Laundering money through a mule


The menace is rampant within the country where accountholders are getting money deposited in their accounts through unknown persons (fraudsters). Later the account holders are approached by the fraudsters to seek withdrawal of the money.

Street Talk

Expert Opinion

By: Sajjad Bazaz

Do you know? A mule is one of the most commonly used working animals in the world, and is known for its  docile nature and ability to endure difficult conditions. Before coming to the exact reason for starting today’s column with mention of a mule, let it be clear that mule is not a donkey, but a hybrid between a horse and a donkey, especially the offspring of a male donkey and a mare. 

Interestingly, a mule for being a more resilient working animal and submissive in nature has occupied a permanent space in the contemporary financial landscape, but unfortunately for all bad reasons. 

In the fast growing digital transaction landscape, transferring of funds in the banking system has become remarkably convenient, consuming just a few minutes to complete the transaction. However, at the same time, this digital revolution in financial transactions has been a gateway to frauds where fraudsters are fine tuning their operations in a more sophisticated way to take advantage of the vulnerabilities within the digital transaction ecosystem. In the whirlwind of financial frauds happening at the back of the digital financial system, it is the money mule fraud which has been a cause of worry for bank customers.

Let me explain. Actually, the cyber criminals have been innovating new mechanisms to not only commit financial frauds but also get the gullible public entangled into the legal trap as part of the crime. Some time back, three Indian students in Singapore were sentenced to prison for participating in a transnational money mule syndicate that was perpetrating “tech support scams,” The trio, according to media reports quoting Singapore police officials, received cash in their bank accounts on behalf of the fraudsters. Later they used to transfer the amount to the fraudsters. Precisely, they were involved in a money laundering scheme in which participants were allowed access to their bank accounts to receive cash. They had allowed their bank accounts to be used against 2% commission of the monies received. 

It’s not only in foreign transactions that money mules operate, the menace is rampant within the country where accountholders are getting money deposited in their accounts through unknown persons (fraudsters). Later the account holders are approached by the fraudsters to seek withdrawal of the money. In majority of such cases, the account holders are not paid any commission, but are threatened of consequences, even police action for money laundering, if the account holder refuses to handover the money. 

Basically, the unprecedented exponential growth of digital transactions during the Covid-19 pandemic has been a green pasture for cyber criminals. Millions of new users, who were not having even an iota of understanding about the world of the Internet, boarded the digital platforms to conduct electronic transactions. The fraudsters left no stone unturned to defraud these gullible people. A report by Deloitte India says banking frauds in India are set to increase in the next two years. Deloitte India conducted the study through compliance officers and senior management of 70 banks of all types and 78 per cent of the banks believe that banking fraud will increase in the next two years. 

The rising cyber frauds in the banking sector, whether due to customers’ own negligence or banks’ carelessness, has a direct bearing on the reputation of the banks. Notably, a fraud committed through a bank account immediately hits the customer’s confidence and this invokes not only reputational risk but also operational risk and business risk for the banks. 

Since banks cannot afford to stop their customers from using digital channels for conducting their financial transactions, the only way for them is to put in place a sound cyber security system so that fraudsters are unable to penetrate into the customers’ accounts. 

In other words, the banks and financial institutions have a prime responsibility of creating appropriate tailor-made defence mechanisms against acts of cybercrime. An expert in the fight against cybercrime stresses the need for business organizations like banks to conduct regular threat analyses and positions its defences. accordingly the reports can be used to build increased awareness about risk factors not only among the staff but also among the public. 

However, at the same time, the bank customers have to understand that the safety of digital transactions lies in their own hands. Before boarding the digital platform and conducting electronic transactions, they need to understand the security aspect of such transactions. The basic rule for them is not to share their account details such as password, PIN etc. with any person, even with their bank officials. Because the bank never asks its customers to share PIN or password. 

So, what is meant by money mules? A money mule is someone who transfers or moves illegally acquired money on behalf of someone else. Actually, the cyber criminals use the bank account of account holders to transfer ill-gotten money to remain unidentified. In other words, these gullible account holders are money mules which help the criminals to remain untraced for the crime victims and criminals, as it becomes harder for police or any investigating agency to accurately trace the money trails. A person can become a money mule willingly against some pro t. However, it has been observed that most of the money mules are unaware about the crime till the fraudsters get trapped. 

So think, if you are moving money at the behest of some other person, you may be serving as a money mule. 

As far as the modus operandi adopted by the fraudsters to recruit money mules is concerned, the RBI directions in this regard are worth quoting. The apex bank has come out with a publication titled ‘BE(A)WARE – A booklet on Modus Operandi of Financial Frauds’, which provides details of commonly observed modus operandi, precautions to be taken against fraudulent transactions and digital hygiene to be followed by the public.

The modus operandi adopted by the cyber criminals to take money mules on board in their criminal acts is explained as: 

– Fraudsters contact customers via emails, social media, etc.,and persuade them to receive money into their bank accounts (money mule), in exchange for attractive commissions. 

– The money mule is then directed to transfer the money to another money mule’s account, starting a chain that ultimately results in the money getting transferred to the fraudster’s account.

– Alternatively, the fraudster may direct the money mule to withdraw cash and hand it over to someone. 

– When such frauds are reported, the money mule becomes the target of police investigation for money laundering.

What are the precautions to be observed for a bank account holder? The basic thing is not to share the details of your bank account, especially to a stranger. There is every possibility that you may be lured to share the account details, but don’t succumb to the greed. Following precautions, listed by the apex bank in its recent booklet, need to be noted if you don’t want to get trapped as a money mule:

– Do not allow others to use your account to receive or transfer money for a fee/payment.

– Do not respond to emails asking for your bank account details.

– Do not get carried away by attractive offers / commissions and give consent to receive unauthorised money and to transfer them to others or withdraw cash and give it out for a handsome fee.

Now, the most important to take note of are the consequences if one is found involved as a money mule.

It is illegal to be a money mule and warrants punishment as is evident from the story of three Indian students trapped in Singapore narrated above. Even if you aren’t aware of being used as a money mule, you would be held responsible for a crime. 

The RBI states, if the source of funds is not genuine, or the rationale for underlying transaction is not proved to authorities, the receiver of money is likely to land in serious trouble with police and other law enforcement agencies.

Besides, a money mule can also damage his credit and financial standing and law can hold him personally liable for repaying money lost by victims. 

Note:-The article contains extracts from the author’s forth-coming book – Straight Talk: Contemporary Banking Decoded – to be released soon…!

(The author is a veteran journalist/columnist. He is former Head of Corporate Communication & CSR and Internal Communication & Knowledge Management Departments of J&K Bank).