Money mule accounts: how Swiss banks can leverage AML solutions

FINMA guidance on risk tolerance and monitoring

Switzerland’s AML law requires banks to perform strong customer due diligence and monitor transactions continuously. FINMA’s 2023 guidance stresses that banks must set clear risk limits and use scenario-based monitoring focused on the key money laundering risks they face. This includes checking beneficial ownership carefully and watching for sudden or unusual account activity, which can indicate money mule schemes. Yet FINMA’s reviews have revealed gaps in how banks analyze and monitor risks. Stronger, more flexible controls are therefore needed now to address evolving money laundering methods such as mule activity.

What is a money mule?

A money mule is an individual who transfers or moves illegally acquired funds on behalf of criminals, either knowingly or unwittingly, often in exchange for a commission. Mule bank accounts serve as conduits for layering and obfuscating illicit money, adding barriers between victims and criminals to complicate law enforcement tracing efforts.

Typical transaction ranges

Money mule transactions are deliberately structured to evade detection:

• Test transfers: Small “smurf” payments under CHF 10 to verify account viability.
• Average transfers: Mule transactions average approximately CHF 1,500 – high enough to move meaningful sums but low enough to skirt automated alerts.
• High-value deposits: In some schemes, single cash deposits can reach tens of thousands of Swiss francs before being rapidly transferred onward to digital currency exchanges or international remitters.

Why instant payments compound the risk

Real-time payment systems – capable of settling transactions within 10 seconds all day and every day – have created fertile ground for mule networks. As soon as stolen funds hit a mule account, fraudsters can instantly layer and disperse the money to other mule accounts, transfer it across borders or convert it to other asset types – with all this happening before traditional monitoring systems trigger the first alert. Regulators warn that fraud rates in instant payments are up to 10 times higher than in conventional batch transfers, with layering tactics exploiting the zero-delay environment to bury audit trails in seconds.

Possible movements once funds exit the banking rails:

1. Cross-border dispersion: Instant transfers to offshore accounts bypass domestic AML controls and leverage jurisdictions with laxer oversight.
2. Crypto conversion: Mules move fiat into cryptocurrency via mixers or tumblers, further anonymizing funds.
3. Stablecoin and fiat redemption: Illicit crypto proceeds are transformed into stablecoins, then converted back into fiat in secondary jurisdictions, making the original source almost impossible to trace.

Regulatory landscape and our response

Swiss banks operate under stringent AML regulatory requirements set by FINMA and guided by FATF standards. However, Switzerland’s National Risk Assessment highlights that the growing popularity of virtual assets has greatly increased money laundering and terrorist financing risks. As faster payment rails go live, money laundering regulations and money mule legislation are evolving rapidly in response, placing pressure on banks to implement real-time transaction monitoring, robust AML compliance frameworks and advanced AML solutions. To help banks detect and prevent mule account activity, EY forensics and integrity services point to the importance of integrating advanced analytics, machine learning and behavioral analysis.

Best practices in detection and prevention address the following key points:

1. Real-time monitoring: Deploy dynamic AML transaction monitoring capable of identifying suspicious patterns in real time, as payments are now cleared within seconds.
2. Enhanced KYC/CDD: Strengthen onboarding to detect synthetic identities and prevent mule account creation.
3. Integrated fraud and AML functions: Leverage intelligence sharing across fraud, KYC/CDD and compliance teams to uncover hidden mule networks.
4. Crypto asset controls: Establish enhanced due diligence on exchange onboarding, monitor mixer interactions and track rapid conversions back to fiat.
5. Staff vigilance: Provide continuous training on emerging mule schemes to empower every employee as a sentinel.
6. Regulatory engagement: Advocate for AML regulatory compliance updates that mandate real-time monitoring standards and enhancements to the enterprise risk management framework.