Mules are the backbone of digital banking fraud. Fraudsters depend on them to make their schemes work, turning innocent-looking accounts into tools for laundering stolen funds and enabling criminals to conceal their tracks and move vast sums of money across borders in minutes.
Money mules are a growing problem, and South Africa is becoming increasingly targeted, writes Jason Lane-Sellers, director, fraud and identity, EMEA at LexisNexis Risk Solutions.
According to the Financial Intelligence Centre (FIC), money mule activities are most prevalent in the Gauteng and Western Cape provinces. South Africa’s younger age demographic, combined with faster payment mechanisms and mobile money capabilities, make it attractive for criminals seeking to move money swiftly. With scams evolving and instant payment systems accelerating transactions, stopping this shadowy network has become a priority for financial institutions.
A money mule is a bank account or account holder that fraudsters use to receive and transfer funds obtained through criminal activity. These accounts often play a role in laundering money, obscuring the origins of stolen funds and complicating efforts to trace their end destination. Fraudsters conceal their activities by moving money quickly through extensive networks of seemingly unrelated mule accounts, often spread across multiple financial institutions.
The adoption of instant payment systems has amplified the threat posed by money mules. Instant payment systems enable rapid transfers, which not only provide convenience but also open the door for heightened fraudulent activity. Fraudsters take advantage by recruiting more money mules to quickly cash out stolen funds.
Financial institutions in South Africa face increased pressure to act preemptively by authenticating identities earlier in the payment lifecycle and screening transactions for fraud risks. With only one opportunity to verify and assess payments, failure to detect fraud can leave banks liable for significant losses.
Consumer protection is stepping up in some countries. For example, in the UK a shift in reimbursement policies for Authorized Push Payment fraud victims further protects consumers from scams. New regulations will require financial institutions to evaluate both sender and beneficiary profiles for fraud risks, a move that may expose more money mule networks.
Fraudulent funds flowing through mule networks often originate from various types of scams. Fraudsters use stolen or fabricated identities to create accounts or leverage existing mule accounts to introduce these funds into the financial system.
Once the funds are in place, fraudsters transfer money through multiple mule accounts at different banks, often across several locations, creating layers of transactions. This layering process makes their activities harder to spot. Funds may even be converted into cryptocurrency or alternative financing systems to further complicate detection. After these steps, the fraudster or someone within their fraud network withdraws the funds, making its origins challenging to trace.
Spotting Red Flags in Mule Account Activity
Before receiving fraudulent funds, mule accounts often conduct minor transactions like small debits or credits to establish a payment history. This activity can make larger, unusual deposits appear less suspicious, but these anomalies, such as a sudden high value or high frequency transfer, can serve as critical red flags. Identifying such indicators is essential to detecting and preventing mule activity.
Money mules can be categorized by their level of knowledge and intent. Some accounts are intentionally opened for mule operations, either by the fraudsters themselves or by willing accomplices. Others involve legitimate account holders who knowingly agree or are coerced or forced into participating in mule activity. However, some mules remain unaware of their involvement, having been deceived into facilitating criminal activities. Each type of mule requires a tailored mitigation approach to disrupt their role in fraud schemes.
Fraudsters use various methods to recruit individuals as money mules, exploiting vulnerabilities or enticing them with promises of financial rewards. These tactics often involve lies, manipulation and in some cases, the victim’s willingness to engage in illegal activities.
Money mule activity can severely disrupt financial organizations on a global scale. By enabling the movement of fraudulent funds, mule networks threaten institutional stability. It is vital for financial organizations to identify and stop these networks to prevent escalating fraud schemes. Failure to do so exposes institutions to financial losses, reputational harm and regulatory penalties.
Organizations in South Africa must demonstrate effective anti-money laundering measures as neglecting risk assessments or basic due diligence can result in hefty fines, loss of trust and even national repercussions by global regulatory bodies like the Financial Action Task Force (FATF). Although the country exited the intergovernmental organization’s grey list in 2025, organizations will face more frequent, potentially stricter review cycles. Financial institutions should not assume the pressure will ease and must maintain robust systems that mitigate mule-enabled fraud before it escalates into broader institutional and regulatory risk.
Building a Stronger Defense Against Mule Networks
The most effective way to detect and disrupt money mule activity involves achieving a comprehensive view of every identity that interacts with an organization. Differentiating between legitimate and suspicious activities requires analyzing vast amounts of transaction and interaction data. While monitoring patterns within an organization’s customer base is manageable, challenges arise when funds extend beyond the institution’s oversight.
Success lies in understanding all parties involved holistically. This includes analyzing digital and physical identities, behavioral patterns, interactions, transactions and account attributes. The ability to connect these data points equips organizations in South Africa with a more robust defense against fraud and positions them to uncover and disrupt complex money mule networks.