Transaction laundering is a rising concern for acquirers and payment processors as it is prevalent, difficult to identify, and puts acquirers at risk for fraud, brand damage, and assessments. Transaction laundering is an extremely difficult problem that occurs when legitimate merchant accounts are used to process unknown transactions for another line of business, be they illegal or otherwise.
Using the approved merchant’s payment credentials, the unknown business processes payments for products and services that the acquirer does not know about, leaving the acquirer exposed to a substantial amount of risk. Without proper monitoring, acquirers, PSPs, payment facilitators, and gateways can unknowingly facilitate transactions for scores of unknown merchants processing laundered transactions. The three most common types of transaction laundering are:
- Benign: Two legitimate businesses are sharing the same payment gateway
- Malicious: An illicit business is sending transactions through a legitimate or shell account
- Affiliate: An illicit business takes payment info, creates an affiliate account at a 3rd party merchant site, and purchases goods to collect affiliate revenue
There is no one-size-fits-all solution for transaction laundering, as transactions may come from a variety of different sources (shopping carts, payment pages, virtual terminals, etc.), use different payment methods (credit cards, digital currency, e-wallets), or process through a page that the acquirer may or may not have visibility into. To detect and eliminate transaction laundering in your portfolio, you must use a mixture of technology and human expertise to pinpoint the highest risk factors present in the transaction. Acquirers should follow industry best practices for identifying transaction laundering in order to protect themselves from these unknown transactions. Working with technology, human analysis, and a provider that offers a full view of a merchant will allow acquirers to work towards a complete solution for their transaction laundering problem.