Transaction Laundering Becomes The New Form of Online Fraud

New forms of fraud and misbehavior are becoming more prominent in the payments industry as of late. The rise of e-commerce is a positive development, but it also increases the risk of transaction laundering. To make matters worse, very few payment processors can pick up on this new threat, as it usually goes by unnoticed.

Transaction Laundering Is A Grave Threat To Payment Processors

To put this news into perspective, one has to fully understand how the payment industry works. In the e-commerce industry there are merchants processing payment card transactions on behalf of other merchants. On paper there is nothing wrong with this concept. However, this method increases the chance of funneling sales through transactions launderers.

Linking existing payment pages to other businesses is illegal, yet this type of fraud is not being picked up by the majority of payment processors. The vast majority of these funneled transactions are related to illicit content providers, ranging from pornographic material to gambling and even drug trading. This is a very worrisome development for the payments industry as a whole, to say the least.

To make matters worse, setting up merchant service providers to process illegal transactions has become significantly easier for criminals. Retailers all over the world have a far easier time setting up their e-commerce front, as they can get up and running within hours. Adding payment pages and accepting different payment methods is usually only a matter of installing the right plugins and creating a merchant account.




Unfortunately, this also makes the job a lot easier for criminals. Merchant service providers are struggling to distinguish between legitimate and fraudulent transactions. The number of available payment platforms is overwhelming, and tracing the origins of money is nearly impossible. The vast majority of merchant service providers is unaware of the transaction laundering problem, which is not helping matters either.

Solving this problem will require a lot of work and research. Thankfully, we live in an era where new technologies are making these jobs a lot easier, although they will still require some effort. A new plan has to be developed by merchant service providers to combat fraudulent transactions, as their current security standards are insufficient.

Automated technologies and transaction processes are convenient, but also prone to abuse. Manual checks need to be enforced more actively, rather than being a sporadic occurrence. Sorting through all of the big data generated by these payment transactions should be the number one priority of any merchant service provider in the world today.

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8 Comments

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