Implement behavioral biometrics to stop money mules, says UK’s financial regulator

The UK’s Financial Conduct Authority (FCA) has published key findings from a review of what role money mules play in enabling fraud, praising firms that use biometric-based safeguards for verification in onboarding, monitoring, and reporting, and pushing for more advanced biometric tools.

The report follows on the government’s Economic Crime Plan and Fraud Strategy, which identify money mules – persons recruited by criminals to carry illegally obtained money – as “integral to moving proceeds of fraud and other crime types,” and recommend a “focus on disrupting mule activity and protecting the public.”

“Fraud currently accounts for 40 percent of all crime” in the UK, says a summary of the FCA report. “We have observed some firms establish proportionate approaches that use innovative solutions including facial recognition systems, device profiling and geolocation. However, despite these efforts, not all firms are responding with the same focus, and some firms need to do more to tackle the problem.”

The FCA looked at new and established payments service providers and electronic money institutions, focusing on how firms are protecting against mule activity.

“Fraudsters heavily rely on interconnected mule accounts to transfer and conceal the proceeds of fraud,” say its findings. “These transactions can pass through various financial institutions or be converted into cash or cryptocurrencies, effectively masking the money trail, and funneling the profits back to the criminal groups.”

The report identifies good practices for firms to improve and maintain effective fraud prevention measures, which include leveraging biometric systems to calibrate against risk, and investing in machine learning systems. It says the FCA would like to see more firms incorporate device profiling, geolocation and behavioral biometrics into onboarding controls to disrupt mule networks.

Banks fare better with AI facial verification

In an article in the Financial Times, Onfido’s chief product officer says AI does better than people at verifying customer identity through facial recognition, specifically for banks and financial institutions.

Yuelin Li says that “humans are not particularly great at recognizing humans,” especially when making a 2D to 3D match using an ID photo that could have been taken years ago. She cites a study that compared the accuracy in facial recognition by forensic examiners and other “professional facial examiners” against face recognition algorithms (which, in fact, concluded that “optimal face identification was achieved only when humans and machines worked in collaboration.”)

Regardless, the question of human versus automated onboarding for financial institutions is on its way to becoming moot. Increasingly, says Li, banks and other businesses are conducting verification online, through apps or portals, increasingly using biometrics.

“One of the things people are very nervous about is things like call centers,” she tells the Financial Times. “A lot of attacks that are going on now – a phishing attack or a text message or something – they get you because you’re coming out of the app.”

Although some research shows that a high percentage of customers abandon digital bank onboarding, biometrics has the potential to expedite existing onboarding processes that are inefficient and clumsy. In addition to familiar tools such as fingerprint or face biometrics, firms such as the French fintech Revolut are exploring behavioral biometrics that analyze gestural factors such as device positioning and typing speed as an addition to their verification toolkit.

Article Topics

behavioral biometrics  |  face biometrics  |  Financial Conduct Authority (FCA)  |  financial crime  |  financial services  |  fraud prevention  |  KYC  |  Onfido  |  UK