Rapid movement of funds is measured with three ratios, and the one most scenarios use on its own also flags every payroll and collection account in the bank.
A pass-through account is detected by measuring three things together over a window: flow-through (how much of what came in went out), dwell time (how long the money stayed) and turnover against the customer's declared activity. On an illustrative business account over 30 days, 98.5 per cent of credits flowed out, funds stayed 0.46 days on average, and turnover was 10.3 times the expected level. Flow-through alone is not enough: at a 90 per cent threshold it also flags a payroll account and a marketplace collection account that are doing exactly what they are for.
Worked in full in The EU AML Handbook by Julian R. Sterling, with every figure reproduced in a free workbook.See the book on Amazon →
A mule or pass-through account receives funds and sends them on quickly, usually to accounts elsewhere, leaving almost nothing behind. Its value to a launderer is one more layer between the source and the destination. The ongoing monitoring the EU framework requires is a comparison of the customer's transactions with what the firm knows about the customer, and that comparison is the part a simple rapid-movement rule leaves out.
| Input | Value |
|---|---|
| Credits in the window | 412,000 |
| Debits in the window | 405,800 |
| Average end-of-day balance | 6,200 |
| Expected monthly turnover declared at onboarding | 40,000 |
All figures are fictional. The expected turnover is whatever the customer file records: declared activity at onboarding, updated at each review.
1. Flow-through = MIN(credits, debits) / MAX(credits, debits) = 405,800 / 412,000 = 98.5%. Only 6,200, or 1.5 per cent, stayed.
2. Average daily outflow = 405,800 / 30 = 13,526.7.
3. Dwell time = average balance / average daily outflow = 6,200 / 13,526.7 = 0.46 days, about 11.0 hours.
4. Turnover against profile = credits / expected turnover = 412,000 / 40,000 = 10.3 times.
In Excel: =MIN(C,D)/MAX(C,D), =Bal/(D/30) and =C/Expected, one row per account, so the three tests run across the whole book at once.
Dwell time from balances is an average. An investigator wants to see the money move, which means matching each debit to the oldest credit not yet spent (first in, first out) and measuring the hours between them.
| Debit funded by | Amount | Hours held |
|---|---|---|
| Day 1 credit of 18,500 | 18,000 | 5 |
| Day 1 credit, remainder | 500 | 31 |
| Day 2 credit of 22,000 | 9,000 | 6 |
| Day 2 credit | 12,000 | 25 |
| Day 2 credit, remainder | 1,000 | 47 |
| Day 3 credit of 15,000 | 13,800 | 18 |
| Day 3 credit, remainder | 1,200 | 50 |
| Day 5 credit of 9,800 | 8,300 | 7 |
| Matched debits; amount-weighted hours | 63,800 | 13.7 |
Of 65,300 received in the five days, 95.9 per cent had left within 48 hours, and the amount-weighted holding period is 13.7 hours, 0.57 days, close to the 0.46 days the balance method gave for the month. When both methods agree, the averages can run on the whole book and the matching can be kept for the alerts.
| Account | Credits | Flow-through | Dwell, days | Turnover vs profile | Simple rule | Combined |
|---|---|---|---|---|---|---|
| Trading SME | 45,000 | 91.1% | 20.49 | 1.07 | Alert | No |
| Employer payroll account | 180,000 | 99.4% | 1.51 | 1.03 | Alert | No |
| Marketplace collection account | 950,000 | 99.8% | 0.66 | 1.06 | Alert | No |
| Suspect account | 412,000 | 98.5% | 0.46 | 10.30 | Alert | Alert |
The flow-through ratio cannot tell these accounts apart: anything with regular outgoing payments scores above 90 per cent over a month. Dwell time separates the trading business, which keeps 20.49 days of outflows on balance, but not the payroll or collection accounts, which are designed to empty. Only the comparison with the expected profile isolates the suspect: the payroll and marketplace accounts turn over close to what their owners declared, the suspect more than ten times. A launderer who learns the rule can leave a float: doubling the average balance to 12,400 lifts dwell to 0.92 days, and 25,000 to 1.85, still under the 2 day line but closing on it. The profile test is the hardest of the three to game, because it would require declaring the laundering volume at onboarding.
The thresholds of 90 per cent, 2 days and 3 times are illustrative. Each needs to be set from the firm's own data, with above-the-line and below-the-line testing, as worked in how to set an AML transaction monitoring threshold.
Scenario design, tuning and the review workload are covered in the free workbook and working documents for this book.
The smaller of credits and debits over a window divided by the larger, so it shows how much of what came in went out again. An illustrative account receiving 412,000 euros in 30 days and paying out 405,800 has a flow-through of 98.5 per cent. On its own the ratio is weak: a payroll account runs at 99.4 per cent for entirely legitimate reasons.
Divide the average balance by average daily outflows. With an average balance of 6,200 euros and debits of 13,526.7 a day, money stays 0.46 days, about 11.0 hours. Matching each debit to the oldest unspent credit gives a transaction-level check: on a five-day sample, 95.9 per cent of credits left within 48 hours.
Because its activity matches its profile. An employer's payroll account turns over 1.03 times its expected volume with a dwell of 1.51 days; the suspect account turns over 10.3 times what the customer declared. Comparing activity with the expected profile is what separates a legitimate conduit from a mule.
This article is one calculation from The EU AML Handbook. The book takes the same case from first principles to the decision, chapter by chapter, and every figure it prints is a live formula in the free companion workbooks.
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