By: Dan Frechtling, SVP of Marketing and Chief Product Officer
Recently I had the pleasure of presenting alongside MasterCard at Merrick Bank’s 8th Annual ISO Conference on Long Island. It was an impressive event that also featured presentations from American Express, the ETA, TSYS and Visa. Our panel addressed transaction laundering case studies, but as usual we meandered into other topics of merchant acquiring risk and compliance.
Acquirers, PSPs and ISOs can gain an in-depth view of transaction laundering from this white paper. But for a quick upshot from the panel, below are four insights worth passing on. Some of them were presented by others and some by me. The common theme is they comprise the dangerous goods and practices that lurk behind transaction laundering.
Oh, the different forms that gambling has taken over the years. In prior years, gambling was occasionally miscoded as courier services under a misconstrued interpretation that the funds were held by an intermediary. Today, acquirers tell us about the growth in providers of lottery services. These include online promoters and lottery messengers who purchase tickets in local lotteries on behalf of clients all over the world. Mobile apps sometimes play the intermediary role, with bets made as in-app purchases. This is difficult to track, especially when apps are available for download from the vendor’s own site rather than through an app marketplace like Google Play.
They are mutating faster than you can learn to spell them. They are chemically engineered for potency and include synthetic cannabinoids, MDMA (better known as Molly or Ecstasy), flakka, and cathinones (the active ingredient in many bath salts). Many of them are card network violations. They are a consumer health risk. The CDC reports calls about synthetic cannabinoids, for one, have quadrupled so far this year. G2 Web Services recently uncovered a single website that was a front for a syndicate of over 10 synthetic and steroid drugs. You can see the unapologetic branding of the hidden site (Figure 1) that was transacting through the front business.
Drugs sold without a prescription can show up in unexpected places, such as a full-line internet retailer selling branded clothing, makeup and accessories…and Cialis and Viagra behind the scenes. There are many gray areas, such as injectable vitamins and hormones that can be dangerous and/or banned outright depending on the jurisdiction. Acquirers and their processors need to check that substance sales they are enabling are legal not just in their location but anywhere they are sold or shipped by the merchant.
G2 Web Services and others continue to see this aggravating and often unlawful practice. The fraudster gathers credit card information from a buyer seeking illicit pornography or similar content. Then the culprit enters this information into a reputable site and earns funds off an affiliate commission. The example below (Figure 2) is a payment page for offensive pornography laundered through an unsuspecting software download site. Then, one of two things happens. One, the buyer is billed on his credit card for software he doesn’t recognize, so he initiates a chargeback and the reputable merchant wastes an affiliate commission. Or two, the buyer plays along, doesn’t dispute the unrelated charge, and the affiliate laundering activity may continue unnoticed. What can merchants do? One practice to avoid attracting affiliate fraud perpetrators is to avoid large payouts. Unfortunately, this places the burden on the law abiding site.
Merrick’s ISO conference is well-established and delivers valuable content packed into a day and a half. Transaction laundering was one piece of the story, and it is the problem many players in the payments chain don’t know they have. For more insight, please join one of the upcoming Cleaning Out Transaction Laundering webinars from G2 Web Services and Deana Rich Consulting to see these examples and more first-hand. Or, learn more about G2 Transaction Laundering Detection here.
For more insight, please join one of the upcoming Cleaning Out Transaction Laundering webinars.