The psychology behind money muling

Money mules have emerged as hidden gears in the complex machine of financial fraud, facilitating scams that cost consumers billions worldwide.

They have also been described as financial crime’s Trojan horse. According to a KPMG report, much like the native Trojans who welcomed the wooden horse within their citadel, individuals lured into money muling unknowingly step into a convoluted web of financial fraud.

Criminal organizations also use money mules to launder funds, conceal the origins of illicit money and make it difficult for law enforcement to trace financial transactions. Interpol states that money mules – whether knowingly or unknowingly – help criminal organizations by providing their own accounts to receive and transfer fraudulent funds, thereby legitimizing them.

There are four key ways criminal organizations recruit money mules, according to the Interpol.

•Job scams: you are contacted about a new job without having applied for any position and where the “employer” doesn’t provide any details about their company;

•Romance scams: you are contacted online via social media or a dating platform;

•Investment scams: you receive a message to make big returns on an investment relatively easily; and

•Impersonation scams: calls or messages from individuals pretending to be from courier companies or government agencies asking you for your personal/bank details.

Between the first quarter of 2016 and the first quarter of 2022 alone, the Anti-Money Laundering Council (AMLC) received 821,979 money mule-related suspicious transaction reports (STRs), with an aggregate value of P510.17 billion. The increase in STR filings related to money mules was particularly observed in 2021, likely due to the accelerated adoption of digital banking and electronic wallets during the pandemic.

The council noted that money mules play a critical role in money laundering by helping criminals obscure the origins of illicit funds. These funds are typically broken down into smaller amounts and moved on behalf of perpetrators behind larger illegal schemes. Money mules add layers to a criminal’s money trail, making it harder for authorities to detect suspicious transactions.

For unwitting money mules, scammers employ various psychological tactics to persuade individuals, particularly those in financial distress, to accept and transfer stolen funds.

In some cases, fraudsters craft highly emotional narratives, often posing as friends or distant relatives facing financial trouble. They then ask for help in “receiving and moving” money. By framing the act as a selfless favor, they evoke the target’s empathy, making them feel needed and morally obligated to assist.

Money mules are also recruited through fake job advertisements or online opportunities that promise easy money for minimal effort. Common red-flag phrases include “work-from-home opportunity” or “make quick cash.” These offers often sound too good to be true but still appeal to people’s immediate financial needs.

Another psychological tactic scammers use is the “fear of loss,” warning unsuspecting individuals that they might lose an opportunity if they don’t act quickly. If a potential mule believes they have already secured an easy job, they may transfer money on behalf of a scammer simply to avoid losing what they think is a valuable opportunity.

Additionally, social isolation and loneliness play a significant role in these scams. Fraudsters engage their targets in prolonged, deeply personal conversations, building a relationship over days or even weeks. Once trust is established, the scammer casually asks for a favor – such as transferring money on their behalf. This gradual escalation is a hallmark of “grooming,” a tactic particularly effective in lowering a person’s skepticism.

Republic Act 12010, the Anti-Financial Account Scamming Act (AFASA), which took effect on Aug. 13, 2024, marks a significant step by the Philippine government in combating money muling and other financial scams.

Under AFASA, a money mule is a person who, for the purpose of obtaining, receiving, depositing, transferring, or withdrawing proceeds from crimes, offenses or social engineering schemes,  does any of the following:

•Uses, borrows or allows the use of a financial account.

•Opens a financial account under a fictitious name or using another person’s identity or documents.

•Buys or rents a financial account.

•Sells or lends a financial account.

•Recruits, enlists, contracts, hires, utilizes or induces any person to commit the above acts.

Money muling is considered a financial accounting scam and is punishable by imprisonment, fines or both, at the court’s discretion.

However, the law exempts victims of human trafficking from criminal liability if their actions were a direct result of being trafficked.

Additionally, in cases of economic sabotage, the Supreme Court is tasked with establishing rules for the release of a portion of assets subject to civil forfeiture for operational support and victim protection, including for human trafficking victims involved in financial scams.

 Laws alone are not enough. There is an urgent need for education and awareness to combat the sophisticated psychological tactics scammers use. As individuals, we must learn to recognize these tactics – empathy manipulation, fear of loss, urgency and social grooming – and protect ourselves against them.

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