Continuous screening vital to detect 75% more money mules

Research conducted by Synectics in collaboration with three major high street banks has uncovered that without continuous screening, 75% of money mules are likely to remain undetected.

This conclusion emerged from a study that explored the advantages of perpetual Know Your Customer (KYC) and Anti-Money Laundering (AML) screening compared to traditional periodic measures. Synectics utilised a data-driven approach to analyse the impact of continuous customer screening, revealing that many money mules manage to evade initial detection due to a timing mismatch between standard application procedures and the behavioural patterns of mules.

The research highlighted that 75% more mule activity can be identified when continuous AML checks are integrated with established fraud reviews. Synectics' Head of Solutions, Chris Lewis, noted the significance of this finding, pointing out that "the fact that mule accounts typically lay dormant or are used legitimately for around eight months before 'activation' means that AML screening strategies should be applied at every point in the customer lifecycle. Based on our figures, at least 75% of accounts that go on to support money mule activity could otherwise go undetected."

The modus operandi of current money mules presents a challenge for periodic reviews. Once activated, these accounts exhibit rapid and repetitive fraudulent behaviour, averaging 3.6 offences across different financial institutions within a short span typically just two weeks between the first and third offences. Lewis commented on this behaviour, stating: "The typical behaviour pattern of money mules after activation is frenzied and short. This means that while many mules evade early detection, they may well have 'scammed and run' before the customer's next periodic review is scheduled. The only way these mules would be detected, is to have a real-time mechanism in place to flag AML concerns as and when they arise."

The study also focused on finding the optimal real-time mechanism for detecting mules with minimal referral rates and high accuracy. Synectics tested different rules-based strategies across the banks involved in the study. Liese Rushton, Fraud Strategy Consultant at Synectics, detailed the successful approach, explaining: "The best results were achieved with three ingredients: Fixed data matching with National SIRA and other third-party AML services, using rules that monitored velocity trends – how many times something happens over a particular timeframe, incorporating rules that 'watched' for distinct profiles, for example new account holders under a specific age with an income above a certain threshold."

One bank achieved a referral rate of 2% with a false positive rate of just 1.25% by implementing this strategy. This suggests that up to 285% more mules could potentially be identified when perpetual screening is combined with initial checks and periodic reviews.

The increased importance of mule detection is underscored by the recent introduction of mandatory reimbursement rules by the Payment Services Regulator (PSR). These rules make both sending and receiving banks liable for refunding victims of Authorised Push Payment fraud, thus necessitating efficient detection methods.

Lewis concluded: "In finding an efficient way to identify mules, banks are effectively killing two birds with one stone. The results of this project clearly demonstrate that the best way to do this is through adopting a tailored perpetual KYC screening strategy."