Is protecting Money Mules the missing piece to the APP Scams puzzle?

The Fintech Forecast is a series of guest articles published each month from thought leaders at ACI Worldwide. 

Author: Elise Thrale

What is a money mule?

In UK Finance’s recent annual fraud report 2023, it was revealed that £1.2 billion was stolen through fraud in the UK in 2022. This number is increasingly made up of losses from victims to Authorised Push Payment (APP) scams, totalling £485.2 million in 2022. This is when a criminal tricks the victim into transferring funds from their account to an account the criminal controls, usually a mule account. The UK is not the only market seeing these big numbers – as mentioned in the previous edition of the Fintech Forecast. This new climate for payments fraud leaves a lot at stake for financial institutions and consumers.

One big piece of the puzzle when preventing APP scams is the money mules. A critical part of authorised push payment fraud, money mules are used to help conceal the fraudster’s identity and move money under the radar. The industry pegs them as part of the problem, but they are often unaware of their crimes and usually the ones that get caught. These individuals are enticed with promises of flexible work, often children, students or vulnerable and in need of quick money.

The shady world of recruitment

Akin to coercing consumers into making authorised push payments, criminals recruit money mules with sophisticated manipulation tactics. Through Whatsapp messages or social media platforms, fraudsters prey on economic hardship with promise of flexible work and easy money. The Guardian recently reported that older generations are increasingly using their bank accounts to be used to move money illegally, due to pressures of the cost-of-living crisis.

However, it is not only older generations that are vulnerable. The digitally literate generations are more likely to fall into involvement in criminal activities. According to the UK National Crime Agency, 6 in 10 mules are under the age of 30. UK banks identified more than 50,000 suspected ‘money mules’ in 2021, a 24% increase on the previous year, showing the huge scale of the issue. As a result, these individuals have their bank accounts closed, and are at risk of a prison sentence of up to 14 years. The imagination does not have to stretch far to envision how, in the worst-case scenario, this could affect the trajectory of a young person’s life.

Stopping mule activity

Banks already have stringent checks in place, but there is more to be done to detect mule account activity – not only to protect those authorizing the fraudulent transactions, but those using their accounts for mule activity too. Currently, most banks do not have access to data on where money is being received, beyond Confirmation of Payee in the UK. This makes it difficult to identify whether an account is being used as a mule account, and to stop these transactions going through.

Collaboration is needed on a cross-industry level. Not only will this help to stop fraudsters using social media and SMS for recruiting people to use their accounts as vessels for illegitimate funds, but also to detect strange activity on the receiving end as well as the initiating end of a transaction. If we are able to detect if a receiving account is high or low risk of being a money mule, it may be a new way of detecting APP scams, assuming that most of this money goes through mule accounts.

Banks, telcos and social media platforms all have a responsibility to protect customers that are at risk of being exploited, whether they are being recruited as a money mule or being coerced to send their money to an unknown account. Education is already out there, but more prevention strategies need to be put in place. The technology exists, we just have to collaborate and use it in the right way.