What has happened?
In October 2023, the FCA publicised the key findings arising from its multi-firm review of payment account providers’ systems and controls against money mule1 activity. It also outlined examples of good practice, areas for improvement, how firms manage the risks of money mule accounts in a proportionate way and ensure anti-fraud compliance.
1 that is, someone who is recruited by criminals to move illegally obtained money .
What are the key points of the FCA Review?
Financial services firms, and in particular payment account providers such as banks and e-money institutions, have a role in disrupting money mule activities and to achieve this, these firms should have a proportionate and risk-based approach to help ensure that their platforms are not being exploited and their customers are not being put at risk by criminal groups. This is a significant risk since in 2022, firms reported more than 39,000 accounts linked to mule activity to the National Fraud Database.
The review focused on systems and controls for detecting and preventing money mule activity in firms that operate payment accounts. This evaluation included firms’ controls across three areas:
1. Onboarding
2. Monitoring
3. Reporting
The findings indicate that some firms are working to address the challenges of money mules by implementing a range of measures and technologies to detect and deter fraudsters. However, despite these efforts, not all firms are responding with the same focus, and some firms need to do more to tackle the problem.
Across the three core control areas, firms should:
- Conduct more proportionate checks at onboarding for indicators and red flags which may identify potential mules.
- Ensure that transaction monitoring systems are set up to detect common mule behaviours and do more to monitor inbound as well as outbound transactions.
- Where some firms identify a mule account, report this promptly on relevant reporting systems so not to delay notifications to other firms. Additionally, when firms are in receipt of fraudulent funds, respond swiftly to alerts from notifying institutions. More timely reporting could help to close down mule networks.
Given the cost-of-living crisis, some customers might find themselves susceptible to providing their account details for money mule activities under influence or pressure. The FCA is asking firms to also improve their communication strategies and awareness initiatives to keep their customers informed about the latest threats.
The FCA has undertaken to use all of its regulatory tools, including enforcement action, if it identifies a firm failing to maintain proportionate and adequate systems and controls in this area. This includes banks, building societies and payment firms.
How can we help?
Thistle Initiatives has supported payments firms for over 10 years as a trusted compliance and regulatory advisor. In addition to assisting you as-and-when, our team of specialists can serve as your right hand in meeting and complying with FCA regulations. We understand the importance of staying up-to-date and compliant and are dedicated to providing the guidance and support needed to do so.
Are you looking for help with your financial crime and regulatory reporting arrangements, or more general regulatory questions? Contact our specialist team now to schedule a free consultation. Get in touch with us by calling 020 7436 0630 or sending an email to info@thistleinitiatives.co.uk.