Fraud Dictionary
Money Mule

Money Mule

A money mule is a person who illegally receives and transports money for another person. It is often used to describe someone who illegally accepts payment from a customer and forwards it to the legitimate owner of the money. 

A money mule may be an employee or contractor of a business, or a friend or family member who has been entrusted with some kind of monetary transaction. When people use cryptocurrency for illegal activities, it is crucial that they are careful about where their funds are going. 

If someone is accepting payments in exchange for goods and services, there is a possibility that they could be laundering the proceeds from crime. So, there are reasons why you should be on the lookout for signs that someone might be doing something shady with your money.

How Does Money Muling Actually Work?

Mules are given a sum of money, either in cash or by electronic transfer, and then asked to send it to someone else. The mules’ role is to conceal the identity of the initial source of the funds. To do so, they may withdraw a portion of the laundered money, and then deposit this in a bank account under their own name, or sometimes under the name of a relative or friend. They might also convert some or all of the funds into another currency, before depositing or transferring it. They will then withdraw or transfer the same funds, but now in a manner that conceals their own identity and the original source of the funds.

What are the UN’s three stages of laundering?

There are three main stages of money laundering, which can also be used to describe the process of money muling. 

Placement - The first stage involves moving ill-gotten gains into the financial system, either by depositing or cashing the money in, or transferring it electronically. 

Layering - The funds are then moved around in order to conceal their source and owner, often through multiple transactions. 

Integration - At this final stage, the funds are returned to their owners in a form that makes them appear legitimate. This can involve reinvesting the funds in legitimate assets, or simply converting them back into cash.

What Are The Warning Signs of Money Muling for Businesses?

One of the ways businesses can combat money muling is by being aware of the signs of suspicious activity related to it. There are several common signs that someone could be a money mule, including: 

  • Sudden increase in spending (e.g. on luxury items, travel, etc.) 
  • Frequent large deposits from unfamiliar sources into the account of a single person (e.g. a young person who is the only employee of a small company) 
  • Unusual withdrawals from the account of a single person (e.g. very frequent withdrawals for a small amount of money) 
  • Sudden large withdrawal from a single account (e.g. to pay taxes on unreported income)

What Types Of Businesses Do Money Mules Target? 

The following types of businesses are the most likely to be targeted by money mules, according to the FBI: 

  • Gift card resellers 
  • Online gambling (particularly poker and sports betting) 
  • Cryptocurrency exchanges 

What are the three types of money mules?

Unwitting mules - This type of mule has no idea that the funds are being used for criminal activity, but has a high likelihood of being unwittingly involved, as they are particularly vulnerable to manipulation by scammers, who are increasingly targeting young people with lucrative offers that promise easy money - including from cryptocurrency mining. 

Exploitative mules - This type of mule is aware that the funds are being used for criminal activity, but is unlikely to be involved in the planning or execution of the scam, but is happy to launder the funds in exchange for a cut of the profits. 

Intentional mules - This type of mule is aware that the funds are being used for criminal activity, and is likely to be involved in the planning or execution of the scam, and likely to have taken steps to protect their own identity and conceal their involvement. 

What is the typical process that a Money Mule uses to launder money? 

There are a variety of techniques that a money mule can use to launder money, depending on the specifics of the scheme.

The simplest way to launder money is to transfer it from a bank account where it was deposited via an illegal activity, to an account where it is used for a legal transaction such as renting an apartment or paying a contractor, and then withdrawing it in cash. 

Mules can also use cryptocurrencies, notably bitcoin, to launder money, either by purchasing bitcoin with the proceeds of a crime, or sending the money to a wallet that holds bitcoin. In the former case, the bitcoin is then sold for cash. 

In the latter, the bitcoins are sent to a wallet whose owner is difficult or impossible to trace. The funds can then be moved to a different wallet whose owner has been identified and whose account is less likely to be frozen. 

How can businesses reduce the risk of money laundering taking place through them? 

The following steps can help a business reduce the risk of being used as a money laundering conduit: 

Know your customer: Conduct due diligence on any new customer and check their identity. - Monitor transactions: Monitor all transactions, including those made with cryptocurrency, to ensure no suspicious transactions are taking place. 

Keep records: Keep records of suspicious transactions, including details of the transaction and why it was flagged as suspicious. 

Report suspicious activity: Report all suspicious transactions, including those involving cryptocurrency, to the appropriate authorities.

Using technology to combat it: Using buyer verification and smart blocking systems like Spotrisk, will help to detect and avoid money muling impacts on your ecommerce business.

Is Money Muling still a problem in 2022?

Money muling is a serious business. While it's true that the phenomenon does not only concern small businesses and retailers, it is also true that these are the ones that get affected most by it. 

Money muling is a process of cleaning dirty money, i.e. money obtained illegally (through drug dealing, etc.) in order for it to be clean and be usable for some other activity. Becoming a money mule is sometimes the easiest way to make some quick money: you don’t need to invest in a business, you don’t need to have skills, you don’t even need to have an ID. 

But it’s also true that money muling is a crime. And it’s also true that most of the time, money mules don’t even know they’re engaging in a crime. They do know, however, that it’s dangerous for them: the authorities are always looking for money mules, and once they find one, they will be punished. The best thing you can do if you want to make quick money is to find a real job.

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