With the development of e-commerce, criminals are discovering new ways to launder money. One of these new methods is Transaction Laundering. Transaction laundering is Electronic Money Laundering, and for this, we can say that it is the digital evolution of money laundering. Transaction laundering provides these illegal merchandise sellers with a secret way to hide their transactions by entering sales receipts into the payment system and wash the dirty money. Transaction Laundering occurs when an approved vendor uses payment credentials to process payments for another undisclosed store selling unknown products and services.
Although unknown, Merchant Service Providers (MSPs) can facilitate money laundering, so regulators punish them for not complying with AML obligations. The fact that unfortunately, MSPs may suffer severe reputational damage. The development of e-commerce and mobile payments has enabled money laundering to reach an unprecedented level. For Online product and service sales, Transaction Laundering is estimated to exceed $ 159 billion in the US alone in 2016. Also, according to some experts, this figure will increase even more in 2020. This began to worry around the world, and governments are trying to combat money laundering. Regulators are very interested in this issue and are introducing new laws to prevent or reduce electronic money laundering. This issue, which has been on the agenda of governments for many years, has become more and more important with the progress of e-commerce. Transaction Laundering takes advantage of legitimate payment ecosystems by setting unknown e-commerce transactions through legal vendor accounts. It acts as a payment process for illegal businesses selling illegal websites, illegal drugs, and other illegal products such as this.
Transaction laundering provides the convenience of criminals to set up legitimate-looking websites, access these sites and access them in real commercial payment accounts, and is unwittingly being washed by this money laundering service provider. Those who carry out these activities use payment ecosystems by using a store merchant account to process transactions originating from another location. Thus, fraudulent traders cannot be detected only by regulators.
To clarify transaction laundering simply: The criminal performing the transactions creates an illegal website where customers can order illegal goods, direct payments from the site through another legal merchant's PSP account, PSP processes the payment, and contacts the receiving bank to receive funds and finally laundered. Funds are deposited in the bank account of the criminal. Scams can easily perform Transaction Laundering. Unfortunately, most of the time, shoppers don't even know they're committing a crime.
Overcoming the laundering risks of the transaction may not be easy to overcome, of course, companies should strengthen AML controls and monitoring processes. Some basic theories should be made to detect transaction laundering. For example, the website of the suspect seller should be examined, the content of the suspect site should be compared with the business volume, the goods of the suspect site should be compared with sales estimates and figures, and customer due diligence should be done. If you do similar things, it may be easier for your company to detect transaction laundering. However, doing these for companies does not prevent laundering; companies need special expertise and advanced technologies to prevent this situation. With the development of technology, the quality of crimes increases, and accordingly technological solutions are developing to prevent these crimes.
As mentioned earlier, with the development of e-commerce, traditional money laundering is changing its place to electronic money laundering, that is, transaction laundering. In contrast, traditional methods against money laundering and the laws enforced by regulators are not enough. Regulators can impose a high fine on banks and PSPs for Transaction Laundering. While FinCEN is currently developing a series of measures to prevent the laundering of the transaction, EU regulations have introduced measures to deal with this in 4AMLD and 5AMLD. On the other hand, Despite the US Treasury Financial Crimes Protection Network (FinCEN) and stricter money-laundering rules than other regulators, implementation mechanisms target traditional commercial and financial services such as banking, capital markets, insurance, cash deposits.
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