Vocalink: Freezing Mule Accounts With AML Tech

Whoa, mule.

Pay.UK’s Faster Payments team said this week that it is deploying technology powered by Mastercard’s Vocalink, which uses machine learning and other advanced technologies to help banks identify and track fraudulent transactions, with an eye on stopping fraudsters as they shuttle cash between multiple, and often far-flung, accounts.

Known as the Mule Insights Tactical Solution (MITS), the technology is going live after a number of pilots that showed banks could uncover and disrupt mule accounts — and, in doing so, expose and shut down large money laundering operations.

The Rules Of The Mules

The mule account? As the name implies, with its pack animal imagery, the accounts (or account holders) are used to deposit money with financial institutions (FIs) and transfer funds between banks. In the high-tech age, money is ill-gotten (in the first place) through “mule” authorized push-payment fraud, malware or phishing. As noted by UK Finance earlier this year, nearly £100 million ($126.27 million USD) was lost in the first six months of 2018 alone, and the average losses stemmed across thousands of pounds for individuals and tens of thousands of pounds for businesses.

Fraud has been around as long as money has been around. Then again, as Vocalink EVP David Rich told PYMNTS in an interview following the official launch of MITS, ours is a high-tech age.

“When we talk about organized crime, although it sounds like a bit of an oxymoron, the reality is that the fraudsters are really organized, and they are also extremely sophisticated … and they collaborate amongst each other,” he said.

The concerted and coordinated efforts among bad actors, seizing the aforementioned scams, come in tandem with the increasing sophistication that underpins the banking system. There can be some methods, too, that involve feet on the street — mules of a more traditional sort, one might say. The money launderer will also organize people to come in from one country to another, perhaps on a vacation, with documentation in hand, opening up scores of bank accounts that can be used to transfer illicit funds.

Whether done in-person or by bits and bytes, the objective of the money launderer is to capture funds, move them quickly through the banking system and extract funds at the other end — at bank branches or ATMs, via Western Union money transfers, in the form of cryptocurrencies or however they can.

“To the money launderer, it’s a business,” he said. “It’s difficult for banks to identify all of these things, compounded by the fact that the velocity of fraud is speeding up more and more.”

Fraud: Stretching Across Generations

He illustrated to PYMNTS that bank fraud done through transfers and the leapfrogging of accounts comes as money doesn’t truly go from account to account within the same bank. A £60,000 haul, fraudulently obtained, may be sliced and diced into chunks of a few hundred pounds, and sent to separate FIs. Each step in the process is known as a generation. Funds taken from an “originating bank” can work their way through any number of other institutions, and wind up back at the originating bank — proving, ultimately, impossible to trace.

“Typically, there can be four or five, or [even] six, generations,” he said, “of illicit money being moved through the banking system, and then extracted.” The banks themselves, of course, are unable to see what’s going on in other institutions, so the blinders help the mules.

“The only real way to fight this is to collaborate amongst all the banks,” said Rich, “and apply machine learning, decision science and analytics to evaluate problems, identify accounts used in money laundering and notify the banks that these accounts warrant further investigation.”

That becomes a bit easier, the executive said, as Vocalink manages the Faster Payments network in the U.K., and examines the huge volume of transactions — billions of them — that flow through its hub.

The data is tied to multiple banks. MITS tracks suspicious payments (identified in part with algorithms) as they move across accounts, as well as the “split” amounts as they go toward new accounts. MITS, said Rich, allows for the mapping fund flows into a visual presentation that can be used to anticipate where the money may go next. He noted that this intelligence can help banks to stop the funds from flowing, freeze them in place and close the mule accounts.

In the U.K., Vocalink has seen that around 75 percent of the money laundering accounts are tied to short “distances” between the capturing of funds, moving them and, ultimately, using them — to the tune of two or three “generations.” However, 25 percent of the accounts are “interrelated fraudulent money laundering accounts, and those accounts represent about 60 percent of the money laundering. If [MITS users] isolate that account, they can disrupt all the other accounts around it,” he said.

As for a rollout, he said AML Insights — which powers MITS in the UK —  has already had engagements “at various levels” across Europe, Latin America and elsewhere — as the advanced analytics in the U.K. can be deployed elsewhere with ease.

“As the fraudsters evolve, we will need to evolve ahead of them, and do that in conjunction, of course, with all the participating banks,” Rich said.