This is the first of a two-part article about how fraudsters use unsuspecting people to facilitate criminal activity through financial institutions.

A money mule is a person who transfers or moves illegally acquired money on behalf of others. These individuals are recruited by criminals to help launder proceeds from fraud, scams or other illicit activities, making it harder to trace the origin of the funds. Money mules add layers of distance between victims and fraudsters. Money mules create distortion in various ways, including using bank accounts in their names, cashier’s checks, virtual currency, prepaid debit cards and money service businesses.

Q: What is most surprising about this fraud?

A: Who is involved in it, and not just as a victim. Anyone, regardless of age, class or group, is a potential victim. What is surprising is how many “normal” people – i.e., non-fraudsters – get involved in assisting the schemes of fraudsters. These individuals are known as “money mules”.

According to the Federal Bureau of Investigation (“FBI”), money mules fall into three categories:

• Unwitting (Unknowing): These individuals genuinely believe they are helping someone – often a romantic partner, a new employer, or a new friend. They do not realize the money they are moving is tied to criminal activity.
• Witting: These people may suspect something is wrong or have been warned (such as from staff at their financial institution), but they ignore the red flags.
  
• Complicit: These individuals know exactly what they are doing and actively participate in laundering money or converting fake instruments into cash, sometimes even recruiting others.

Q: How does an honest person get recruited as a money mule?

A: There are three groups most targeted by fraudsters: seniors, young adults and the chronically under-employed. Social media sites, such as Telegram, that allow for maximum anonymity on the part of fraudsters, are the simplest way to find potential mules without risk.

• Seniors: Seniors can be more likely to make the initial connection with a fraudster because they seek increased social contact. Once connected, seniors have been noted to be less likely to question suspicious behavior if it is from someone they consider to be an authority figure or someone helpful towards them, since they grew up in an era where trust and politeness were social norms. In turn, they wish to be helpful, so they often willingly transfer money or packages if they believe they are helping. Seniors are, generally, reluctant to report being a target of fraudsters in any form out of embarrassment, which puts them at risk of being repeat targets of fraud activity (both as a victim and as a money mule).
• Young Adults: A common recruitment tactic is to offer a fake job with assurances of the ability to earn “easy money” for minimal work, framing such positions as “payment processor” or “transfer agent.” Such an offer is appealing to young adults seeking their first full-time position. Due to their lack of experience in the business world, they may overlook poorly-written communication or a refusal to provide business credentials from fraudsters. Also, young adults may not understand the legal consequences of some of the actions fraudsters ask them to carry out.
• Chronically Underemployed: Individuals who have difficulty securing long-term full-time employment may have to work a series of part-time jobs to make ends meet. Picking up an extra job that requires little of their time can be an attractive option. An underemployed individual with a weak credit rating may perceive little to no risk in opening a bank account that is used to process questionable deposits, even if the fraudster requests direct access to the account.

Q: What specifically might a money mule be asked to do for a fraudster?

A: Money mules are used for different purposes by different types of criminals. For example, a money launderer’s goals are different than those of a fraudster. Fraudsters commonly use money mules as a channel to launder or execute the conversion of funds.

• Example 1: A money mule is recruited to open an account at a credit union and just leave it inactive for months. An extended period goes by (which might exceed a year) and then the fraudster manages to take over an account from another member at the same credit union (through deceit and social engineering). The fraudster executes a member-to-member transfer from the victim-member to the account of the money mule – a simple process since both accounts exist in the same institution. The money mule then receives instructions from the fraudster to transfer the funds from their account out of the credit union through external transfer, cash application, Zelle® or wire transfer.
• Example 2: An individual is recruited by a money mule and confirms what bank accounts they have and at which institutions. The fraudster seeks to capitalize on the goodwill the money mule has established as a long-time member of those financial institutions. The fraudster provides a series of counterfeit, washed, or forged checks for the money mule to deposit into their account, with instructions to act quickly and convert those funds to cash. The money mule sends a portion of the funds to a mobile cash app to keep as their “compensation” for this effort and then sends the rest of the funds via wire transfer to an account designated by the fraudster.

A primary advantage for the fraudster in having the money mule carry out both the examples described above is that if the illegitimate nature of the transactions is discovered by the financial institutions involved, there is no way to trace the activity directly back to the fraudster. The money mule is left alone as the only individual identified as directly involved. This is a crucial aspect of the relationship. Fraudsters view money mules as disposable and will readily abandon them if trouble arises. There is no loyalty in this relationship from the perspective of the fraudster. The money mule role serves to insulate the fraudster from law enforcement attention.

In the second part of this article, the consequences of individuals agreeing to become money mules will be discussed. Money mules often suffer serious emotional responses related to being part of such illegitimate activity, including anxiety and depression. Additionally, there is a potential for reputational harm. And there is a real and substantial risk that money mules will become the subject of criminal prosecution.

Perhaps the extra money earned through such endeavors is not worth it…