Identity and access

Pandemic-related support programs give money mule activity a kick

President Joe Biden delivers remarks March 23, 2021, at the Arthur James Cancer Hospital and the Richard Solove Research Institute in Columbus, Ohio. (Official White House Photo by Adam Schultz)

The emergence of various financial relief programs related to the on-going COVID-19 pandemic and its subsequent impact has drawn the attention of cybercriminals, who see these as an ideal opening through which to perpetrate “mule account” schemes, according to research from Aite-Novarica.

The number of fraud cases that misuse accounts and information under the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 have grown almost 10-fold in the 16 months between May 2020 and September 2021, from just over $540,000 to more than $470 million, according to the Arnold & Porter LLP CARES Act Fraud Tracker, and cited by Aite.

A significant number of these booming fraud cases involve “mule” accounts – which may be created or used with or without the permission of a legitimate bank customer – to funnel ill-gotten gains, according to Trace Fooshee, senior adviser in Aite’s fraud and anti-money laundering group. The Aite study – dubbed The Emerging Case for Proactive Mule Detection and the product of interviews with more than 30 top U.S. fraud executives – was commissioned by BioCatch. Fooshee and John Paul Blaho, senior director of product marketing for BioCatch, presented their findings and insights at a webinar Wednesday.

“Prior to the pandemic, money mules were a problem, but not as significant as today,” Blaho said in his remarks. Economic, personal and technological reasons have all fueled the use of mule accounts, especially in relation to committing fraud related to CARES Act funds. More people working from home, using a wider array of mobile financial services, and many feeling dire recent economic strain have all created a maelstrom of opportunity for mule accounts to take off.

“Whenever there are new use cases around the transfer of money, there are new opportunities,” Blaho pointed out. “The economic strain on consumers, many of whom have lost jobs... and need cash has created a want and a desire. Consumers are under a lot of duress and pain with the pandemic.”

“And that has created an opportunity for the cybercriminals to exploit around money mules,” he adds.

To further complicate matters, until recently (emphasis on recently) financial services executives have struggled with how to cost justify spending valuable fraud-hunting resources on mule accounts since, in most cases, the institution and their customers are not incurring financial losses. (The mule accounts are being used to transfer money.)

But, as the pandemic has moved forward, fraud trackers like Fooshee noticed that “the distribution and rates of fraud have been uneven and disparate.” Bank executives have reported flat or even reduced rates on conventional types of fraud, while money mule "recruiters were having a heyday, because of displace and unemployed workers. Their labor pool to supply mule accounts swelled.” Organized cybercrime groups, which Fooshee dubs “Fraud Inc.,” also began to take advantage of state and local support programs operating “under the aegis of the CARES Act.”

“Money mules are the life’s blood of Fraud Inc.,” Fooshee said.

Hence, even the $470 million figure on recent CARES related fraud, per Arnold & Porter, is probably a “pretty low-ball estimate” since it’s based only on the cases that law enforcement have actively pursued, according to Fooshee. He believes the accurate amount is “well north of $1 billion.”

On a positive note, the rapid rise in fraud related to pandemic funds — earmarked to help struggling consumers and businesses — has drawn a great deal of ire from the public and media attention. Knowing that cyber-criminals will use mule accounts to launder their funds, and the damage this type of fraud could have on their reputation (if not amounting to financial losses), more bank executives are beginning to pay attention to this type of fraud, Fooshee pointed out.

According to his research, only 13 of the 32 FSI fraud executives he spoke with recently “are proactively tracking mules.” But nearly two-thirds (64%) say they are stepping up their activity here, Fooshee says.

“Senior management have taken a peculiar interest in mule activity as we’ve seen a lot of news articles... about the rather shocking degree of waste coming out of the federal stimulus,” he adds. “If taxpayer money is being wasted and that waste has flowed through financial systems, [regulatory] agencies might take a more active interest.”

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