How Chief Risk Officers can stop money mule scams with document fraud detection 

In the ever-evolving financial crime landscape, Chief Risk Officers (CROs) are increasingly focusing on the emerging threat of scams, especially those involving money mules, alongside traditional fraud detection. 

Financial crime evolves rapidly, with fraudsters constantly developing new tactics to stay one step ahead.

Money mule activity, where individuals act as intermediaries to move illicit funds, has grown in prevalence. While many financial institutions have advanced identity and application data-based fraud detection capabilities, they often haven’t recognised how document fraud can be connected to these scams, leaving banks at risk of unknowingly facilitating financial crime. 

The Hidden Threat of Money Muling 

Money mule activity is a growing challenge for banks. The European Union Agency for Cybersecurity (ENISA), asserts that money mule schemes are rising, representing over 20% of reported financial crimes. 

Money muling can be tough for banks to spot, especially when fake documents are used to make financial activity appear legitimate. Standard detection solutions often struggle to catch these fraudulent documents, leaving banks vulnerable. Once the initial verification checks are completed, it becomes harder to detect money mule activity, allowing them to stay in the system unnoticed and increasing the risk for banks. 

Why Document Fraud is a Blind Spot for Banks 

While banks have adopted various technologies to detect financial crimes, document fraud can be a major weakness. Many banks rely on manual verification checks by a human (such as visually inspecting income credits on a bank statement), which can be slow and costly, forcing them to choose between these labour-intensive methods or accepting the risk of fraud. An oversight can allow fraudsters and scammers to create accounts or conduct transactions undetected, which, while not necessarily causing a direct loss to the bank, could facilitate larger financial crime events. 

The potential impact of these scams extends beyond immediate financial harm. CROs face mounting pressure from communities and regulators to ensure they take reasonable steps to prevent fraudulent activity. 

The Solution for the Next Decade 

While many banks view ‘open banking’ as a solution for fraud detection, only 0.3% of customers are currently using it, according to an Accenture 2024 report. This highlights a significant challenge: solely relying on open banking or screen scraping technologies will not suffice in the fight against fraud. Instead, a blended approach that combines open banking with advanced document fraud detection is essential over the next 5–10 years. 

Banks must consider integrating document-based solutions into their processes to address the ongoing risks posed by money mule activity and document fraud. With the low adoption of open banking, it’s clear that banks and consumers will continue using documents. Banks that utilise the latest technology to tackle documents at scale will stay one step ahead. 

Fraud as a Service: The Rise of Accessible Financial Crime 

The sophistication of fraud has evolved with the rise of ‘Fraud as a Service’ where criminal syndicates, ranging from everyday individuals to highly organised groups, can access tools and techniques that were once far less accessible.  It takes just a few clicks for scammers to produce fake documents that can deceive even seasoned financial services employees.  

The explosion in document tampering capabilities means banks must be more vigilant than ever. Ignoring leading document fraud technologies could result in scammers accessing bank accounts or executing transactions that fuel larger criminal operations.  

Fortiro CEO and Co-Founder, Sean Quagliani, has highlighted the ease of creating fraudulent documents in his presentations at various Australian industry conferences. You can view one of Sean’s presentations here. 

How Fortiro is Leading the Charge in Document Fraud Detection 

Fortiro has become the solution of choice for some of Australia’s biggest and most successful banks. Fortiro offers a comprehensive solution to detect document fraud with industry-leading accuracy. 

Fortiro’s platform extracts and prepopulates income data, without the need for human intervention. Fortiro also helps banks comply with government regulations by redacting personally identifiable information such as Tax File Numbers at scale. 

Fortiro’s unique approach to document fraud detection ensures financial institutions can protect themselves from becoming unwilling facilitators of financial crimes. As banks look to navigate the challenges of financial crime moving into 2025, adopting advanced document fraud detection technologies is not just a precaution, it’s a necessity. 

Conclusion 

In 2025, scams and money muling activity are predicted to be the new frontiers of financial crime, and document fraud is a critical component of this threat. Banks that fail to adopt the latest document fraud detection technologies risk becoming enablers of scams.