Tackling payments fraud across the account lifecycle

• How great is the challenge posed by money mules today? 
  
  
• Why are banks’ attitudes towards money mules shifting? 
  
  
• What should banks be doing today to bolster their fraud defences? 

Depending on whom you consult, payments fraud is costing banks billions – if not trillions – every year. As transactions increasingly move into the instant, digital space, fraudsters are exploiting the opportunity to surreptitiously siphon away cash. Money mules pose the most significant threat here, with 89% of fraud losses diverted to brand new accounts. 

The scale of loss is untenable. Only exacerbating it are the institutional costs associated with opening customer accounts; including the requisite maintenance, anti-money laundering (AML) controls, and marketing. After all, no customer lifetime value is recovered from money mule accounts. Purlieus losses, like reputational damage and lawsuits, are less tangible but just as stark. Given this global challenge, the need to intercept money mules is shooting up banks’ agendas. Whereas once the liability of these crimes fell on the shoulders of the sending bank, some regulators are beginning to push for more holistic, end-to-end action. The UK, for example, now places the liability of money mules on both the sending and the receiving bank – while in the United States, the National Automated Clearing House Association (NACHA) is introducing new rules that require Receiving Depository Financial Institutions (RDFIs) to implement risk-based controls and monitoring procedures to identify and address fraudulent Automated Clearing House (ACH) credit entries. 

So, what can banks do today to tackle this problem head-on? The key is to address money mule activity across the entire lifecycle of the account – from identity verification (prior to onboarding), all the way to account closure. The early-account phase – i.e., the first 30-90 days after an account is opened – is most sensitive, because behavioural anomalies are harder to recognise. In this window, money mules often exploit the lack of transaction history to move in funds, then cashout. This strategy demands a layered approach from banks – from real-time monitoring and peer profiling to offline community analytics and AML, at the T+2 phase. If banks can successfully blend these approaches, the systemic challenge posed by money mules can be met. 

Sign up for this Finextra webinar, hosted in association with NICE Actimize, to hear our panel of experts discuss why tackling money mules demands a more end-to-end, holistic strategy from banks.