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How to Avoid Becoming a Transaction Laundering Victim

Transaction laundering is one of the recent and highly dangerous scams in the payments industry. Are you a merchant trying to protect yourself from transaction laundering? Are you interested in chargeback protection? This article will help you get answers to your questions.

What Is Transaction Laundering?

Transaction laundering is also called credit card laundering or factoring. Besides, it’s also known as merchant account laundering. What is this? This is an increasingly popular scam. The point of this fraud is to use the online acquisition system to take payments for illegal goods and services.

So, cybercriminals hijack the legitimate payment process to sell illicit goods/services online. When a legitimate merchant account is used for processing unknown transactions for another line of business, regardless of whether it’s legal and illegal, you deal with transaction laundering.

Detecting this type of fraudsters is a major problem for banks, payment service providers (PSPs), acquirers, and financial organizations of other types. There’re already lots of cases when websites looking quite legitimate have been caught selling illegal products.

Transaction launderers target even popular online marketplaces with the purpose of abusing the online payment system to facilitate illegal activities. There’re 3 main types of transaction laundering:

  • Benign – When 2 legitimate businesses are making use of the same payment gateway.
  • Malicious – When an illicit business is using a legitimate/shell account to send transactions.
  • Affiliate – When an illegal business takes payment information, creates an affiliate account at a 3rd party merchant site, and then buys goods for the purpose of collecting affiliate revenue.

Transaction Laundering: Need Chargeback Protection?

First of all, let’s see why transaction laundering is difficult to prevent. Well, this has to do with the fact that transactions may come from different sources. These may include shopping carts, payment pages, virtual terminals, and more. Also, they can be made via different payment methods such as credit cards, digital currency, and e-wallets. Besides, they can be processed via a page that may not be visible to the acquirer.

Mobile wallets, Near Field Communication (NFC) chips, and payment apps represent some of the latest ways to collect payments. These payment options “open up” doors for fraudsters to do what they “love to do.” The scammers either rout payments for illicit goods/services through their own legitimate front accounts or do “what they love to do” with the help of someone else.

Transaction laundering can lead to rather hard consequences for legitimate online retail businesses. As a result, businesses may end up with closed merchant accounts. Moreover, merchant accounts can be added to a Terminated Merchant File database. Besides, legal issues can be created for assisting criminal organizations.

It’s critical for merchants to be able to protect their business. This can be done thanks to a reputable payment processor like that’s voted the #1 high risk credit card processing company in the US. EMB carries an A+ rating with the BBB and offers exceptional merchant services, including chargeback protection, to merchants of any type and size. Besides, EMB carries an A rating with Card Payment Options and offers the lowest rates in the industry.

How to Avoid Transaction Laundering

Since transaction laundering is a growing problem, you should be well prepared to protect your business from launderers. How can you do this?

  • Don’t Partner With Affiliates Without Reviewing Them

Monitor affiliates as long as you are connected to make sure their content is legitimate and advertising is true.

  • Pay Attention to Affiliates’ Marketing Efforts

How do your affiliates market their goods? Do they have any unrelated items associated with them?

  • Focus on the Affiliate Networks You’re Working With

Make sure to work with reputable affiliate networks.

  • Check Your Payment Processor

Before starting to sell new products online, check with your payment processor, especially in those cases when products come from a 3rd party.

  • Have a Clear Affiliate Policy

Create a clear affiliate policy. Ensure you and your employees enforce it.

  • Follow Basic Internet Security Processes

Use antivirus software. Don’t open merchant accounts or logins in open internet networks. Vet staff and potential partners before giving them access to financial or banking records and transactions.

Transaction laundering occurs when an online storefront is used without the merchant knowing about this. The purpose is to launder funds. This is a growing problem nowadays. Transaction laundering exposes organizations to liability. It may result in fines from Visa or MasterCard. So, take the right measures to avoid becoming a transaction laundering victim.