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Protecting Against Money Mules: Insights from the FCA’s Review

Protecting Against Money Mules: Insights from the FCA's Review
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In October 2023, the Financial Conduct Authority (FCA) unveiled the findings of a comprehensive multi-firm review targeting payment account providers. The focus was on the assessment of their systems and controls in the battle against money mule activity. A money mule is an individual who, either knowingly or unknowingly, aids fraudsters by receiving and transferring illegally obtained funds. The findings, practices, and areas for improvement detailed in the report offer valuable insights into the ongoing fight against financial crime. Here are the key takeaways from the FCA’s review and how Neopay can assist firms in navigating this critical compliance landscape.

Key findings of FCA money mule review

Fraud, which currently constitutes a staggering 40% of all crime, continues to be a pressing concern. The FCA’s review focused on the systems and controls used by firms that offer payment accounts, encompassing measures during onboarding, monitoring, and reporting. The findings highlight a mixed landscape, with some firms taking commendable steps to tackle the issue of money mules. These proactive players have embraced innovative solutions such as facial recognition systems, device profiling, and geolocation to deter fraudsters.

However, not all firms are approaching this challenge in the same manner. Some need to enhance their efforts, particularly regarding proportionate checks during onboarding to spot potential mules and optimising monitoring systems to detect suspicious activities. While most firms utilise the National Fraud Database and cooperate with relevant authorities, timely reporting remains an issue, causing delays in stopping money mule networks.

The impact of economic challenges cannot be underestimated. The cost of living crisis leaves some individuals vulnerable to participating in money mule activities under duress. To address this, firms are urged to improve their communication strategies and awareness initiatives to keep customers informed about emerging threats.

Proactive measures for firms

The FCA’s report casts a spotlight on several measures that firms should adopt proactively:

  1. Strengthen onboarding checks: Ensure that onboarding checks are proportionate yet sufficiently robust. This includes scrutinising customer data for red flags and indicators, such as the use of virtual addresses.
  2. Swift reporting: The timely reporting of suspected mule accounts is crucial. It’s vital to respond quickly to alerts from other institutions to close down mule networks effectively.
  3. Enhanced transaction monitoring: Leverage the power of transaction monitoring tools by incorporating additional data points like geolocation and behavioural biometrics.
  4. Adapt and educate: Don’t overly rely on machine learning models without robust historical data. Consistently adapt detection and monitoring methodologies while educating consumers about the risks associated with money mule activities.

How Neopay can help

With deep insights into financial compliance, Neopay assists firms in implementing systems and controls to effectively navigate the money mule challenge. Our solutions include guidance on transaction monitoring, support for selecting partners for KYC/KYB, and policies and procedures reviews, all of which can play a pivotal role in the fight against fraud. We also offer compliance and financial crime audits to ensure firms maintain robust and proportionate controls.

The FCA’s review on money mule activity offers critical insights for financial institutions. To stay ahead in the fight against financial crime, firms must embrace proportionate controls during onboarding, improve transaction monitoring, and optimise reporting mechanisms. Contact our team to find out how we can support your business.

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