Banks struggling to contain ‘mule accounts’

More than 100,000 Australian bank accounts are being used to funnel illicit funds, but the nation’s banks are struggling to put a dent in the fraud.

Major banks are closing a fraction of Australia’s mule accounts.

More than 100,000 Australian bank accounts are being used to funnel illicit funds, including from scams, but the nation’s banks are struggling to put a dent in the fraud, with the big four shutting down fewer than 13,000 of these so-called mule accounts in the past financial year.

Commonwealth Bank, Westpac, NAB and ANZ have poured hundreds of millions of dollars into scam prevention in recent years in a bid to tighten up security measures and get a handle on scammed funds running through their systems.

Adding friction to payments, limiting transfers to crypto exchanges and name-matching technology are among the steps taken to stop scammers but mule accounts are proving the most challenging to tackle, with banks struggling to identify countless of these accounts that funnel funds for criminals, even while employing mule-detection technology.

“Mule accounts are often set up legitimately and used for legitimate purposes until one day they are sold or someone becomes a witting or unwitting part of a scam, which often makes them hard to detect,” NAB’s executive for group investigations Chris Sheehan told The Australian.

“We are aware of social media pages and groups being set up purely for these purposes, re­inforcing that scams start outside of the banking system and that all parts of the ecosystem have a role to play to stop the crime.

“As soon as we become aware of a mule account, we investigate and take appropriate action to stop the muling activity.

“We report mule accounts in line with our financial crime obligations,” he said.

ANZ introduced a mule detection model in 2023 to help identify these mule accounts. This technology has flagged just 1000 alerts on accounts since then, with only some of these accounts since closed and reported.

The banking industry refuses to release any estimate on how many mule accounts could be operating in the Australian market but numerous well-placed sources told The Australian it would be well over 100,000, with more mules being targeted by criminals every day.

“For these scams to operate the way they do, they need a solid network of these mule accounts, cyber-fraud investigator Dan Halpin told The Australian.

“They’re always being replaced – they have a constant supply.”.

Criminals are targeting students and short-term visa holders in particular to gain access to legitimate Australian bank accounts, offering as little as $200 to “rent” these clean accounts for illicit ­purposes.

In other cases, manipulation, fraud and other scams capture unwitting mules.

In these cases, including where a victim is scammed out of money or tricked into receiving stolen funds, the banks will not close the account but more likely work with and educate unwitting mules.

As the big four have pushed heavily into scam detection, criminals are increasingly targeting lenders and payments companies whose risk controls fall short, Mr Halpin warned.

This view was backed up by fintech BioCatch, which has contracts with nine of the top 10 Australian banks to detect mule accounts.

“Different banks have different controls. Some banks are deploying more technology to combat (scams) … but criminals go where they’re more successful. And if you look at the quantum of the losses, the $2.5bn-$3bn reported (for 2023), that money needs to go somewhere,” BioCatch SVP for emerging solutions and networks, Tim Dalgleish, said.

BioCatch helped banks shut down more than 150,000 money laundering accounts in the APAC region in 2023.

Of the big four, NAB closed the most mule accounts in the 2024 financial year, at 5669. CBA closed 2993 accounts, followed by Westpac’s 2220 and ANZ shuttered 2000.

The 12,800 accounts closed by the majors was up on the 9061 accounts the major banks shuttered in fiscal 2023.

Addressing the rise in mule account closures in 2024, Westpac attributed it in part to banks limiting transfers to crypto exchanges.

“Scammers are redirecting efforts to use Australian bank accounts to move funds since the introduction of blocks to certain digital currency exchanges. Prior to these blocks, cryptocurrency was the main exit point of choice for scams,” a spokesman said.

Originally published as Banks struggling to contain ‘mule accounts’