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Fraud This Holiday Season Could be Even More Difficult to Detect as Fraud Rings Expand Mule Networks

Fraudsters use money mules for laundering as well as to receive and reship goods purchased with stolen identities. A large mule network provides more low risk shipping addresses for fraudsters to utilize as well as more options for strategically chosen shipping locations less likely to trigger fraud detection systems. A down economy and millions of people out of work makes it easier for fraudsters to recruit money mules with work-from-home schemes.

Money mules range from knowingly complicit to those duped by fraudsters. Whether they believe they are a holiday gift wrapper or know they are aiding and abetting fraud, these mules become more willing to participate in activity they know, or even think might be, illicit when out of work or when times are tough.

The FBI warned about fraudsters exploiting COVID-19 to recruit more money mules with work-from-home schemes in April, although this had more of a focus on money laundering. They cautioned consumers not to open bank accounts in their name for a business that has purported to hire them and that being told to keep a portion of money transfers is another red flag. Another common scheme is to have mules receive funds in their personal bank accounts then “process” or “transfer” the funds via ACH or money orders.

The FBI also published a Money Mule Awareness Booklet to help consumers identify if they are being recruited for these schemes. This publication listed three types of money mules. Those who are unknowing, witting and complicit, where witting mules suspect something is fishy but choose to ignore the signs or look the other way.

While the FBI primarily focuses on money laundering related mule schemes, fraudsters effectively use mules to receive and re-ship products for facilitating third party fraud and the use of stolen payment card information to steal physical products. This makes detection more difficult as professional fraud rings spoof their IP address and use a plausible shipping address in relation to the stolen card’s billing address. Considering many organizations look at velocity of use of a shipping address and the proximity of billing and shipping addresses as risk signals, fraud rings with an extensive mule network are often able to keep more fraudulent orders under the radar.

Mules to receive and re-ship goods can be complicit, unknowing or witting as well. These mules are often recruited as a holiday gift wrapper, who receives products and wraps them before shipping back to the fraudsters. This enables fraudsters to avoid using re-shipping services, which often lead to orders flagged as higher risk, and aids in having goods shipped overseas as well.

Fraud expanded during the 2008 recession and organizations should expect similar challenges this year if millions remain furloughed or out of work.

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