How Advanced Device Authentication from ToothPic Can Fight Fraud such as Mule Accounts
Mule accounts have become a central enabler in today’s banking fraud schemes. Every major scam relies on these accounts to receive and move stolen funds, making it difficult to trace and recover money once it leaves a victim’s account. As digital banking grows, so does the sophistication and scale of this threat.
What Are Mule Accounts and why do fraudsters use mule accounts?
Mule accounts are accounts used—knowingly or unknowingly—to receive, move, and “cash out” stolen funds from various types of fraud. In every major scam, from investment fraud to phishing and unauthorized account takeovers, the stolen money must be transferred somewhere. This “somewhere” is the mule account. There are two main types of mule accounts:
- Witting mules: individuals who knowingly allow their accounts to be used for illegal transfers, often in exchange for a commission.
- Unwitting mules: victims tricked into sharing their banking credentials or opening new accounts under false pretenses (such as fake job offers or social engineering scams).
Mule accounts act as intermediaries, making it difficult to trace the money back to the original criminal. By quickly moving funds through multiple accounts—often across borders—fraudsters can “clean” the money and withdraw it before banks or authorities can intervene.
How Mule Accounts Fuel Fraud | The Challenge: Detecting Mules in Real Time
Recent data reveals that fraud in the Europe, Middle East, and Africa (EMEA) region is evolving rapidly, driven largely by mobile-first attacks and sophisticated social engineering tactics. Fraudsters increasingly use scams such as bank impersonation and fake job offers to recruit individuals—often unknowingly—to open or surrender control of accounts that become mule accounts. These accounts serve as conduits for moving stolen funds, making them a critical enabler of financial crime.
In 2023, stolen device cases surged by 43% [1], while 75% [1] of reported frauds originated from mobile devices, underscoring the shift toward mobile platforms as the primary attack vector. Additionally, over 10,000 mule accounts [1] were detected by leading fraud detection solutions across the EMEA region during a recent period, highlighting the widespread nature of the problem; similarly, in India, authorities identified approximately 80,000 mule accounts [2], underscoring the global scale and urgency of combating this threat.
Detecting mule accounts is especially challenging because fraudsters design them to closely mimic legitimate user behavior. They often log in regularly to build trust and avoid triggering traditional anti-money laundering (AML) systems, which typically rely on retrospective transaction analysis. This makes it essential for financial institutions to adopt advanced solutions capable of identifying mule activity early in the fraud lifecycle—ideally before fraudulent transfers occur. Early identification reduces operational costs, reimbursement liabilities, and the risk of funds disappearing irretrievably.
ToothPic’s advanced technology addresses this challenge by leveraging device-based cryptographic authentication. It extracts a unique imperfection from the smartphone camera sensor—an invisible “fingerprint” that makes every device uniquely identifiable. This allows ToothPic to recognize when multiple accounts are linked to the same physical device, even if fraudsters attempt to create numerous mule accounts. By binding accounts to device-specific features, ToothPic prevents fraudsters from easily recycling devices across multiple fraudulent accounts.
As fraudsters grow more patient and sophisticated—regularly logging in to mimic legitimate users—traditional AML systems, which operate retrospectively, struggle to keep pace. Meanwhile, regulatory frameworks are tightening. For example, in the UK, banks must now reimburse fraud victims, sharing liability between sending and receiving institutions. This regulatory pressure is accelerating the industry-wide adoption of real-time mule detection and advanced risk profiling.
How ToothPic Can Break the Mule Account Cycle
ToothPic’s technology is designed to address the root of the mule account problem: the ability of fraudsters to access and control bank accounts using stolen or compromised devices and credentials. Here’s how ToothPic’s approach stands apart:
- Device-Based Authentication: turning your smartphone into a cryptographic key at the core of ToothPic’s solution is device-based authentication. Unlike traditional systems that rely only on passwords or SMS codes, ToothPic binds account access to the unique hardware characteristics of a user’s smartphone.
- Unique Hardware Binding: ToothPic leverages invisible, hardware-level features—a tiny imperfection in the device’s camera sensor—to create a unique, unclonable cryptographic key. This key is securely stored and used to authenticate the user every time they access their account.
- Impossible to Clone or Spoof: Because the cryptographic key is derived from physical properties of the device, it cannot be copied, transferred, or forged as also the key is extracted and never kept either in the short or in the long short memory. The credential is created to access and then destroyed.Even if a fraudster manages to steal login credentials, they cannot access the account without the registered smartphone.
- Seamless User Experience: This process runs in the background, providing strong security without adding friction to the user’s banking experience.
Breaking the Mule Account Cycle
By using device-based cryptographic authentication, ToothPic makes it exponentially harder for fraudsters to:
- Use stolen credentials or devices to access accounts for mule activity.
- Take over legitimate accounts and repurpose them as mules.
- Move funds quickly and anonymously through networks of compromised accounts.
This proactive approach allows financial institutions to detect and disrupt mule accounts much earlier in the fraud chain—before fraudulent transactions are completed and losses occur. It also reduces operational costs and regulatory risk by preventing fraud at the source, rather than reacting after the fact.
Advantages for Financial Institutions
By integrating ToothPic’s technology, banks and financial institutions gain several critical benefits:
- Early Detection and Prevention: Identify mule accounts and suspicious activity earlier in the fraud chain, reducing financial losses and operational costs associated with investigations and reimbursements.
- Regulatory Compliance: meet evolving regulatory requirements (such as PSD3 and reimbursement mandates) by implementing proactive, real-time fraud prevention measures.
- Reduced False Positives: device binding provides precise risk signals, minimizing disruptions to legitimate customers.
- Mobile-First Security: With 75% of fraud originating from mobile devices, ToothPic’s mobile-centric approach is perfectly aligned with current threat vectors.
Conclusion
Mule accounts are the backbone of modern financial fraud, enabling criminals to move and hide stolen funds with alarming efficiency. As fraud tactics evolve, so must the defenses. ToothPic’s advanced device authentication offer a robust, and unique solution to disrupt the mule account cycle—helping to protect both financial institutions and their customers from the growing threat of digital banking fraud.
Want to learn how ToothPic helps fight fraud? Check out our banking use case.
