SA’s youthful population and the rapid adoption of mobile payments is making it a prime target for financial crime, particularly the use of ‘money mules’ to move stolen funds, experts warn.
Jason Lane-Sellers, director of fraud and identity (EMEA) at LexisNexis Risk Solutions, defines a money mule as a person who, intentionally or naively, transfers illicit funds on behalf of criminals.
“A money mule is a bank account or account holder that fraudsters use to receive and transfer funds obtained through criminal activity. These accounts often play a role in laundering money, obscuring the origins of stolen funds and complicating efforts to trace their end destination. Fraudsters conceal their activities by moving money quickly through extensive networks of seemingly unrelated mule accounts, often spread across multiple financial institutions,” says Lane-Sellers.
Anna Collard, SVP of content strategy and evangelist at KnowBe4 Africa, adds: “Fraudsters rely on money mules to move illicit funds, and South Africa has become a prime target because of its sophisticated financial infrastructure, growing digital adoption and high levels of unemployment."
She continues: "It's relatively easy to recruit people here. Sometimes they just speak to youngsters in the streets and offer them a fee to use their bank accounts on a once-off basis." Then there's the other end of the scale: "There are horrible stories of buildings filled with trafficked people (sometimes drugged), whose bank accounts are being used against their will."
According to the UN International Labour Organisation, it is estimated that more than 27 million people worldwide are victims of human trafficking, including money mules, says LexisNexis Risk Solutions.
Lane-Sellers notes: "Traffickers often target vulnerable individuals, promising legitimate work that could alleviate their financial difficulties or help them support their families. They manipulate these people into creating accounts to filter funds obtained through fraudulent schemes, such as scams."
Technology to help defence
While global banks are still developing strategies to tackle this issue, real-time monitoring tools, network analysis and shared risk data are becoming critical in detecting mule activity.
Lane-Sellers emphasises the importance of tracking both incoming and outgoing transactions to spot suspicious patterns.
Criminal enterprises rely on mules to move money both locally and internationally, so understanding real-time network activity is essential, Lane-Sellers continues.
“Checks and balances in faster payment systems often focus on specific transaction details, primarily the outbound process. These systems validate recipient account legitimacy and confirm the accuracy of account details. To effectively combat money mule activity, companies must monitor both inbound and outbound transactions. This approach encourages the identification of suspicious incoming transactions and the detection of patterns indicating potential misuse. Following account usage by its owner can uncover unusual behaviours tied to mule activity,” he adds.
Instant payment systems, while convenient, have exacerbated the problem by enabling fraudsters to quickly cash out stolen funds. This has led to increased pressure on financial institutions to authenticate users and screen transactions more rigorously.
Rise in activity
The rise in mule activity is closely tied to scams and account takeovers. Some mules are coerced or tricked, while others knowingly participate in the schemes. Fraudsters often use stolen identities to open accounts, layer transactions across banks or convert funds into crypto-currency, making detection harder.
Early red flags include small test transactions followed by large or frequent transfers.
Financial institutions must enhance their fraud detection strategies using behavioural biometrics and digital identity tools, warns Lane-Sellers.
He says the most effective way to detect and disrupt money mule activity involves achieving a comprehensive view of every identity that interacts with a company.
“Differentiating between legitimate and suspicious activities requires analysing vast amounts of transaction and interaction data. While monitoring patterns within an organisation’s customer base is manageable, challenges arise when funds extend beyond the institution’s oversight,” he adds.
Effective defence depends on the ability to analyse digital and physical identities, behavioural patterns, interactions, transactions and account attributes. According to LexisNexis Risk Solutions, the ability to connect these data points equips companies with a more robust defence against fraud and positions them to uncover and disrupt complex money mule networks.
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