Unseen Cashflow: Dissecting the Anatomy of Modern Scams

Discover the intricate methods behind money transfers in scams and unravel the complexities that make recouping these funds an arduous task

Chapter 1:

The Invisible Hands Behind Financial Fraud

Imagine answering an unexpected phone call, only to find your lifetime savings swindled in a matter of minutes. Telephone scammers have been rampaging for years, and show no signs of slowing down in 2023.

According to UK Finance's 2023 annual fraud report, the amount of money lost to authorized push payment (APP) frauds reached a staggering £402.8m, affecting regular individuals like you and me.

To put that into perspective, in the same year, the coronation for King Charles III was estimated to cost between £50m to £100m—only a fraction of the amount lost directly to faceless scammers.




Authorized push payment fraud, which involves impersonation and deception to trick victims into sending money directly to the fraudsters, has proven stubbornly resistant to efforts aimed at its eradication.

Despite the tireless efforts of online vigilantes who intervene in direct phone calls, and even those who hack into scammers' headquarters to halt operations, APP frauds continue to evolve, adapt, and thrive.



Extensive investigations carried out by experts over the course of several years have led to the revelation of the concealed financial channels supporting these fraudulent operations, with some credit given to popular television series like Breaking Bad.

Common methods of transporting the illicit gains involve money mules hired in victims' countries of residence.

These mules collect the stolen funds in various ways (such as mailing or in-person collection) before sending the money again to the hands of the true culprits.

However, this method is high-risk and labour-intensive for transporting substantial sums. Consequently, more practical and increasingly prevalent methods are the uses of shell companies and cryptocurrencies for money laundering.


Chapter 2:

Understanding Scams: Deception, Trust, and the Art of the Steal




There are various manifestations of authorized push payment fraud, all with the shared objective of deceiving victims into voluntarily initiating substantial bank transfers, regardless of the detrimental consequences.

The presented video vividly demonstrates the wide-ranging nature of these scams. On certain occasions, fraudsters entice individuals through counterfeit phishing websites, while in other instances, they employ unsolicited phone calls impersonating authorities.

Even more alarming is their investment of months in cultivating trust, only to exhaust victims' life savings.

With the rapid advancement of AI technology, scammers have now started utilizing voice cloning technology to deceive victims by mimicking the voices of their loved ones.


Chapter 3:

Money Flow in Scam Operations




Money laundering encompasses a sophisticated array of methods, ranging from simple as sending a package to the intricate process of establishing front companies and integrating illicit funds into legitimate income.

This section will guide you through a comprehensive overview, starting from the least challenging yet effective techniques, gradually progressing towards the most labor-intensive and intricate approaches employed by fraudulent entities.



The Foot Soldiers: Money Mules


Younger individuals are frequently targeted by criminals for recruitment as money mules. Recent revelations indicate that in the United Kingdom, approximately 64% of money mules fall under the age of 30. This process involves requests to use money mules' bank accounts to deposit or transfer money, often with the promise of a reward or payment.

A research in 2022 revealed that there are approximately two million mule accounts operating within the United States. These accounts facilitate fraudulent transfers amounting to around $3 billion annually. The study also indicates that scammers have adjusted their tactics by reducing transaction amounts to minimize detection by traditional means.



Now, let's delve into a hypothetical scenario involving a £1,000 transaction initiated by Grace, a 70-year-old victim of a scam. She has received instructions to send the money to a UK bank account held under the name of John Doe.

Mr. Doe will serve as the primary proxy (fancy word for money mule) in this fraudulent scheme. It is highly likely that John Doe's account would have a history of multiple similar transactions stemming from illicit origins, occurring with notable frequency.

Additionally, there would also be legitimate transactions, such as salary payments, interspersed within the account activity.

This technique is known as "layering." By layering funds from diverse sources, it becomes increasingly challenging for authorities to trace and ascertain the legitimacy of these transactions, effectively distinguishing between illicit and legitimate funds.




During this phase, less astute scammers may opt to cash out by instructing their proxies to carry out international transactions directly to the scammers' own accounts.

However, this approach poses greater risks since it becomes relatively straightforward to trace the funds back to the scammers.

Moreover, if there is an unusually frequent influx of cash flow, it could attract the attention of banks and local tax authorities.

A more effective strategy involves increasing the number of intermediaries between the primary proxy and the actual scammers. By intermingling funds from various sources and facilitating transfers among multiple proxies, the final destination of the money becomes significantly harder to track.

Utilizing money mules, despite being a labor-intensive method, is considered relatively easy and carries a lower level of risk. This is primarily due to the extended timeframe and increased resources required for authorities to trace the funds to their ultimate destination.



In late 2022, Europol initiated a three-month operation to combat international money muling activities. The operation resulted in the arrest of 2,469 individuals, with approximately £15 million intercepted. While these figures may appear impressive, a separate report by BioCatch sheds light on the scale of the money muling issue.

It estimates that there are around 468,000 money mule accounts in the UK, and the annual volume of funds transferred through such accounts amounts to approximately £550 million.

Thus, despite Europol's diligent efforts, they were able to apprehend less than 0.01% of the total number of mule accounts and intercept only about 10.9% of the estimated fraudulent transactions during the same period.

Comparing these statistics to the overall amount lost to scams in the UK during that time in 2022, the intercepted funds accounted for a mere 4.95% of the total losses.


The Masks of Illicit Trade: Shell Companies


Numerous legitimate channels exist for transferring money, and one such avenue involves establishing authentic businesses within the targeted victims' country.

In some cases, the owners of these shell companies possess knowledge of the illicit operations being conducted. However, there are instances where unsuspecting victims of scams are deceived into setting up companies on behalf of the actual fraudsters.

Typically, the main shell company is established within the countries where the target victims reside. The intention behind this strategy is to avoid drawing attention from banks, as it would appear unusual for victims to transfer significant sums of money offshore.

After establishing a shell company, scammers often employ various tactics to persuade victims to participate in financial transactions or investments facilitated through the shell entity.

These scammers entice victims with attractive offers, promising substantial returns on investments, exclusive opportunities, or access to time-sensitive deals. In some cases, these transactions are disguised as service fees or necessary payments.

To maintain the illusion of legitimacy, these fraudulent businesses typically maintain minimal operational activities.

This deceptive approach allows scammers to blend the illicit funds with legitimate revenues, creating a façade of genuine business activity.

By commingling the proceeds of criminal activities with lawful funds, they aim to obscure the origins and nature of the illicit funds, making detection and investigation more challenging.



When it comes to investment scams involving significant sums of money, shell companies are often utilized due to the perception that frequent large transactions are normal in such contexts.

A notable example of this trend is the emerging "pig-butchering" scam, which has gained prominence in recent years.

Analysis has revealed the existence of 168 UK-based companies implicated in fraudulent cryptocurrency or foreign exchange trading schemes, with approximately half of these believed to be associated with pig-butchering scams.



The Virtual Gold Rush: Cryptocurrencies in Scam Operations


The rise of cryptocurrency has paved the way for a new breed of scams, capitalizing on the decentralized and pseudonymous nature of digital currencies. Fraudsters exploit the unregulated landscape, leveraging tactics such as fake initial coin offerings (ICOs), Ponzi schemes, and cryptocurrency investment scams to defraud unsuspecting individuals.

In 2022, the Australian Competition and Consumer Commission (ACCC) disclosed a staggering loss of over £115 million attributed to cryptocurrency scams. The Guardian has also reported a significant loss of over £329 million to cryptocurrency scams within the UK.

Cryptocurrencies have not only been exploited for scams but have also emerged as a preferred choice for money launderers, primarily due to their inherent secrecy and privacy features.

The absence of comprehensive regulations surrounding cryptocurrencies further enhances their appeal, as they offer a means to bypass the constraints imposed by traditional financial institutions.

Additionally, the borderless nature of cryptocurrencies eliminates the reliance on local banks, enabling individuals to deposit and transfer funds across jurisdictions without geographical restrictions.

Aside from Bitcoin, which is public and easier to trace, which also led the FBI to recover million dollars worth of Bitcoin for Colonial Pipeline in a ransomware attack in 2021, privacy coins, like Monero, offer more robust anonymity features compared to Bitcoin, making them attractive for criminals seeking to launder their funds.



Crypto mixers, also known as tumblers or mixing services, have gained popularity among crypto criminals as a means of obfuscating their transactions. These services accounted for 8.0% of all funds originating from illicit addresses in 2022.

Mixers operate by collecting cryptocurrency from multiple users, blending the funds together, and subsequently redistributing to each user an amount equivalent to what they initially contributed.

This process aims to obscure the traceability of funds, making it challenging to associate specific transactions with their original source.


By analyzing the disparity between the monetary losses attributed to authorized push payment fraud in the UK and the volume of funds transferred to mixers, which have been identified as originating from scams, it becomes evident that a significant proportion, approximately 33%, of these funds could have been laundered through cryptocurrency channels.


Chapter 4:

The Challenges in Tracing Scam Money




Jurisdiction Challenges:



Tracing scam money often faces significant obstacles due to jurisdictional issues. The lack of international cooperation, conflicting legal frameworks, and differing regulatory systems pose significant challenges for investigators (Hooper et al., 2013).

The advent of technologies like cloud computing has further complicated these issues, dispersing user data across international borders and necessitating cooperation between agencies from multiple countries. The effectiveness of anti-money laundering efforts is often hampered by these jurisdictional challenges.



Local Corruption:



Local corruption plays a significant role in hindering the tracing of scam money. Corrupt officials and institutions can facilitate money laundering activities, obstruct investigations, and protect the perpetrators.

Based on the most recent corruption index from Transparency International, countries frequently linked with fraudulent activities (as shown on the right) generally exhibit scores that fall below the average.

Mathur (2017) provides an in-depth examination of corruption in India, demonstrating how it can impact various sectors, including the tracing of scam money. The link between local corruption and the challenges faced in tracing scam money is evident, with corruption often serving to protect scammers and obstruct investigative efforts.



Lack of Evidence:



The scarcity or insufficiency of evidence presents another significant challenge in tracing scam money. Investigators often face difficulties in gathering admissible evidence to support legal proceedings and asset recovery.

Moore and Clayton (2007) discuss the challenges in gathering evidence in the context of online scams, highlighting the limitations of strategies like website take-down. The complexity of financial transactions, the use of offshore accounts, and the sophisticated techniques employed by scammers all contribute to the lack of evidence.



Victims Feeling Shame and Traumatized:



The psychological impact of scams on victims, particularly feelings of shame and trauma, can hinder the tracing of scam money. Victims may be reluctant to come forward, share information, or cooperate with authorities due to these emotional responses. In the video, it is extremely difficult to find a victim willing to come forward and testify.

Whitty and Buchanan (2015) examine the psychological impact of online dating romance scams on victims, noting that for many, the emotional impact of the scam was more upsetting than the financial loss.

This highlights the significant role that victim psychology can play in the effectiveness of scam investigations.