The cultural hurdle AML must overcome to combat money mules

It's difficult to overstate just how large a problem money muling is.

This notoriously elusive financial crime is an unrelenting stressor on banks and payment systems processors, and connected to $4.9 trillion worth of laundered money. Incredibly, this staggering figure is set to rise further.

Is money muling evolving faster than we can react?

The increasing complexity of money muling trends presents a pressing challenge. It is not merely an escalation in numbers; the very DNA of money muling is evolving. While some banks are warning of a 23% rise in student mules, others have noted a 29% spike in individuals over 40 engaging in such activities.

This demographic expansion complicates detection efforts. Although muling remains dominated by the 17-25 age category, today’s figures cement it as a broader concern with less predictable indicators. Consequently, Payment Service Providers (PSPs) face a period of heightened uncertainty in which they must explore new strategies and pick up the pace of risk detection.

Failure to do so puts AML compliance in jeopardy and opens the floodgates to enormous losses stemming from upcoming mandatory victim reimbursement. And given that many money mules are unwitting participants, protecting their financial integrity makes ethical and regulatory sense.

Reforms are well-intended but only the beginning.

Recent reforms, such as the Economic Crime and Corporate Transparency Act (ECCTA), are a positive step towards facilitating the exchange of information to aid in the prevention of economic crimes, including money muling.

For those fighting money laundering, it is welcome news that a legislative mechanism now exists for peer-to-peer financial crime data sharing, which is crucial for intercepting illicit funds and laundering activities.

However, having new legislative powers is not the same as having a practical solution to the problem, and effective implementation remains critical.

Shaking off the silos is essential.  

Research from the Future of Financial Intelligence Sharing (FFIS) highlights a stark disparity in the collaboration capabilities of economic criminals versus the fragmented efforts of those safeguarding the financial system.

While fraud prevention has benefited from private-private information sharing for some time, AML efforts have been hindered by a lack of cohesive strategy and widespread information silos.

So, although legislative mechanisms matter, cultural transformation is a necessity if PSPs are to combat money muling and enhance AML practices.

Where a new collaborative outlook is needed.

At present, significant variables influence a PSP’s outlook of data sharing and collaboration for AML. These might include:

• Appetite for and perception of risk.
• Trust or opinion of other parties.
• Organisational responsibility and liability.
• Sector, territory, and business model.

While these considerations are valid, conducting analysis in silos or triggering data sharing when unique thresholds are met fosters inconsistencies and oversight gaps in risk. This allows financial crime to multiply and go unchecked.

Mirroring a counter-fraud culture.

AML teams need only look at their fraud prevention counterparts to see why data sharing and collaborative practices are beneficial.

By mirroring a counter-fraud culture, AML teams can not only tighten the net on financial crime, but perhaps for the first time, address a complex issue that straddles the line between AML and fraud.

As FFIS points out, a money mule can commit acts of fraud and laundering at the same time, highlighting the dual nature of muling and the need for a unified culture of risk intelligence sharing.

Seamless, syndicated processes can seriously disrupt muling.

The arrival of the ECCTA is an opportunity for PSPs to look differently at data sharing. Those responsible for AML should explore how new approaches can bolster defences against a worsening money mule problem. And just as crucially, question where a siloed culture may have caused problems in the past.

Financial crime data sharing is most effective when it is seamless. Therefore, switching to a fraud-style model – where risk management platforms are built into AML operational strategy and strategic culture – must be considered as a path forward.