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UK Ban on Legal Highs Turns Dealers to Transaction Laundering

Post Categories: Blog

By: Dan Frechtling, SVP of Marketing and Chief Product Officer 


On May 26, the UK’s Psychoactive Substances Act came into law. It criminalized the production, distribution, sale and supply of “legal highs,” as such synthetic drugs are called. Those convicted of violating the law by producing or supplying may be sentenced up to seven years in prison. So-called retail “headshops” and street transactions are expected to be targeted by law enforcement and the market is already moving to abandon these sales channels.


Following the path of traditional drugs, sellers are hiding these substances from law enforcement through the means of e-commerce and Transaction Laundering. Acquiring banks will be responsible for finding lawbreakers and terminating accounts — and they will need the right tools.


Even before this ban came into effect, G2 Web Services has found legal highs increasingly sold online out of convenience. These include nitrous oxide (laughing gas), salvia divinorum (sage), mephedrone (meow meow) and synthetic cannabinoids (spice).


Research with Drug Users Illustrates the Rise of the Internet Channel

The Global Drug Survey, which queried 101,313 people from over 50 countries, refers to synthetic drugs as Novel Psychoactive Substances (NPS). The newly published 2016 report data shows a declining rate of street sales and a sharp increase in the online market. In fact, 58% of UK citizens surveyed reported having purchased these substances online within the past year.


The ban of psychoactive substances was timely, as the UK is seeing a dramatic increase in the use of synthetic drugs. More than 10% of Britons have purportedly used these psychoactive substances, the largest rate of any population worldwide. Following four years of declining rates, the use of these synthetic drugs spiked in 2015.


The Rise of Transaction Laundering

There are significant barriers to online drug sales. They are both illegal and brand damaging, and members of the payments community are forbidden from facilitating illegal purchases. So the market moves to less visible corners of the Internet, namely the dark web and Transaction Laundering. The dark web is less of a place and more of a method — hiding IP addresses of websites’ host servers through anonymity software like Tor, or alternatives like I2P and Freenet. Payment methods are commonly cryptocurrencies and stolen cards.


Transaction Laundering (TL), on the other hand, doesn’t require the buyer to install anonymity software. The sellers take care of concealing the purchases by routing them through legitimate-looking sites and tricking the sponsoring banks and processors.


Transaction Laundering, also known as credit card laundering, aggregation and factoring, occurs when a hidden website uses the merchant account of an approved front site to conceal the true nature of the sales. G2 has seen both an increase in Transaction Laundering and an increasing proportion of illegal drug sales in TL cases in 2016. The outlawing of legal highs is liable to further stimulate this growth.


Identify and Eliminate Violators from your Portfolio

G2 offers many resources to learn more about the threat of Transaction Laundering. Visit for complete information on our Transaction Laundering Solutions. G2 TLD clients can also access the
Insight Hub for best practices on combatting Transaction Laundering.


Acquiring banks, processors, ISO and payment facilitators already recognize that card-not-present (CNP) environments have become a preferred method of concealing violating products. The same will be true for sales of psychoactive substances. Even those that serve low-risk merchants are not immune.


Learn about recent regulations and case studies, emerging drug threats and how to identify violators lurking in your portfolio. See how members of the payments community can better protect themselves against fraud.


Download Threats Grow with Rising Online Drug Sales Report


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