Fake Products Endanger High Risk Merchant Account Providers

Mar 13, 2020

According to Finextra.com, $200 million in fraudulent transactions has been stolen from banks in the years between 2003-2013. Merchants, who opened a merchant account with the expressed intention to sell legitimate goods, once approved, rack up fraudulent transactions, only to abandon the merchant account. This deceitful tactic allows merchants to process as many transactions as possible, before raising any kind of red flag to the merchant account provider.

In the online world, it is easy to create counterfeit identities and businesses. So much so that, on January 25, 2017, Habib Chaudhry was apprehended after running from the law for four years. His crime? In an unprecedented crime scheme, he and 18 other individuals were arrested for running a “synthetic identity” crime ring. This involved the creation of 7,000 new identities and both applied and received 25,000 credit cards where they were used to make fraudulent purchases.

Criminals like these set up fake stores, selling counterfeited products, only to help fund more criminal activity like human trafficking, money laundering, or simply causing harm to the end consumer.

High-risk merchant account providers must not be too eager to sign up just any prospect to increase their portfolios. They must be on high alert for these con artists as they are out to do serious damage. 

Here is why high-risk merchant account providers must be vigilant and screen their prospects carefully, to avoid being victims and unknowing participants in their criminal activity.


  • Consumers are the victims when purchasing counterfeit products.


A study conducted by the American Society of Tropical Medicine and Hygiene, reported that in 2013, a “substandard or degraded anti-malaria” drug was responsible for the deaths of 120,000 children under the age of 5 in the Sub-Saharan region of Africa. Despite this, counterfeit pharmaceutical sales continue to make up 10% to 30% of the market in drug sales.


  • Mobile Malware and Phishing Scams are on the rise.


A growing number of consumers make their purchases on their mobile phones. This makes them more vulnerable to malware and phishing scams. More fraudsters are developing legitimate-looking apps and are used to steal money, identity, and other private information. 


  • As a high-risk merchant account provider, you could be liable.


When the scamming merchant is caught running up fraudulent transactions and disappears, the merchant is stuck with the bill. Furthermore, the chargebacks, not to mention a stain on your reputation are legitimate threats that could mean the end for your business.


  • You could be funding an extremist group.


Fraudsters who are on the AML/ATF list know that they are ineligible to receive a merchant account, so they simply create a fake or steal an identity. Although they may be operating real businesses, you certainly do not want to encourage identity theft or funding firearm trafficking. Either way, you stand to be heavily fined or damaged reputationally.


  • Financial losses due to Transaction Laundering.


More merchants are using the “green light” of having been approved of a merchant account, only to use it to sell goods in which they have not received prior approval for. According to Finextra.com, it is estimated that a total of $352 billion has been laundered every year, just in the US.

Something To Ponder

High-risk merchant account providers must become just as sly and agile as these scammers. Their sophisticated crime rings require sophisticated and advanced systems of anti-fraud technology to filter out criminals from the beginning.

Let us help you get a high risk merchant account today!

Get Started

Award winning.

  • 2012
  • 2013
  • 2014
  • 2015
  • 2016

Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

Live Chat