layer” dirty money across multiple different banks and accounts.
Related: What is Money Laundering? Definition & Examples
How Can You Detect Money Mules?
The simple answer: you can catch money mules by using an AI-powered AML solution like iDenfy, which consists of many automation capabilities, like AML screening and monitoring, transaction monitoring, risk assessment, built-in KYC verification during the account opening process, etc. With large volumes of clients and transactions conducted by the minute, banks and other regulated sectors use some sort of software, as it’s impossible to handle and review all AML red flags efficiently while keeping up with high requirements for scaling and accuracy.
A single mistake can not only lead to non-compliance but also open doors for money muling and money laundering on your platform. For example, sudden large cash deposits, wire transfers to foreign accounts, or payments that don’t match the customer’s profile can be a sign of fraud and money mule activity. An automated AML system flags these anomalies, an AML investigation is opened, which is then reviewed manually by the company’s in-house analysts. This helps save time and react to suspicious behavior ASAP, especially if it’s a high-risk, prioritized case that leads to a SAR filing.
At iDenfy, we have recently improved our AML screening and monitoring platform, designed to simplify AML-related tasks and make due diligence easier, both for individuals and corporate clients. Want to see it for yourself? Let’s chat.
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