Money laundering is often a sophisticated crime pursued through complex transactions across multiple financial systems; but it may also rely on much simpler techniques – a Europol investigation into money mules has just concluded with the arrest of more than 1,800 individuals. Spanning 26 countries, the probe identified more than 18,000 money mules – and more than 300 recruiters – with 7,000 fraudulent transactions worth €67.5m exposed.
For the uninitiated, money mules are individuals through whom criminals clean up their dirty money. In return for a small cut, the mule is asked to transfer the criminal’s cash through their own bank account; this practice, sometimes known as squaring, gives the cash greater legitimacy as it moves through the system. Police have linked money mules to criminals involved in offences including drug dealing, sexual exploitation, fraud, human trafficking and even terrorism.
The size and breadth of Europol’s investigation – the seventh such initiative it has launched in the past five years – underlines the scale of the problem. The agency worked with authorities in countries in every continent of the world, identifying more than 300 individuals it believes are active recruiters of money mules.
Very often, these recruiters prey on the most vulnerable groups, including those in financial difficulties. Earlier this year, for example, the UK fraud prevention group Cifas warned it believed that criminals had identified young people suffering the financial fall-out of the Covid-19 pandemic as a promising group to target. Cifas said it had seen a 5% increase in the number of money mule cases involving account holders aged 21 to 30.
Indeed, even before the Covid-19 pandemic, cash-strapped students were an attractive target money launderers. Banks such as Barclays have grown so concerned about the problem that they have launched publicity campaigns to warn students.
In some cases, money mules have been unwitting participants in money laundering, warns the UK’s Action Fraud. They are reeled in through job adverts or social media posts offering lucrative rewards for relatively little work, but do not realise what they’re being asked to do is illegal. There have also been reports of money mules trying to pull out of arrangements with criminals, only to face threats of violence intended to force them to carry on.
However, ignorance does not constitute a legal defence, and the fall-out for money mules found guilty of involvement in money laundering can be significant. In the UK, the most serious offences of this type carry a 14-year prison sentence, but there are also broader impacts. Those convicted of money mule offences may struggle to access basic banking services; they are likely to struggle with credit applications, including for contracts such as mobile phone accounts.
Against this backdrop, financial services companies, as well as regulators and legal authorities, have been attempting to crack down on money mules in recent years, often using data and analytics tools that automate the identification of suspicious transactions. The UK’s largest bank Lloyds, for example, launched an investigations team in 2018, and has since frozen 88,000 bank accounts and cash transfers of £60m.
There have also been campaigns for new laws that would make social media platforms responsible for taking down adverts launched by fraudsters aiming to recruit money mules.
However, this is a global problem, rather than an issue that any one country can solve alone. Within days of Europol’s investigation, Australia’s police authorities said they had taken action. The FBI in the US has also been closely involved in international cooperation threats.
This means further pressure on financial services companies to do their part is likely in the months and years ahead. One possibility is more work to inform customers about the problem – and the penalties for those caught out – but banks will also need to work harder on detection as well as prevention. That will require further investment in anti-money laundering and know-your-customer systems and processes that flag problematic payments and transfers for further investigation.
One challenge is the relatively small scale of individual money mules and the transactions they put through. Their value to criminal groups is in aggregate, rather than singly. Not only are small-scale individual transactions more difficult to track and flag as suspicious, but this is also something a “whack-a-mole” exercise; close down one money mule account and others spring up elsewhere.
Nevertheless, working together, financial services businesses, regulators and law enforcement agencies will need to find new ways to solve this problem. The crimes that money mules enable through their laundering are very real – and very serious. And the banks that fail to play their part in tackling these crimes are at risk of substantial reputational damage – as well as opening themselves up to potential regulatory sanction.
Europol’s increasingly frequent investigations into money mules show that with international co-operation this problem can be addressed. The challenge is to keep up the pressure on the criminals.