Keeping an eye out for money mules

The FBI and other law enforcement agencies have recently stepped up efforts to crack down on money mule schemes that rope in victims unaware that the money they’re sending is part of an elaborate money laundering operation.

In March 2019, the U.S. Department of Justice announced a major initiative against elder fraud and said that the FBI, U.S. Postal Inspection Service, and U.S. Secret Service had taken actions against 600 money mule perpetrators by interviewing victims and conspirators, issuing warning letters, and filing civil and criminal cases, according to a news release.

“We will continue to use creative solutions to protect our nation’s seniors from fraud; financial security is critical to homeland security,” Derek Benner, the acting deputy director of the U.S. Immigration and Customs Enforcement agency, said in a statement.

Money mules, unlike their drug-trade counterparts, aren’t shuffling illicit goods over a physical border. Instead, they take part in criminal activity by accepting illegal proceeds in bank accounts and sending them off to a third party.

CPAs sit in a unique position to spot these schemes and help those who may have fallen prey or to warn their clients beforehand.

“Money mule fraud has been around for a long time, but it is spreading as the bad actors, often based overseas, become more sophisticated in how they seek targets through the internet or otherwise,” said Steve Baker, a former Federal Trade Commission director for the Midwest now working for the Better Business Bureau. Older adults are particularly susceptible to the schemes, he said.

“When an elderly person doesn’t have relatives or friends they can talk to, then they’re particularly vulnerable to all sorts of schemes,” Baker said.

In some money mule schemes, the bad actors will pose as lonely American servicemen or servicewomen looking for love connections on online dating websites, but they actually are working to lure in vulnerable singles. Other setups include work-from-home offers where the job involves setting up bank accounts to accept money from supposed clients and then sending it off to mysterious bosses overseas.

But the middlemen — whether they know it or not — are actually laundering money, a crime.

TheBetter Business Bureau estimates there may be a million romance fraud victims in the United States alone, with $1billion in losses reported in the United States and Canada over a three-year period, according to a 2019 report Baker prepared for the consumerprotection group. Andromance fraud victims were pulled into money mule schemes in 20%—30% of those cases.

This type of scheme is attractive to the con artists because it puts distance between them and the criminal act of receiving ill-gotten goods, Baker said. The person in the middle isn’t necessarily losing their own money and may even be encouraged to keep a portion for their troubles.

But if police catch wind of a scheme, they first turn to whoever’s name is on the bank account. “The first thing law enforcement is going to do is to follow the money,” Baker said. (Read about recent cases in the sidebar, “Case Files.”)

Romantic ploys are particularly effective money mule schemes because the innocents on the other side already have their guard down in hopes of finding a love connection. “If you’re going to fall in love, you’re going to take a little leap of faith,” Baker said.

Other times the middleman (or woman) is aware of what’s going on but is willing to take a risk for some money in their own pocket. “You’ve got some people that are known participants, and they get a percentage,” Baker said.

Here’s what CPAs need to know about the world of money mules to protect clients and even themselves.

Warn of ‘too good to be true’

Part of the lure of many money mule schemes is the pitch that there’s a way to make money by doing almost nothing, Baker said. This is a sign that things aren’t right, and Baker suggested applying some caution.

Help clients realize they can be targets

This is hard for many people to accept, but some people become less capable of spotting schemes the older they get, said Jim Sullivan, CPA/PFS, a financial planner and author of The Adviser’s Guide to Financing Retirement Healthcare. This applies to CPAs as well, who may pride themselves on their financial acuity but may also have a hard time sorting out reasonable requests from fraudulent ones as they enter their golden years. Accepting your limitations will help you develop systems to avoid being taken advantage of.

Sullivan knows these conversations can be difficult to have, and he approaches them gently by first pointing to research that shows that, as we age, we have more challenges detecting and avoiding sophisticated scams.

“Never take this personally,” he said.

Love and checking accounts

People need to be wary if an online romance changes gears and the potential lover on the other side uses flattery to slide in a request that involves money or a bank account, the FBI warns in a booklet about money mule awareness (available at fbi.gov). This is a key way that money mules operate, and older women are often targets. The agency recommends against giving, loaning, or accepting money from online suitors, especially if that money will go to a third party you’ve never met. CPAs can emphasize the need for safe financial practices, like not sharing bank information or opening up accounts for others.

Grammar matters

Job postings or professional communications riddled with misspellings, poor grammar, or unusual uses of the English language are hints that the sender is from outside the country and not the future employer or lonely widower they’re posing as. The FBI, in its list of suggestions against money mule schemes, recommends paying attention to how offers appear and forgoing those chock-full of mistakes.

Be a sounding board

Everyone, especially older adults, should have some friends or family in their lives that they can talk to about financial requests and offers, Sullivan said. Having a group of trusted friends to run financial requests by can help people spot sketchy scenarios and avoid being taken advantage of, he said. CPAs can fill that role as well and make clear that they are happy to answer questions that clients may have.

Ask about family circumstances

CPAs should be talking to clients about their family circumstances, whether their parents are living on their own and have solid retirement savings.

“It’s a relevant topic for them to help their parent avoid these types of financial scams,” Sullivan said. “You want a full picture of the client’s family so that issues like this can be brought up and discussed.”

Having discussions with clients about money mule or other schemes could help them or their loved ones avoid fraudulent schemes.

“You’re standing between the client and mistakes and scams,” Sullivan said.

Case files

Money mules are an essential part of organized crime and international fraud schemes, whether it is a romance con, business email scam, or a work-from-home ploy. Criminals can’t get their loot without the help of money mules, but law enforcement authorities around the world are sending money mules, both unsuspecting dupes and willing participants, to jail. Here are recent examples of money mules being arrested and charged.

Operation Wire Wire

In a June 2018 coordinated sting operation, federal authorities arrested and charged 23 alleged money mules in the Southern District of Florida with laundering at least $10 million, according to a Department of Justice press release. Federal authorities allege that a ring of international fraudsters used the money mules to launder the proceeds of multiple business email compromise, or “CEO,” schemes, in which criminals pose as company executives to trick employees into wiring money to the criminal’s accounts. The money mules received “ill-gotten gains” from the criminals and then drained the funds “into other accounts that are difficult to trace,” according to federal authorities.

Romance scam

Rodney Gregory of Lebanon, Ore., was sentenced to three years of probation and $184,230 of restitution for his role as a money mule in a number of romance schemes in June 2019. Over the course of several years, Gregory opened numerous business bank accounts to receive illicit funds from fraud victims who thought they were sending money to an online romantic interest. He then forwarded that money overseas to criminals who had been posing as the love interests. Gregory was charged after continuing to forward money and open new accounts after being repeatedly warned by federal authorities to stop.

International problem

Money mules aren’t limited to the United States, or adults, either. In April 2019, Scottish authorities from the Organised Crime and Counter Terrorism Unit arrested and charged 29 people, including nine teenagers, with money laundering crimes as part of a coordinated crackdown. Authorities said that this scheme also involved the purchase of high-end luxury goods like jewelry and electronics, along with bank transfers. Scottish authorities warned that organized crime groups are recruiting schoolchildren to act as money mules, often through social media.

About the author

Sarah Ovaska-Few is a freelance writer based in North Carolina.

To comment on this article or to suggest an idea for another article, contact Drew Adamek, a JofA senior editor, at Andrew.Adamek@aicpa-cima.com or 919-402-4607.

AICPA resources

Articles

• “Spotting Fraud Victims,” JofA, Sept. 2018
• “Investment Fraud Schemes Targeting Senior Citizens,” FVS Eye on Fraud, Spring 2018, Issue 2
• “Money Laundering: Combating a Global Threat,” JofA, Sept. 2016

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