Money Laundering Bulletin
Whack-a-mule
Cost of living pressures, an easy opportunity to make a quick buck, ignorance or wilful blindness, and the advent of cryptocurrency - the conditions are set for money mule herding at scale, internationally... to go on, and on. Keith Nuthall reports on crowd-laundering.
The use of money mules moving criminal proceeds worldwide continues to grow, with law enforcement, financial institutions and researchers highlighting the problem. In the UK, 31,979 money mule cases were recorded in 2017; rising to 40,129 in 2018; 42,900 in 2019; and 40,353 in 2020; according to 2022 research published in the International Journal of Business and Economy. [1]
Any which way
Mules will move money by cash, crypto and standard electronic banking and in that regard, more mule accounts are being discovered by banks, judging by a UK-based Lloyds Bank paper released last October [2022]: it said a 'mule-hunting team' had, since 2018, "uncovered more than 130,000 mule accounts and stopped UK£91.7 million [US$114 million] from falling into the hands of fraudsters..." [2]
European Union (EU) police agency Europol, judicial network Eurojust, with Interpol, the European Banking Federation (EBF) and 25 national law enforcement agencies reported last December [2022] that in joint operations running from September to November 2022, they identified 8,755 money mules, 222 money mule recruiters, arresting 2,469 people worldwide -1,648 criminal investigations were initiated; 4,089 illicit transactions identified; and €17.5 million intercepted. Participating countries were Australia, Austria, Britain, Bulgaria, Colombia, Cyprus, the Czech Republic, Estonia, Greece, Hungary, Singapore, Hong Kong, Ireland, Italy, Moldova, Netherlands, Poland, Portugal, Romania, Slovak Republic, Slovenia, Sweden, Switzerland, Spain and the USA. [3]
On the rise
Lloyds Bank's research, in the UK, found that there had been a 29% increase in over-40s acting as money mules between 2021 and 2022, with cost-of-living increases making mule offers more appealing. This backed up 2021 research from UK anti-fraud service Cifas, which concluded that in the UK there had been a 34% "increase in the number of accounts belonging to 40-60-year-olds bearing the hallmarks of money mule activity since 2017". [4]
Tony Sales, social engineering expert for UK-based consultancy We Fight Fraud, said this increase was "because of Covid", with traders and businesses "really struggling" and so susceptible to offers of money mule commissions: "They've exhausted the 'bounce back loan' scheme... so it's totally possible to see a rise like that. Anyone on the fringes who might be a little bit dodgy is definitely going: 'Yes I'm gonna have this, when they can."
Youthful appeal
Lloyds' research concluded under-24s remained most susceptible to mule offers, with one in 10 people admitting they would move money through their bank accounts for a fee, and noted that "students can be particularly vulnerable given they might be living away from home for the first time and looking for extra income".
Sales commented: "The reason they go for student accounts is because of the donations [and loans] from the universities - they have big clumps of money they get in the account, so [the bank] allows big amounts of money to go into the account," which may, in this case, be criminal proceeds.
In Malaysia, 2022 research written for Universiti Teknologi MARA Cawangan Kedah, in this south-east Asian country [5] concluded Covid-19 movement restrictions forced job losses and small business closures, making people susceptible to mule offers, with recruiters also successfully targeting "indolent people, drug addicts, retirees... housewives, college students and social workers" - the last as it is a poorly paid and stressful job.
Ignorance - not an excuse
In Britain, most people were "unaware of the possible 14-year prison sentence as punishment", noted Lloyds Bank, with social media posts, fake job advertisements or targeted email proving effective. No wonder, said Dr Nicola Harding, education and research director for We Fight Fraud, given that money muling convictions are extremely rare in many jurisdictions. Police are "actually looking for people who are the bigger players in organised crime. If just a money mule has been picked up and you're nothing to do with [the predicate crime], they're probably not going to convict you; they're going to see you much more as a victim".
Sales said the lack of enforcement is a "great marketing tool for the criminals - 'I've been doing this 20 years and I've just had one person questioned by the bank'". Where cases are brought, said Dr Harding, they are, however, publicised for deterrent purposes by police and prosecutors. She highlighted recent cases in Ireland, such as an art student money mule, which received publicity - although his sentence was suspended. [6]
Malay crackdown
Some countries do crack down, however: the Universiti Teknologi MARA Cawangan Kedah research, in 2021, said, 29,769 mule accounts were identified by the Royal Malaysia Police, with 12,659 persons detained and charged "for permitting their bank accounts to be exploited for criminal operations". Punishments is potentially severe - up to 15 years in jail and a fine not less than five times the sum or value of the proceeds laundered, or MYR5 million (US$1 million), whichever is higher. [7]
Meanwhile, Interpol has been warning financial institutions and national law enforcement teams about effective recruitment techniques in its #YourAccountYourCrime campaign, launched in August 2022. [8] Stephen Kavanagh, Interpol police services executive director, said: "Money mule schemes can be disguised as employment, romantic relationships or investments, or simply as helping out a friend."
Desperation drives
Sales - an ex-fraudster who now consults on detecting and resisting crime - said economic need was a key recruitment tool: "When I was at it, women in their 30s were the most game" to become mules: "They would gladly give up their card and have five grand put into their account. They didn't care if their account got shut down." Dr Harding added: "Historically women are paid less than men. If they were single woman on their own, they haven't got so much contributing to the household. Maybe they've got kids - so it's a very low-risk way of gaining extra cash."
Marketing channels
A blog from UK-based AML tech company Ripjar Ltd stressed that unsolicited muling jobs can be presented as simple offers of employment to the naïve - offering commission for transferring funds. Romance fraud is a key avenue: "Prospective money mules may be contacted via social media or dating websites by money launderers posing as romantic partners." And investment scams involve mules being contacted online with details of participation in a lucrative scheme to help move money: "Money launderers may assume the identity of employees of banks or courier companies, or even acquaintances or relatives, in order to get individuals to hand over personal account details." [9]
Get in line
On the cash muling side, Canadian law enforcement veteran (ex-Royal Canadian Mounted Police), AML expert and crime consultant Chris Mathers, stressed that money muling recruitment is like shooting fish in a barrel, especially in poorer countries. In Mexico and other developing countries, for instance: "Everybody needs to make money," he said: "Put the word out - 'Who wants to make money?' It's not a recruitment process -- it's just a big pool of people: You just tell them what you want. People in developed countries never understand what it's like in those places. They are living in countries where the gap between rich and poor is so significant, people have no chance at anything. They are in despair and with no hope; they will do anything to survive."
For drug trafficking money mules, "There's no shortage of gang members and relatives of gang members and [for instance] people are travelling across the southern border to the United States, which is quite porous so criminal contacts are not hard to find. You're paying people to do it or extorting them or they're doing it to curry favour with an organisation."
Misplaced loyalties
And poor country mule recruitment is often a family affair, especially when bank accounts are involved, said Mathers: "You're reaching out to people in your own ethnic group and family ties. They say: 'I am using my cousin, my mom, my sister... I use their bank accounts.' And they will do that because their family connection is so strong in these countries. In countries where there's no government to look after people, the family connection becomes very robust, and they'll do anything for each other. If you're working in the bank and your cousin says: 'Listen I want to put this money into an account and I don't want it to fill out a piece of paper', then it's: 'No problem, because you're my cousin.'"
The socials
Outside the family circle, crime gangs are using social media and WhatsApp text messages to recruit strangers as mules. Dr Harding noted she had received a message the day she spoke to MLB, "saying I could get a job as a data entry operator", which was clearly a mule recruitment message. "It says: 'We're looking for thousands of data optimisers" with the basic job requirements being "Age 20 years or older; Mobile phone or computer with Internet access required; Working hours UK work from home freelance; Wage UK£100 per hour to UK£300 per hour; 1,000 to 3,000 per week; Monthly salary UK£10,000 or more. Contact 'WhatsApp hiring money manager'." She added: "It's an unsolicited message. Last seen online one minute ago."
Cryptocurrency - on and offline
A key new element of muling is the use of cryptocurrency, with mules taking proceeds of crime, placing the money in a standard bank account, buying crypto and either sending that abroad remotely, or carrying it physically in a 'cold wallet' device that stores crypto keys and passwords offline. These can easily be carried around the world, said Mathers: "You have to make a declaration that you don't have any more than US$10,000 and it's been amended [in some jurisdictions] to include crypto, but how are [customs] they going to know? It's a little piece of metal, and they are getting smaller and smaller. There are millions of people going to an airport taking their electronic devices out [in security]. They take it through and it's the end of it - unless you have the codes, you're not opening it."
The use of mules to launder tainted crypto was highlighted in an unusual and publicised November [2022] case brought by the US Attorney's Office, Eastern District of Texas. This follows a multi-law enforcement agency Operation Crypto Runner leading to 21 individuals being charged for laundering the proceeds of romance scams, business email compromises, technical support schemes, and other fraud schemes. [10]
One suspect charged, Zenobia Walker, of Maryland, admitted receiving fraud victim cash by mail, money orders, wire transfers, and cashier's cheques, which were deposited into her personal bank accounts and withdrawn, then deposited into other bank accounts to exchange for cryptocurrency. Between December 2019 and September 2020, Walker exchanged US$308,800 for cryptocurrency sent to foreign co-conspirators.
Mathers said: "Crypto is the new muling." That includes online wallets, which just need a password to empty. "You exchange it into any currency you want, so you're bypassing exchange controls. Crypto supporters say there's the blockchain you can see where all the transactions go, but that is not true," he said, because of the complexity of some crypto movements, including provenance obfuscation systems such as tumblers.
"If it's the 9/11 terrorists we might be able to get to the bottom of it because we'd spend millions of dollars going through every transaction; we might be able to trace it, maybe. But a typical fraud or drug case, there's no way you're gonna trace it. I see this every day. A guy rips somebody off - money goes into his bank account; goes into another bank account; goes to the crypto exchange; and gone. It's a sophisticated hawala - instead of getting a picture of an elephant you get a code word - so if I want to move money around, I can do it."
Northern Cyprus - crypto without checks
Sales agrees. In Europe, "The smart criminals just go to Northern Cyprus [the mostly unrecognised Turkish Republic of Northern Cyprus - TRNC] and go to [crypto] exchanges where you can draw out money [in person]. I went to Cyprus last year and I was going into a crypto exchange and putting money in and taking money out, no questions asked. Nothing. I asked [the manager] how much can you take out and he said up to 50,000 US a day, with two hours' notice and you don't need no ID. All I need is my little USB key. I don't even need to have this thing online anymore - I can have a nano-wallet. It's never been connected online. I put it in my suitcase, travel abroad, and get 50 grand a day out. No-one's gonna go there and check, 'cause the country technically doesn't exist, so there's no rules. It's the wild wild west." His experience chimed with an online briefing from Northern Cyprus lawyers Peyman Erginel Law, which said: "Despite the wide usage of cryptocurrency in Northern Cyprus, there are no laws or regulations that would regulate cryptocurrency turnover within the territory of TRNC". [11]
Trusted partners
Recruitment of crypto mules is also easy: "There's no shortage of people who know how to use crypto, it's like people who can ride a bicycle in the younger generation." Crypto mules, said Mathers, can be found on the dark web, although: "Whether or not you can trust them or not is another thing. You need to have some modicum of control over them. If I find someone on the dark web, I can't put my hands on him." So, as with cash and standard bank muling, personal contacts are the best way to source collaborators: "If I've got the kid that lives up the street doing it for me, if he doesn't do it right, I can go and grab him," noted Mathers.
Cut-rate layering
How much money can mules earn? The basic standard is 10% of the money moved, said Sales, but, fees vary widely: UK£30 (US$37); 50/50; a third - "There are so many different rates. It comes down to what that person's knowledge is and how they got there in the first place? How did that make them vulnerable?" Indeed, Dr Harding stressed: "The more vulnerable the money mule, the less they get paid." She and her colleagues were researching loan sharks and found victims had been used as money mules. One admitted he had transferred four lots of UK£5,000 (US$6,250) out of Britain and was paid just UK£30 each time. "He was extremely vulnerable, so for him it was acceptable - get 120 quid [UK£] for nothing."
In emerging market countries, fees can also be low. The Malaysian university research cited cases where mules received a one-time payment of between Malaysian Ringgit MYR250 (US$54) and MYR500 (US$108). "Money mules are complicit in crime since they help to launder the illicit money. The payoff is modest compared to the danger incurred by the money mule," claimed this research.
Signal, stop, start again
What should AML officers look for to detect mule red flags in financial institutions? France-based data visualisation company Linkurious highlighted, in a June 2022 report, changes in transaction patterns, including international transfers and significant crypto currency purchases; abnormalities in online behaviour, such as hesitation when inputting data and keystroke delays; and rounded amount purchases that are frequent and/or in large amounts, which might indicate gift card purchases for money muling. [12]
But red flags only go so far, said Sales, especially in today's high fraud environment. Most mule payments are international and an account-holder "has plausible denial if [the money] leaves the country". Mules claim they have been hacked: "They say they don't know about it and it's quite plausible that somebody could come into their account. As a criminal, all I have to do is create reasonable doubt - then game over."
Even if a mule is identified by a bank and reported to law enforcement, they may well be of little use to police. "Any serious fraudster will have a '10 percent man' andand they're the face that you meet. They're not the main person. You're never gonna meet the main person. The 10 percent guys are going to take your card and take your bank logins and when it's done, he's gonna come back and give you the money."
So, an arrested mule can only supply a name of this representative and is unlikely to talk anyway. "They're talking to someone who's probably really skint and vulnerable and then you're asking them to inform on a criminal and leave them in that place where they live. They'll think: 'Hold on, it's a bit dodgy for me'," said Sales.
Moreover, given today's plethora of digital bank accounts, noted Sales: "All the money mules I knew didn't give a fuck they're gonna lose their bank account. They couldn't care less about it. They just get another one."
Given the lack of prosecutions in many countries, there is very little leverage for police to get mules to talk and give useful evidence. Under such circumstances, the number of money mules is only likely to proliferate, and worldwide.