Ways to detect and prevent money mules

Detecting money mules

The number of money mule schemes affecting community banks is increasing, in part because of the pandemic. Here’s how two community banks are protecting their customers from falling victim to fraud.

By William Atkinson


More and more community banks are having to deal with money mule schemes targeting unsuspecting customers. One such community bank is Lakeland Bank in Oak Ridge, N.J., which has had more than one encounter with this problem.

Quick Stat

66,300

money mules were identified in complaints to the FBI and its partners in 2020

14.5%

more money mules were identified between 2019 and 2020

$26 billion

The amount these complainants identified as stolen in 2020, a 22% decrease from 2019

Source: FBI

“Mainly, the instances [of money mules] consisted of unemployment benefits fraud and were identified through our anti-money laundering [AML] detection system,” says Marlena Taglieri, the $7.7 billion-asset bank’s senior vice president, Bank Secrecy Act (BSA) and fraud officer.

Money mules are bank customers who knowingly or unknowingly aid money launderers by transferring or moving illegally acquired funds on their behalf. According to the FBI, more Americans are becoming money mules (see sidebar). The numbers continue to increase as a result of the pandemic, with many scams involving unemployment benefit claims and illegitimate remote work opportunities.

Taglieri says each incident involves significant work on Lakeland Bank’s part. “These instances have been addressed through contacting assigned federal law enforcement agencies, fulfilling reporting requirements when necessary, returning blocked funds to the originators and, ultimately, exiting the relationships,” she says.

 

A rise in money mules

Lakeland Bank began seeing increases in money mule scams when COVID-19 began, largely due to government requirements to close nonessential businesses, which pushed people to digital channels they may be unfamiliar with.

“Individuals were forced to stay home, work from home, educate from home and limit travel,” Taglieri says. “People became vulnerable and fell victim to various scams, such as online dating scams or work-from-home scams.”

The potential became apparent to Lakeland Bank through unemployment benefit scams, in which victims were contacted to collect payments and then forward the funds, whether it be with gift cards, person-to-person (P2P) payment platforms or wire transfers.

One of the first steps Lakeland Bank took was posting dedicated blogs to its website to educate customers on avoiding such scams. Training for customers and customer-facing staff on the various types of financial fraud also helped deter such activity.

“Knowledge is power,” Taglieri says. “To have a customer or bank associate question the transaction, source or destination of the funds frequently allows the opportunity to identify scams before transactions are initiated.”

In situations where it’s appropriate, the bank communicates with local and federal law enforcement agencies. To comply with the BSA, it has an AML detection system in place that helps identify suspicious movement of funds and possible scams.

But Lakeland Bank’s work isn’t finished. “We will continue to educate our customers and associates on the different types of fraud that can occur and tactics that are continually evolving,” Taglieri says. “We will continue to evaluate our technology to assist in automating and improving the identification of such activity and continue our partnership with local and federal law enforcement agencies.”

 

Fighting fraud through education

Another community bank staying vigilant against money mule scams is $1.6 billion-asset F&M Trust in Chambersburg, Pa.

Security officer Ray Wills says these scams are often not discovered until the customers have already lost money. Anytime the community bank does discover one through its investigations or from a customer report, the most effective course of action is to respond quickly and protect the customer’s account. F&M Trust then gathers as much information as possible and uses available resources, including the U.S. Postal Inspection Service, law enforcement officials and consumer protection agencies like the Federal Trade Commission (FTC).

As a way to reduce the likelihood of such scams, F&M Trust created a Money Moves section of its website as a resource to share information with customers about a variety of topics, including how to identify and prevent money mule scams.

“The need to specifically address the money mule scam was identified because most F&M Trust customers who were affected by this type of fraud didn’t realize that they were involved,” Wills says.

F&M Trust also educates employees via internal communications and training, so they can be prepared to help customers in the event they become embroiled in a scam. The community bank provides free public informational seminars, which are specifically focused on vulnerable populations, such as elderly and socially isolated people. “These groups are more frequently targeted by scammers and are at a higher risk of becoming victimized,” Wills says.

With the number of money mules on the rise, these are a number of steps community banks should consider to reverse the trend.

“Most financial institutions have customers who have been affected by scams, and the problem isn’t likely to go away anytime soon,” Wills says. “Fraud schemes such as money mules exist simply because they are successful, and scammers will take advantage of every opportunity to launder their stolen money and take more from the unsuspecting.”


William Atkinson is a writer in Illinois.