The facilitation of proceeds of crime through ‘mule accounts’ is a growing financial crime risk, particularly for the retail banking industry. UK law enforcement view mule accounts, whereby illicit funds are transferred either wittingly or not, through a third party’s account to break the audit trail of transactions, as one of the primary ways of laundering the proceeds of fraud. In November 2017, CIFAS, the UK’s fraud prevention service released statistics showing a 75% rise in the number of 18 to 24 year old’s who are letting their bank accounts be used to transfer the proceeds of crime.
CIFAS, along with UK Finance ran a ‘Don’t Be Fooled’ campaign which aims to deter young people – in particular, students – from becoming money mules. According to the figures, there were 8,652 cases of ‘misuse of facility’ cases amongst 18 to 24 year old’s between January and the end of September 2017.
Mules are not always aware that they are breaking the law. Muling can be so quick and effortless, they convince themselves that no-one will notice. The banks are sometimes slow to identify bank accounts used for this because muling involves relatively small sums of money that can pass under the radar. A person convicted of money laundering could face up to 14 years in prison.
The organised criminal gangs behind money mule scams often use the proceeds of crime to commit other serious offences such as drug and people trafficking, sexual exploitation and terrorism. money mules
Impact on the Bank’s control framework
Whilst collective efforts to deter money mules is important, financial institutions must adopt appropriate systems and controls to detect, prevent and report money laundering
Banks must continually evaluate their existing Transaction Monitoring and Anti-Money Laundering Controls with a view to understanding (and challenging), the effectiveness of key controls and / or considering deploying enhanced / new preventative controls in an effort to combat this method of financial crime.
Customer Due Diligence processes need to identify and gather appropriate information at on-boarding for higher risk groups (e.g. students), and activity / behaviours must be factored in, which includes estimated volumes and values.
Consideration should also be given to tailoring transaction monitoring systems to match customer types, which should include scenarios and indicators of mule activity. Focus can then be directed on higher risk customer groups such as student / basic bank accounts.
Customer education and awareness is a vital tool in combating this form of financial crime. The distribution of information highlighting the risks and helpful countermeasures to targeted groups of customers may significantly reduce the chances of customers becoming a victim of mule.
Banks should not only consider the financial impacts to their firm, but in addition, the customer / clients impact (customer redress), regulatory and reputational risks inherent with the facilitation of financial crime through their systems and monetary flows.
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