Mule accounts are a critical element of many types of bank fraud. Scam artists open mule accounts to deposit fraudulent checks. They also recruit money mules and use their accounts to launder counterfeit instruments or carry out other types of fraud.
To minimize your risk of exposure to bank fraud, your financial institution needs tools and strategies to spot new mule accounts and existing accounts being used as mule accounts. Keep these tips in mind.
1. Watch for the opening of mule accounts.
Many criminals use fake or stolen identities to open mule accounts that cannot be traced back to them. If you wait for fraudulent transactions to hit these accounts, you will incur unnecessary losses. Instead, you need proactive fraud protection tools that can monitor new account applications for behavioral signs of fraud.
For instance, the speed at which the application is completed can help to identify mule accounts. Criminals who open a lot of accounts know the process. They are fast and fluent in a way that a legitimate user is not.
But the areas where a criminal slows down are where a legitimate person typically speeds up. In particular, this happens with personal details. Legitimate customers can quickly type in their Social Security Numbers, phone numbers, and addresses. Criminals using a blend of real and synthetic identifying details often slow down at these points in the application process.
2. Look for signs of mule-like activity.
If you don’t catch the account while it’s being opened, you need to keep an eye out for signs of fraud while it is in use. Criminals often use the same account to deposit multiple fraudulent checks or to commit other kinds of fraud.
You need fraud detection and prevention tools that can scan account activity and look for patterns of fraudulent behavior. For instance, some mules open accounts when financial institutions are offering incentives. Then, they leave the account alone to avoid detection. A few months later when they think they’re an established account holder, they start using the account for fraud.
In this situation, the behavioral pattern that your anti-fraud tools should notice is a dormant account that suddenly begins to process a lot of transactions. Another tell-tale pattern of mule accounts includes multiple deposits followed by immediate wires out of the country.
3. Use behavioral biometrics to look for account takeover.
Often, criminals convince honest people to let them use their accounts as mule accounts. Your fraud solutions should be on the lookout for signs of this activity such as the pattern outlined above.
But behavioral biometrics can go a step further and look at red flags such as hesitation, distraction, or other signs that someone is acting under the direction of a criminal and is a little worried about their actions.
4. Have skilled fraud detectors review potential cases of fraud.
Digital tools can not be your only line of defense. You also need to get your team involved. Your management team will need to manually review transactions and applications that have been flagged as fraudulent.
Help them out by investing in robust tools that have built-in defenses against false positives. In particular, you need fraud detection and prevention solutions that use machine learning to improve their approach to fraud detection over time. If these tools mistakenly flag a legitimate transaction as potentially fraudulent, they will learn from their mistake and improve their accuracy the next time.
However, as powerful as machine learning algorithms can be, your human team also plays a critical role in training your anti-fraud solutions. When your solution flags an account application or a transaction as potentially fraudulent, your team will come in and either verify or deny the suggestion.
If your team makes mistakes at this juncture, your solution will absorb the mistake and the machine learning will go down the wrong path. To protect your financial institution, you need to commit to training your team. This needs to be an ongoing process as fraud techniques are always changing.
5. Train tellers to listen to customers.
Polite chit-chat with customers builds relationships and personalizes bank services for your customers. But beyond that, it can be a defense mechanism against fraud. A lot of the people who open mule accounts are lonely or financially desperate — criminals leverage their needs for affection or money to convince them to become mules.
These victims often reveal some of what’s happening when they’re in the teller line making a deposit. For instance, someone who has been the victim of a love scam may talk about their new boyfriend or girlfriend they have never met, and explain that they’re making a deposit for them.
Someone who is the victim of a cashier’s check or money order fraud may tell the teller that they’ve recently won a sweepstake or gotten an easy work-from-home job. Keep your tellers up to date on the latest scams involving mules so they know what to listen for.
Get Help With Fraud Prevention and Detection
Whether you’re looking for mule accounts or any other fraudulent activity, your financial institution needs a blend of competent staff members and high-quality fraud detection and prevention solutions. If you’ve got the former covered, we can help with the latter.
At SQN Banking Systems, we offer a variety of fraud prevention and detection tools. Let’s get started with a review of your current anti-fraud practices and help you decide the best path forward. To learn more, contact us today.