December 3, 2023

Money mules are a major challenge for fraud leaders around the world. Many financial institutions are at a loss as to how to effectively combat money mule activity. NICE Actimize’s latest report, “Mule Defense—Product Review: Learn more.reduce risk“details how challenging money mule activity can be, and the best practices financial institutions can implement to detect and stop it.

current challenges

According to the NICE Actimize report, the challenge posing the greatest fraud threat to financial institutions today is money mules (53%), followed by unauthorized payment fraud (36%), customer first-party fraud (29%) and authorized push payments ( APP) scams (20%).

With the rise of real-time payments, bad actors are trying to cash in on the advantages of fast payments. Global adoption of real-time payments, especially in the P2P space, is expected to increase payment volume from $1.8 trillion in 2021 to $5.2 trillion in 2028.

NICE Actimize found a 146% year-over-year increase in the amount of fraudulent attempts, while attempted fraudulent transactions increased by 92% year-on-year.

What’s more, nearly 60% of new account fraud is mule-related. Money mule activity can be especially disastrous for financial institutions. In addition to the losses from stolen funds, a significant amount of operational overhead must be used to address fraud.

In addition to possible financial losses, non-monetary losses can cause damage to financial institutions. This can include reputational damage, permanent brand blemishes, and even loss of stock value.

Some financial institutions have begun to take note of the seriousness of this illegal activity, but there is more work to be done. To make matters worse, detecting mule activity has historically been difficult. Fortunately, technological innovations have equipped financial institutions with more tools for better detection.

How typology-focused fraud detection can help

With the rise of peer-to-peer (P2P) scams causing consumers to lose huge sums of money to fraud, banks will soon be in trouble to refund financial losses. Now is the time for banks to consider new approaches to fraud detection.

NICE Actimize leads the way with a game-changing approach to fraud detection. Unlike traditional, transaction-centric monitoring, the use of specialized data enrichment, multiple parallel typology-based AI models, and typology-specific risk scores can help improve detection and reduce false positives.

Additionally, the traditional way of resolving and investigating alerts—with operations and investigations teams working on one transaction at a time—was inefficient. New policies and workflows can be created based on fraud type to improve operational execution. The Fraud Department can be divided into specialized teams, including teams that assess money mule, authorization fraud (scam), account takeover and account origination risks.

Why Real-Time Money Mule Detection Works

Real-time money mule detection is critical to mitigating losses associated with authorized and unauthorized fraud. As fraud teams grow in sophistication and financial clout, more and more money is being poured into expanding the types of fraud schemes and techniques used to exploit vulnerabilities. Financial institutions must act just as quickly to protect their customers’ money and personal information. By not mitigating mule activity in real time, financial institutions also risk regulatory scrutiny and liability shifting.

NICE Actimize’s fraud solution, IFM-X – Mule Defense, will detect, investigate and prevent mule account activity throughout the customer lifecycle of existing and new accounts.

When it comes to stopping mule activity at the front door (i.e. app and account opening), AI-enabled identity analytics models are used to detect any stolen identities and synthetic identity fraud.

In early and mature accounts, AI-driven behavioral analytics are used for account monitoring. Advanced network analysis and packaged network narratives are used to discover relevant mule accounts.

Financial Institutions Need Solutions

Effectively detecting and mitigating money mule activity remains difficult and complex for financial institutions. Early and rapid detection is key to reducing the far-reaching damage to consumers and financial institutions alike.

NICE Actimize’s solutions leverage artificial intelligence and the collective intelligence of the industry to fight fraud.This is Only real-time money mule detection solutions on the market, which is one reason for financial institutions to try.