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June 15, 2023 marks World Elder Abuse Awareness Day, a globally recognized day that aims to highlight the exploitation and abuse of older people.
Unfortunately, according to credit reference agency Experian, a new front has opened up against older people in the UK: increasing numbers of people in their 50s and 60s are being exploited as money mules. This typology includes victims’ bank accounts that are unwittingly used to transfer illicit funds.
These victims allow their accounts to be used as part of a scam where cash is quickly transferred from one bank to another. They are often tempted to offer their account information with the promise of cash or a gift.
The past year has reportedly seen a significant increase in scams using money mules. Experian notes that more than two out of every five UK current account fraud cases now involve money.
Fortunately, we explore the concept of money mules—and their many iterations—in our recently published report on typologies.
Okay, but how does this apply to cryptocurrencies?
After exploiting victims as money mules, many of these illegal actors are turning to blockchain to further obfuscate the source of their ill-gotten gains. And it is at this stage that law enforcement officials can use Elliptic’s analytics tools to track the flow of funds.
These criminals often buy crypto-assets with their laundered money in an attempt to continue the laundering process and eventually cash out. However, fraudsters can leave a trail of traces on the blockchain that can be detected using analytics capabilities like those introduced by Elliptic.
Once a transaction is made on the blockchain, the data is recorded forever and is publicly available. It usually cannot be changed or deleted, and includes information about the address of the sender and receiver, as well as the amount of cryptoasset involved.
As we point out in our Typologies Report, there are several ways to root out these criminals once they take their laundered funds and turn them into a crypto-asset:
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Using crypto-asset transaction monitoring software such as Elliptic Navigator to identify transactions among exchange clients that exhibit patterns of money mule activity, such as repeated low-value transactions that ultimately originate from or flow to an illicit source of funds.
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Using Elliptic Investigator – our forensic investigation tool – to track and visualize the flow of funds to or from an exchange that reveals patterns of transactions associated with money thinking.
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Tracking customer IP addresses to identify customers who may be accessing accounts from the same location.
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Searching user accounts for email characters registered to foreign domains that do not match their residential addresses.
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Obtaining a third party due diligence report for concerned customers in case they have other phone numbers or addresses associated with their name than those listed on their account.
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Imposing restrictions or prohibitions on clients transferring funds to or receiving funds from third-party accounts.
How criminals launder funds using cryptoassets
As we’ve explored before, criminals who use the bank accounts of unwitting money mules to launder their money often take their illicit funds and continue the laundering process by purchasing crypto assets to “clean” their money.
At this stage, these scammers have a number of options available to them.
Using legitimate exchanges
Bad actors can open crypto accounts on legitimate exchanges using fake know-your-customer (KYC) documents. They can also reuse money mules, using individuals’ data that is used to open accounts on their behalf to buy cryptocurrencies.
However, it must be noted that criminals are vulnerable when they deposit laundered illicit funds on major exchanges. This is because these platforms can freeze the accounts of known criminal actors, who often have millions of dollars worth of cryptocurrency in their wallets.
For example, in February 2023, using Elliptic intelligence, crypto exchanges Binance and Huobi were able to freeze accounts containing approximately $1.4 million in cryptoassets stemming from the June 2022 hack of Harmony’s Horizon Bridge.
Using crypto ATMs
Criminals can also use mules to route illicit funds through crypto-asset ATM networks.
Although many crypto ATM providers implement anti-money laundering (AML) and anti-terrorist financing (CFT) controls, many do not, allowing criminals to abuse the latter services.
One particular example of digital asset laundering works as follows. After converting illicit funds into cryptoassets, they are often transferred to wallets that often belong to members of the same criminal network.
Those receiving the transfers then cash out the funds at an exchange or withdraw cash at other cryptoasset ATMs.
Fiat funds are further laundered through wire transfers or cash deposits in banks and other financial institutions.
Silver lining
It is important to recognize that these money mules are criminals I can be eradicated by Elliptic’s solutions, which are built on hundreds of billions of proprietary data points offering over 97% coverage of crypto transactions by trading volume, along with the largest collection of crypto exchange risk profiles.
To learn more about the latest illicit threats in the crypto space, click below to download our new “Report on typologies”.
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Cryptocrime for EMEA
