FCA publishes guidance on money mule prevention

by George Iddenden
FCA announcement

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The FCA recently published its latest guidance on detecting and preventing money mules. This came off the back of the national Economic Crime Plan 2 and Fraud Strategy that has been introduced to focus on disrupting money mule activity.

Money mules are individuals recruited by criminals to move illegally obtained funds. They play a crucial role in cashing out proceeds of fraud. Some are unwittingly involved in the process, while others knowingly participate in money laundering or fraudulent schemes.

Fraud accounts for 40% of all crime, with fraudsters using money mule accounts to cash out their gains.

The FCA has said that financial services firms, especially banks and e-money institutions, are crucial in preventing money mule activities.

The report found that some firms have implemented innovative solutions, like facial recognition systems and geolocation, to detect and deter fraudsters. However, not all firms respond with the same focus.

According to the regulator, there are still some firms that need to do more, especially in conducting proportionate checks during customer onboarding and improving transaction monitoring.

While most firms use the National Fraud Database for onboarding checks and sharing information with authorities, there are issues with prompt reporting.

The report found that some firms delay reporting mule accounts, which has a knock-on effect of disrupting the networks.

The FCA called on institutions to improve their communications strategies and awareness initiatives to protect customers from the risks associated with money mule activities.

The report underscores the growing threat of fraud, with over 3.7 million fraud incidents in the UK in 2022.

Money mule networks are expanding, with over 39,000 mule accounts reported in 2022. Alongside the financial impacts, there are also risks to individuals who may be unknowingly involved.

Financial institutions must take a proactive approach, strengthen controls during onboarding, enhance transaction monitoring, and improve reporting mechanisms. By doing so, they can help reduce the impact of fraud on the financial industry and the public.

The Payments Association head of policy and government relations, Riccardo Tordera, said: “We welcome the FCA approach to tackling fraud, the industry is always favourable to measures that are effective, have clear scope and do not stifle innovation”.

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