Older Victims Being Used by Frauds to Launder Money

There is no point in running a fraud if you can’t collect the ill-gotten gains. As Western Union and MoneyGram have made attempts to clamp down on the use of their systems to send money, the scammers have been recruiting older consumers to help them launder the money. Many of these are elderly or vulnerable adults, and often (but not always) victims themselves.  And this is being done on a massive scale. These “mules” may or may not know that they are assisting fraud, but they are themselves liable for at least aiding and abetting fraud, and many have gone to jail.  Anyone who deals with older fraud victims is almost certain to come across this situation. This article is meant to describe the phenomenon, give some idea of its size, and provide some concrete advice to help these people and their families.

In some ways this situation is not really new.  If someone living in Nigeria obtains a stolen credit card, calls a US business to buy a laptop, and asks that it be shipped to Lagos, Nigeria, many businesses will quickly realize it is probably a fraud and won’t ship it. The US Postal Inspection Service has for years warned about “reshipping scams,” where consumers find a job at an online site where they will be paid for accepting a package coming to them in the US and then repackage it and reship it, often to a foreign location. To add salt to the wounds, often the crooks do not actually pay their victims, instead sending them a counterfeit check or just stiffing them.

Postal Inspectors are responsible for the honest use of the mail (including FedX and other services). They have long warned of this scam.
The Postal Inspection Service can issue warnings to the victims involved in these scams, issue a formal cease and desist letter, or have them criminally prosecuted. The choice of which to do often depends, of course, on whether the “mule” is aware that they are involved in a fraud, or ends their role after being notified that they are laundering money.  Of course, if the mule is making money for their efforts it is more likely that they will be regarded as an aider and abettor of fraud.

I am aware of no reliable statistics on how many mules are operating, but it is surely safe to say that there are thousands of people engaging in this activity.

Jamaica

One of the most common frauds targeting the elderly are lottery and sweepstakes scams, where people receive a telephone call, in many cases claiming to be from Publisher’s Clearinghouse, telling them that they have won a very large sum of money (and usually a new Mercedes) but must send along some fees for taxes, insurance, or something similar. Most of these calls come from Jamaica, where this is a very big business. Note that Jamaica is area code 876. I would estimate that there is at least $1 billion every year flowing from consumers to Jamaica. And the victims of this fraud are overwhelmingly older. FTC complaint statistics show that over half of the losses to Jamaican fraud comes from victims over 70 years old. Not all lottery calls come from Jamaica — there is also a problem in Costa Rica – but Jamaica is the most common location for this type of fraud.

Some victims – the Jamaicans call them Whales — just keep sending money while they are strung along with reasons why they must send more and more on a variety of pretexts. There are many consumers who have lost hundreds of thousands of dollars in a vain attempt to collect their “winnings.” And then when the crooks are convinced that the victim has no more money to send, they promise that a third party in the US will send them part of their winnings, perhaps to reimburse some of the money they have lost. Thus they use older fraud victims to receive money from OTHER victims and then send the money to Jamaica. In fact, at least one older victim with Parkinson’s disease did as asked and flew to Jamaica with $9000 in cash. He was arrested and sent home

US and Jamaican authorities are working together to fight this fraud. Project Jolt includes representatives of the Postal Inspection Service, Homeland Security Investigations, the FTC, and Jamaican law enforcement.

Here is a warning from the U.S. Embassy in Jamaica

This is a piece that recently ran on TV in San Diego. It is short and amply shows the effects Jamaican lottery frauds can have:

Also, the American Greed series on CNBC very recently aired a 45 minute documentary on the Jamaica lottery scam. It includes the story of one victim who was used as a mule and subsequently shot himself.

This site also has a separate article that covers Jamaican fraud in more detail.

Romance Scams

But this tactic is used not only in sweepstake/lottery scams – the frauds have a ready supply of helpers who have been drawn into a romance scam. Those looking for a relationship often, of course, turn to the internet dating sites. There they may be contacted by someone posing, for example, as an officer in the US military stationed overseas or people working outside the US. The scammers, often actually young males in Nigeria, spend weeks or months cultivating (or grooming) these victims, often providing the victims with daily assurances of their love. Then at some point there is an emergency and the crook needs to have money sent to them. Because the victim believes that this is truly their soul-mate, they send money, often time after time, for additional “emergencies,” to help with business problems, or to bring their “loved one” home to the US. In a separate piece I provide more information on just how and why this works, but be assured it does work and is a massive problem.

These romance scam victims are often defrauded of their life savings, even borrowing money on mortgages, credit cards and even family and friends. Even if these victims have not yet lost their own money these “romance scam mules” are a hugely valuable resource for fraudsters. When the victims are asked to help their “loved one” they are often happy to comply. For example, Alyinka Sunmola was a Nigerian living in South Africa who was dealing with 50 or more older women. Often he pretended to be a US army colonel. Sunmola also bought stolen credit card numbers, which he used to buy laptops and ipads from US companies. He had these shipped to the women he was romancing, who then sent them along to him in South Africa. Prosecutors believe he stole a very large amount of money using this method. There are no indications in this case that the “mules” knew they were trafficking in stolen goods.
In another case, by contrast, a woman in West Virginia did know that she was helping a romance scammer. Audrey Elrod received hundreds of thousands of dollars into bank accounts she opened for her Nigerian fraudster. She then sent the money to Nigeria through Western Union. After being arrested on federal fraud charges she simply moved to North Carolina and continued to send money overseas. She ultimately pleaded guilty, and last year she was sentenced to 52 months in federal prison

Other scams that take advantage of mules

Stolen credit cards: So did you ever wonder what people do with all those stolen credit card numbers they get from all the data breaches in the news? Often they are used, as Sunmola did, to buy goods from businesses. Again, my suspicion is that most of the money goes through money mules.

Phishing: We also hear regularly about phishing scams – where people use phony emails in a pretext to get people’s online bank account information. If I’m a scammer, and I’ve stolen the money from someone’s online account, it would be very suspicious to just do a bank to bank wire transfer to my account in Nigeria. Bank security people have told me that they have seen numerous situations in which the money was stolen from online bank accounts and then wired into other US bank accounts opened by romance scam victims, who then in turn transferred the money to other bank accounts overseas.

Business Email Compromise: Mules, especially romance scam victims, have also become key players in this fraud.  In the last year or so we have also seen an explosion of business email compromise scams that are defrauding all sizes of businesses around the world. The frauds spend time researching companies and learn the names of the senior officials and the forms of their internal email. Then the Chief Financial Officer gets an email that appears to come from the boss or another senior official, which may tell them that a major supplier would like their money wired to a different location. It will include instructions on what bank account to wire money to.
Because the email at first glance looks legitimate, and often uses the CFO’s real name, these appear legitimate and they are often successful in deceiving businesses or other organizations into sending huge amounts of money. Often the money goes into bank accounts that have been opened by romance scam victims/mules, who are then instructed to do bank wire transfers to send the money off shore.

FBI warning on BEC mules:

Drugs:
Thus far I’ve mainly focused on mules who simply receive funds and send them along. But sometimes they actually travel (I mentioned this with Jamaica). But elderly victims have also been used to transport drugs – and have been imprisoned. In most cases is appears the senior was involved in a lottery or romance fraud, and was convinced by the scammer to travel with a suitcase or other item, which they did not know contained drugs. The Internet Crime Complaint Center estimates that 144 elderly couriers were conned into (unwittingly) carrying drugs overseas. Over 30 such people have been incarcerated. In February the Senate Aging Committee held hearings on precisely this subject.

And on July 29 there is report that a 77 year old minister from Maine, who was a romance scam victim, was just released from prison in Spain. He had originally been sentenced to six years in a Spanish prison for transporting drugs.

Complicit Mules

Of course some of the US based intermediaries collecting the money are full participants in the fraud. Just a few weeks ago Vania Lee Allen pleaded guilty to federal criminal charges. She impersonated an FBI agent and actually visited elderly victims in Georgia in person to try and convince them to continue sending money to Jamaica in a sweepstakes scam. There have been a number of other criminal cases against Jamaicans living in the US who took part in these scams.

In addition, it is not unusual for people in other countries to recruit people in the US on student visas to assist by, at a minimum, acting as mules.

US-based mules are also keys to many more different frauds, often run over the internet. For example, there are thousands of complaints from consumers who saw a car, a piece of heavy equipment, or a pet available at an online site. People are directed to pay by doing a bank to bank transfer or by sending money through Western Union or MoneyGram. The promised goods do not exist. This is simply theft. And often the money initially goes through mules before ending up with a scammer or a criminal enterprise.

Mules are also used in frauds being run out of India. In American Credit Crunchers the FTC sued a India-based company collecting phantom debt. The company made telephone calls to potential victims, often pretending to be local law enforcement posed to immediately arrest the consumer if they did not pay their “debt” by credit card over the phone. The Defendants had no legal right to collect any of the debt.  Varang K. Thaker, an Indian national living in Southern California opened the credit card account and received proceeds. He kept some of the money and transmitted the remainder to India. There have been several very similar cases since then.

Consumers are making more complaints right now about IRS impersonators than any other topic. We believe these calls are mainly coming from India. Because American victims would surely never send money directly to India to pay their federal taxes, use of a mule to collect the money is a necessary ingredient in this type of fraud.

In Grandparent scams and bogus loan companies operating over the internet victims are directed to send their money through Western Union or MoneyGram. There is a long history of frauds recruiting drug addicts as “runners” to pick up the money, take a small cut, and then pass along the money to those behind the fraud.

So why use mules?

Two main reasons. Because most of the frauds involved take place over the telephone or the internet, which are extremely difficult to trace, the main way to find the fraudsters is to follow the money. Unless the scam is discovered and law enforcement and banks can respond in the first 48 hours, the chances of recovery of any victims’ funds are very low. Where the money is filtered through many, often relatively innocent, mules (especially in different states or even other countries) this greatly complicates the investigating job. Second, some victims, whether individuals or small businesses, would note red flags and hesitate or balk at sending money if they knew their money or goods were destined for another country. Of course the danger for the fraudsters is that the mules will simply take the money and not send it along. This is lessened considerably where the scammer counts on the victims trust (for romance scam victims). In addition, elderly victims and their families may not know that they are involved in a fraud and thus may not report it.

What can banks do?

A good deal of the money involved flows through US banks. Often mules are directed to open a bank account, receive funds into that account, withdraw the funds, and then send a number of smaller transactions out of the US though Western Union or MoneyGram.

Under the Bank Secrecy Act banks are required to file Suspicion Activity Reports (SARs) when they note odd activity suggestive of fraud.

Here are some things banks can look for, and hopefully freeze or suspend suspicious accounts pending additional investigation.

* A new deposit account; minimal deposit soon followed by large EFT deposits.
* Deposit customers suddenly receiving and sending EFTs related to new employment, investments, business opportunities or acquaintances (especially Internet opportunities).
* Newly-opened deposit account with an unusual amount of activity, such as account inquiries, or a large dollar amount or high number of incoming EFTs.
* Account that receives incoming EFTs then shortly afterward originates outgoing wire transfers or cash withdrawals approximately eight to 10 percent less than the incoming EFTs.
* A foreign exchange student with a J-1 Visa and fraudulent passport opening a student account with a high volume of incoming/outgoing EFT activity.

What to do if you discover your elderly client is acting as a mule?

Report it. Immediately and to as many places as possible. Complaints can be made to local law enforcement, of course, especially if the activity is ongoing. The best all- around place to report is to the FTC’s Consumer Sentinel database. A victim, family member, victim helper, or APS worker can get a live operator by calling 877-FTC-Help or complain on line. The database is regularly used by a variety of law enforcement agencies in their fraud-fighting role (FBI, Postal Inspection Service, Homeland Security Investigations, FTC, etc). You should also file an online complaint as quickly as possible with the FBI’s Internet Crime Complaint Center (IC3.gov), especially for a business email compromise or romance scam. I recommend filing a report with both the FTC and IC3 because ICE is not currently contributing the complaints it receives to Sentinel.

Consumers can report directly to the Postal Inspection Service  or by calling 1-800-275-8777. They can also complain to the local State Attorney General or Better Business Bureau.

In addition, fraud reports should immediately be made to the money transmitters (Western Union and/or Money Gram), and any banks or investment/business/brokerage accounts involved, to have the transaction cancelled (and report other fraudulent transmissions sent in the past). Time is of the essence- if these companies are contacted immediately, there is a chance they can stop the money from being forwarded. Moreover, Western Union and MoneyGram have information the consumer may not have – such as where the money was physically picked up – and they add that information to complaints and contribute them to Consumer Sentinel. In addition, MoneyGram has agreed to tell consumers who call and complain where the money was actually picked up. Thus if victims move fast, that information may permit law enforcement to obtain surveillance video of the person picking up the money.

Western Union 1-800-448-1492;
MoneyGram 1-800-926-9400;

If the victim is elderly or a vulnerable adult, the local Adult Protective Services Agency where the victim resides should also be contacted. They may be able to recommend steps to try and end further losses, and could provide additional safety planning strategies to help prevent additional fraud, such as changing email/phone numbers and being on guard for possible future identity theft. See

Other Resources:

FBI warns of planned crackdown on money mules:

Steve Baker
Sbaker109@comcast.net
July 29, 2016; updated 12/6/2016

 

Steve recently retired as Director of the Federal Trade Commission’s Midwest Region, where he worked on consumer fraud matters, in the US and Internationally, for more than 30 years. He serves on the Board of Directors of the International Better Business Bureau.