To understand, let’s break it down. When criminals make money from illegal activities like drug sales, that money isn’t clean—it’s tainted. To hide its source, they use ‘layering,’ a method of moving money through multiple accounts to make it look legitimate.

Enter mule accounts. Instead of putting dirty money directly into their own bank accounts, criminals use mules—both willing participants and unwitting victims—to receive and transfer funds. Some mules know they’re part of a crime, while others are tricked into thinking they’re doing a legitimate job.

Here’s how it works: A criminal might pay a mule to use their bank account to move money. Once the illegal funds are deposited, they’re swiftly transferred to other accounts, creating a complex web that’s difficult to untangle. The mule may receive a small portion of the illicit cash for their participation. Alternatively, the criminal could deposit the money into a legitimate account, such as a trust account, and provide a seemingly credible explanation of its origins and destination.

So, why does this matter to you? Well, if criminals use your business or services for money laundering, it poses significant risks. It tarnishes your reputation, exposes you to legal risks, and undermines the integrity of the financial system. Plus, you could face hefty fines or even criminal charges for failing to prevent money laundering.

With the increasing use of this method, it’s more important than ever to be vigilant. Here are some red flags to look out for:

• Unusual transactions: Look for transactions that are larger or more frequent than usual for the account holder’s profile.
• International transactions: Sudden or frequent transactions with overseas entities, especially in high-risk countries, could indicate illicit activities.
• Rapid inflow and outflow of funds: This pattern might suggest that the account is being used as an intermediary for transferring funds.
• Receiving funds from unknown sources: Be cautious if the account starts receiving funds from unknown or unverified sources, especially if the amounts are significant.
• Frequent cash deposits or withdrawals: Large cash deposits or withdrawals, especially if they’re inconsistent with the account holder’s usual behaviour, can be suspicious.
• Unexplained account activity: Any activity that lacks a legitimate explanation or seems inconsistent with the account holder’s profile should raise concerns.
• Use of cryptocurrencies: Increasingly, mule accounts might be involved in cryptocurrency transactions, especially for laundering money or conducting illegal transactions.
• New account holder behaviours: Abrupt changes in the behaviour of the account holder, such as suddenly becoming more secretive or evasive, could be a warning sign.
• Unusual account access: Watch for unauthorised access attempts or multiple logins from different locations, which could indicate that the account has been compromised or is being actively monitored.
• Unwillingness to provide information: If the account holder is unwilling to provide requested information or is hesitant to answer questions about their transactions, it could be a sign of illicit activity.
• Association with known criminal entities: If the account is linked to individuals or organisations known to be involved in illegal activities, it’s a significant red flag.

Keeping abreast of money laundering tactics and promptly spotting and reporting suspicious activities are crucial for protecting your business and the financial system. Sign up for our sector-specific refresher training to delve deeper into red flags relevant to your industry.