CIFAS: UK Fraud Prevention Warn on Children Turning Money Laundering Mules

Cifas, the UK’s fraud prevention community, found that in 2018 nearly 6,000 children under 18 were knowingly or unknowingly taking part in money laundering – an increase of 20 per cent from the previous year.

Children’s finances are almost wholly digital now; most children receive their pocket money via online prepaid cards such as Go Henry or Nimbl.

The digitalisation of children’s financial products has brought many benefits. But the transition has created loopholes for criminals to exploit, as know-your-customer procedures revolve around the parent or guardian, and not the child.

Is it time to start implementing more KYC requirements and anti-money laundering checks on prepaid cards aimed at those under 18?

In line with the growing shift away from High Street banks to digital challengers, the market for digital financial services for children is expanding fast.

In 2020 research from Lloyds Banking Group showed that more than a third of children aged 12 to 15 have pocket money sent directly into a bank account, demonstrating the shift away from the notes and coins many previous generations would have received.  

At the moment there are almost no checks on the child’s transactions.

Giving young people the ability to spend and save through technology can be a great way to learn about financial management and budgeting. It also brings convenience of being able to pay for goods online, contactless shopping and cash withdrawal.

However, this growth in digital financial services is leading to an increased risk associated with children’s online banking and other financial products like prepaid cards.

While the financial services industry is constantly updating procedures to tackle fraud and money laundering, new products in the digital economy have enabled criminals to exploit children and have them complete transactions on their behalf, that is, becoming money mules.

At the moment there are almost no checks on the child’s transactions, but the spending limits are generous. Generous enough to encourage criminals to take notice.

The reality of children’s financial services

Given the market for children’s digital financial services is still nascent, it is hard for providers to detect illicit transactions or suspicious activity taking place on these types of accounts. According to Europol, more than 90 per cent of identified money mule transactions are linked to cybercrime.

On top of this, UK finance figures have revealed that the number of 14 to 18-year-olds misusing their bank accounts has risen by 73 per cent in only two years. The financial services industry needs to take action to detect mules and disrupt their activity. However, the path to detection and control is not so simple.


BANNER Asset Tracing Enfor i-AML


It is difficult to know if this is a widespread practice, but the systematic loophole is there if bad actors choose to exploit it.

The current model for detection mostly trusts parental diligence, assuming the account subscriber will notice any illicit activity and report it. This method is practical for younger children, with a regular flow of agreed pocket money entering and leaving an account – it’s likely any changes would be noticed.

However, once a child becomes a teenager, they are more likely to have a part-time job and deal with larger sums of money being deposited into their accounts. And as some subscriptions are allowed to continue beyond the age of 18, fraudulent transactions between payees other than a parent or guardian could be easily missed.

There is a risk that young people being used as money mules may go undetected.

There is also the possibility that the account subscriber is the one seeking to leverage the child’s card. A parent or guardian could, in theory, use their child’s digital accounts for illicit activity. In this instance, money muling would be nearly impossible to detect.

It is difficult to know if this is a widespread practice, but the systematic loophole is there if bad actors choose to exploit it.


Why KYC for children matters

In most instances, the risk assessment for children’s financial products is automatically considered to be low, which could draw criminals to the sparsely monitored area of AML that presents an opportunity for exploitation.

Even once a child turns 18, most digital financial providers allow the account to continue to operate without conducting KYC procedures for a set period, as long as the subscription is still being paid.

Automation is a valuable tool to fight child exploitation through money muling.

Continuous risk monitoring and checks for suspicious activity can help combat the use of these types of products for money muling. Automated risk monitoring procedures and integrated checks can play an important role in spotting common factors that can better identify suspicious activity.

Data checks can be integrated into automated workflows that flag connections with high-risk individuals. And transaction monitoring solutions can look for suspicious patterns on accounts.

Automation is a valuable tool to fight child exploitation through money muling, freeing up compliance staff to focus on analysing suspicious activity and guarding against fraud and money laundering. It has the potential to be used to greater effect to close these loopholes.


August 3, 2022 Published by The Financial Times.

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