Understanding money muling: what is it and how does it work?

In 2022, Australians suffered a record $3.1 billion in losses due to scams. The Australian Competition and Consumer Commission (ACCC) reported that a significant portion of these scams were linked to money mule accounts. By understanding money muling, businesses can protect themselves from the financial and legal repercussions associated with it.

So, what is money muling and how can we use identity verification solutions to detect and prevent it?

What is money muling?

Money muling is a type of money laundering involving funds obtained in illegal ways, such as phishing, malware attacks, eCommerce fraud, and romance scams. A money mule is a person who receives illegally obtained money into their bank account from a third party and transfers it into another account. The mule is often unaware that they are involved in a criminal activity and may believe that they are participating in a job, investment, or helping an online friend. They are usually offered a commission for receiving and transferring the funds.

Although they may not be directly involved in the crimes that generated the money, they are considered accomplices as they launder the proceeds of such crimes. Individuals most commonly targeted for money muling include newcomers to the country, individuals under the age of 35, students, and those experiencing financial hardship.

How are money mules recruited?

Money mules are often recruited through the use of cyberfronts and spam advertisements offering fake job opportunities. These false job opportunities may be advertised with titles such as ‘Private Financial Receiver’, ‘Money Transfer Agent’, ‘Shipping Manager’, and ‘Sales Representative’. Money mules are often lured in by job opportunities that seem too good to be true, with appealing commissions or incentives and no experience required.

What are the legal consequences and liabilities associated with being a money mule?

Participating in money muling is a criminal offence and can have severe legal consequences. The penalties for money laundering depend on how much money was involved in the offence and the level of knowledge the accused had about the illegally obtained money.

Offences range from under $1000 to over $1m, with more severe penalties for larger amounts. There are three levels of knowledge: negligence, recklessness, and intention. The more knowledge the offender has about the source of the funds, the more severe the punishment.

If you believe you have been approached to participate in a money mule scam or you have been used as a mule, you should contact your bank or financial institution immediately.

How do identity verification solutions detect and prevent money muling?

In 2006, the Australian Transaction Reports and Analysis Centre (AUSTRAC) introduced the Anti-Money Laundering and Counter-Terrorism Financing Act (AML/CTF Act). This act was implemented to regulate industries at a higher risk of money laundering, such as banking and gambling.

Identity verification technologies help businesses comply with customer due diligence (CDD) and know-your-customer (KYC) regulations which are key components of the AML/CTF act. KYC is a subset of AML compliance that focuses on knowing the identity of the customer and understanding the types of transactions they are likely to engage in. By knowing their customers, businesses can identify suspicious behaviour known as ‘anomalies’, which may indicate money laundering.

CDD refers to the identifying information businesses must collect from customers to verify their identities. Identity verification solutions compare customer data against trusted data sets and combine document scanning, biometric authentication, and liveness checks to ensure customers are who they claim to be.

To discover how greenID’s identity verification solution can be tailored to protect your business against money muling. Get in contact with us today.