According to the National Crime Agency, over £100 billion of cash generated by serious and organised crime is laundered through and within the UK or UK-registered corporate structures each year. To help legitimise illicit funds, criminals often rely on money mule accounts which transfer funds on behalf of the criminals through mule accounts. This creates anonymity and obscurity between the money and its source.
In response to the growing issue of money muling, the UK’s Lending Standards Board introduced the Contingent Reimbursement Model (CRM). Previously, compliance with this code was optional for financial institutions (FIs), however, as of October 7th under the Payment Systems Regulator (PSR) rules, it will be mandatory for all FIs in the UK to reimburse victims of APP (Authorised Push Payment) Fraud.
The CRM focuses primarily on securing favorable outcomes for fraud victims, though it does not directly prevent fraud. However, the increased pressure to reimburse victims of fraud shifts the liability onto FIs, pushing them to take steps to detect money muling activity and prevent the transfer of illicit funds.
With millions of real-time payments processed every second, FIs face a significant challenge as regulatory reforms take effect. Namely, how to monitor fraudulent transactions in real-time without introducing unnecessary friction into the customer experience.
To help businesses adjust to impending regulatory changes, NTT DATA has partnered with Lynx Tech, a leading provider of fraud detection software to FIs. Lynx’s money mule detection technology leverages a real-time risk model to identify inbound fraudulent transactions, making it an essential tool for minimising losses as new regulations come into force.
Staying ahead of real-time transactions
With the increasing use of mobile banking apps and online banking services, transferring money has become as simple as a few clicks. Real-time payments have changed the game for money mules, allowing money to be transferred at an unprecedented pace with a low chance of detection. As the frequency of financial transactions rises, FIs are becoming increasingly vulnerable to both financial losses and compliance risks.
Powered by advanced AI technology, Lynx’s money mule detection solution reviews every incoming and outgoing transfer in real time. This enables FIs to identify money mule accounts in real-time and automate the response such as flagging and blocking further activity. The solution’s built-in mule scoring system provides FIs with a clear assessment of the likelihood that an account is being used for illicit activities.
Assessing the big picture
We’ve discussed the difficulties of staying on top of individual transactions, so let’s take a step back and look at the bigger picture. Effective fraud prevention requires FIs to have a comprehensive view of all financial interactions on all channels (ATM, online banking, card payments, etc.), which is no mean feat. In practice, this means not only monitoring individual transactions but also identifying patterns that might indicate illicit behaviour, such as money laundering or fraud. The complexity arises when funds move across multiple accounts, institutions, or even across borders, slipping out of the direct oversight of any single FI. Without this full picture, it becomes extremely challenging to accurately identify suspicious activities, especially in a landscape where mobile banking, instant payments, and international transfers have become commonplace.
Adding to the complexity, FIs must balance security with customer experience. While it’s critical to identify and stop fraudulent transactions and the associated financial and emotional losses, doing so without disrupting the flow of legitimate transactions is important for maintaining trust and satisfaction. Precision in fraud detection is key to ensuring that customers continue to enjoy a seamless banking experience while illicit activities are effectively intercepted.
Lynx’s Combined Fraud and Money Mule Detection Solution addresses these challenges by offering a unified approach, providing financial institutions with a 360-degree view of all incoming and outgoing transactions in real time, staying one step ahead of fraudsters.
Safeguarding trust and integrity in the financial sector
In 2023, the UK government reported over 37,000 bank accounts exhibiting behaviours linked to money muling. As fraudsters grow more sophisticated, mule accounts continue to increase and customers are becoming increasingly concerned about the security of their funds. FIs must address this issue and demonstrate to their customers that proactive measures are being taken to protect their money in real-time.
By partnering with Lynx, NTT DATA is helping financial institutions stay ahead of these threats with cutting-edge, real-time monitoring technology. Lynx’s advanced solutions empower FIs to detect and stop illicit activity that funds organised crime. As market and regulatory changes reshape the financial landscape, institutions that implement robust fraud detection systems will be best positioned to safeguard trust, maintain brand loyalty, and protect the integrity of the financial system.
Concerned about how upcoming regulatory changes will impact your business? Get in touch to set up a 45-minute consultation with NTT DATA to discover how Lynx’s advanced fraud detection software can benefit your institution and keep you ahead of compliance requirements.