What is Transaction Laundering and How to Detect and Prevent it
Illicit merchants pose as an innocuous business to trick you in approving them for a merchant account. Gambling, counterfeit goods, and pharmaceuticals are sold by merchants pretending to be websites selling shoes, furniture, or electronics. For acquiring banks and ISOs, it’s frustrating and costly to mitigate.
Transaction Laundering Explained
Transaction laundering refers to the processing of payments through a merchant account underwritten by a payment provider on behalf of a different merchant, which is not known to, approved by or underwritten by the payment provider . It is sometimes also referred to as “factoring” or “undisclosed aggregation”.
Transaction laundering typically takes one of the following forms:
- Underwritten merchant as victim: The underwritten merchant may be a victim of the illicit merchant and unaware, at least temporarily, of the use of the merchant account.
- Underwritten merchant as co-conspirator: In this case, the underwritten merchant may be approached by the illicit merchant, either before or after underwriting, and offered something of value (i.e., a commission) for illicit use of the underwritten merchant account.
- Underwritten merchant as shell: Here, the underwritten merchant may initially appear to be independent and legitimate, but it is in fact a shell company created for the purpose of acquiring a merchant account, and is under the control of the illicit merchant.
What's the risk of transaction laundering?
It’s more than just reputation. Transaction laundering exposes your organization to liability and may result in fines from Visa or MasterCard, and potentially regulatory scrutiny.
What makes LegitScript’s content and transaction laundering solution different?
LegitScript has the world’s best data on transaction laundering: after years of monitoring and identifying bad merchants on some of the world’s largest e-commerce or advertising platforms, including Google Ads, Bing Ads, Visa, and Amazon, processing over a million rows of merchant data each day, we have the experience to know which merchants are legitimate and which are actually a shell for illicit activity.
But we don’t rely on data alone. We believe in combining a “big data solution” with a human subject matter expert due diligence review for every merchant in your portfolio. And no excuses: we’re accountable for being accurate and being able to justify our determinations to you.
What’s more, our analysts cover regulatory analysis for 20 countries and in 15 languages around the world. When it comes to understanding global regulations, and being able to analyze content in the appropriate language, LegitScript’s team is unparalleled.
But what we think makes our transaction laundering and content monitoring solution the best isn’t just our world-class data or world-class people. It’s our culture of being passionate about accuracy, expertise, and finding the right answer.
Surya SEO, a search engine optimization firm, was acquired by one of the largest acquiring banks in the US via an ISO. But the merchant URL, suryaseo.com was really a transaction laundering website for buygenericxanax.com, which was illegally selling controlled substances without a prescription.
Other monitoring firms failed to catch the connection between the merchant and rogue internet pharmacy. LegitScript’s process identified the connection within seconds. Let us apply the same expertise and due diligence to your merchant portfolio.