Recently, it’s been noted that fraudulent activity is behind nearly 1% of all new current account applications in the UK. Indicating a rising threat to the financial sector. According to Experian, an alarming element of this trend is the increasing prevalence of ‘money muling’. This is a form of illegal activity that is implicated in over 42% of first-party current account fraud reports.
Money muling involves the use of personal bank accounts to facilitate financial transactions on behalf of third parties, typically criminals. It’s concerning to note that a significant number of these fraudulent activities are propelled by the rising cost of living and inflationary pressures, leading to increased financial vulnerability among individuals. These conditions make people more susceptible to manipulation by fraudsters seeking to use their accounts for illicit transactions.
First-Party Fraud and Money Muling
First-party fraud involves individuals providing false identity information or knowingly misrepresenting their identity for personal financial gain. Money muling involves knowingly or unknowingly allowing one’s bank account to be used by criminals for financial transactions. These transactions often involve funds acquired through authorised push payment (APP) fraud. Which is where individuals are deceived into transferring money directly to a fraudster.
Criminals, through money muling, distribute these funds into their own accounts. The transaction trail becomes more complex and difficult to track once the money has passed through multiple accounts. Experian reveals that typically, funds in a mule account move through two to three different accounts before making their way to international accounts. In certain instances, the use of crypto wallets complicates the tracking process even further.
Understanding Money Mules
It’s crucial to recognise the shifting demographics of potential fraud victims. Traditionally, individuals under 24 have been the primary targets, but recent years have seen a surge amongst those over 40. This change underscores the need for broader public awareness campaigns that reach all demographics.
A key point that often remains under-emphasised is the severity of legal consequences for money muling. Many people may not realise that acting as a money mule can attract a prison sentence of up to 14 years. Raising awareness about this stark reality could deter potential money mules, leading to a significant decline in these figures.
Mule Accounts: A Closer Look
Frequently, individuals open new accounts for money muling, while also keeping several older accounts active. These older accounts can serve as backups for transferring funds if the authorities detect and shut down the newer account.
Experian’s UK and Ireland Managing Director of Identity and Fraud, Eduardo Castro, highlighted the need for public awareness about the illegal nature and prosecution risks associated with money muling. There’s a need to educate especially younger individuals who are lured in by the promise of financial gain from adverts on social media.
The Experian Mule Score: A New Tool In The Fight Against Fraud
In response to this rising issue, Experian has developed a tool called ‘Mule Score’ to help financial institutions. This machine learning-powered solution evaluates account opening history, turnover activity, and characteristics. All drawn from a database of over 200,000 confirmed mule cases to assess and identify high-risk ‘mule’ accounts.
The Mule Score accurately identified more than 50% of the most high-risk ‘mule’ accounts through proof-of-concept trials. This innovative tool enables banks to assess their entire portfolio and quickly spot suspicious account activity, helping them report fraud and take timely action.
Experian’s Mule Score offers financial institutions a robust method to detect, investigate, and close accounts suspected of harboring fraudulent deposits. This significant advancement aids in preventing fraudulent funds from infiltrating the mainstream financial system and offers relief to victims of fraud.
An Ongoing Struggle
The battle against fraud is ever-evolving, mirroring the tactics of fraudsters themselves. While the introduction of fraud prevention tools, such as Experian’s Mule Score, represents a significant advance, it’s likely there will be initial challenges. For instance, some legitimate accounts may be wrongly flagged or closed. However, these hurdles are part and parcel of the development process in our strive towards more robust and accurate fraud prevention measures.
Keeping pace with the evolving landscape of fraud requires the continual development of our prevention measures. It’s also vital to stay abreast of changing demographic trends and to intensify efforts in raising public awareness about the grave legal implications of participating in such activities.
As the incidence of fraud in the UK financial sector increases, it’s crucial for individuals to remain vigilant. If you suspect suspicious activity, report fraud immediately. And remember: aiding fraudulent activities like money muling carries serious legal repercussions. Stay informed, stay safe.
