Bates Research | 12-17-20
Federal Law Enforcement Targets 2300 Money Mules Fueling Fraud in All 50 States
Fighting financial fraud remains a high priority for federal law enforcement. Throughout 2020, Bates Group has followed the many alerts issued by FinCEN, OCIE and other agencies warning of a variety of scams targeting financial firms and their customers, particularly elder clients. Through these advisories, the agencies remind compliance professionals to be vigilant of red flags for deceitful practices that may indicate financial fraud. The advisories also provide specific recommendations on additional detail requested when filing related suspicious activity reports (SARs). Prominent among these warnings are advisories about money mules—individuals playing an important role in a host of fraudulent activities—and schemes related to COVID-19 in particular.
On December 2, 2020, federal law enforcement cracked down on money mules again. (Bates highlighted an earlier federal enforcement crackdown back in March 2020.) The U.S. Department of Justice (DOJ) announced the results of the joint operation—a coordinated effort that included the DOJ, the FBI, the U.S. Postal Inspection Service, the Department of Labor Inspector General, the FDIC Inspector General, Immigration and Customs Enforcement, the Social Security Inspector General, the Secret Service, and the Treasury Inspector General for Tax—to “disrupt the networks through which transnational fraudsters move the proceeds of their crimes.” Here are the highlights.
Recap on Money Mules – Individuals Enabling Many Scams
In its announcement, the Justice Department described money mules as “individuals who assist fraudsters by receiving money from victims of fraud and forwarding it to the fraud organizers, many of whom are located abroad.” FinCEN defines a “money mule” as any “person who transfers illegally acquired money on behalf of or at the direction of another.” Under these definitions, money mules are used to enable a wide range of schemes. In the recent action, federal law enforcement pursued money mules associated with underlying cases of lottery fraud, romance scams, technical support fraud, CEO and business email compromise scams, government imposter fraud and unemployment insurance fraud.
The agencies recognize the distinctions among an “unwitting or unknowing money mule,” a “witting money mule” and a “complicit money mule,” all defined by the person’s awareness, motivation and level of participation in the larger scheme. FinCEN says that all three types of money mules are deployed in COVID-19 schemes. The enforcement action was calibrated to these differing levels of awareness and participation.
Recent Enforcement Action
The scope of the joint enforcement agency initiative is, by any measure, impressive. According to the Justice Department, the actions netted approximately 2,300 money mules in areas “spanning 92 federal districts.”
Some highlights of the crackdown include:
- warning letters sent to over 2000 money mules notifying them that they “were facilitating fraud and could face civil or criminal consequences for continuing their actions;”
- the seizure of assets (including a 2019 Lamborghini) or return of victim funds in over 30 cases;
- the filing of 14 actions by the Postal Inspection Service against identified money mules requiring them to cease facilitating fraud;
- criminal charges brought in 35 cases against money mules “for their roles in receiving victim payments and forwarding the fraud proceeds to accomplices or laundering fraud proceeds; and
- civil injunctive actions in 17 cases covering federal Districts in Washington, South Carolina, Florida, California, New York, and Colorado.
The agencies’ announcement also noted other criminal financial charges brought against fraudsters in multiple jurisdictions. In Maryland, for example, the U.S. Attorney indicted individuals “for opening bank accounts using falsified documents for the purposes of facilitating a business email compromise scam.” In Ohio, money mules were indicted for facilitating a “grandparents scam.”
FinCEN Red Flag Reminders
Bates previously reviewed FinCEN’s red flags for financial compliance professionals on money mules pertaining to COVID-19. FinCEN recommendations included vigilance as to:
- receipt of transactions that don’t fit a customer’s profile (e.g., overseas transactions, purchase of convertible virtual currency);
- unsatisfactory answers to “know your customer” inquiries;
- opening new bank accounts in the name of a business (possibly at multiple banks), and someone other than the customer transferring funds out of those accounts;
- receipt of multiple unemployment insurance payments within the same time period or from numerous employees (with ACH payment names that don’t match the account holder);
- deposits that get diverted quickly “via wire transfer to foreign accounts;”
- documents related to the “employer” showing the use of a free email server rather than a company-specific email; and
- out-of-the-ordinary requests from the customer’s new employer to send and receive funds through the customer’s personal account (especially for individuals claiming to be U.S. citizens or servicemen currently abroad).
The announcement on the money mule enforcement crackdown demonstrates the reach of a coordinated federal effort. Along with references to educational efforts, local FBI campaigns (Don’t Be a Mule), the National Elder Fraud Hotline, and other initiatives (including, notably, the American Bankers Association’s engagement with member banks on money mules and highlighting the role of financial institutions in addressing the problem), the message on disrupting money mule networks is comprehensive and unequivocal.
For that reason, financial firms should take note. As the Postal Inspector stated: “[O]ur law enforcement partners will be relentless in the pursuit of criminal organizations that perpetrate these schemes… [we] use cutting-edge technology to build strong cases and campaigns.” In other words, expect coordinated enforcement efforts to continue and to become more sophisticated, increasingly through reliance on analytics driven by information provided by financial firm compliance filings (SARs).
For AML and Financial Crimes support, please contact Edward Longridge, Managing Director and Head of Bates AML & Financial Crimes Practice: