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Transaction Laundering: Green Sheet Highlights Telltale Signs

Post Categories: Blog

By: Greg Baxley, Marketing Coordinator


The Green Sheet Magazine is dedicated to the education and success of the ISO and MLS. Its August 08, 2016 issue includes a feature on the threat of transaction laundering by Chris O’Donnell, senior copywriter at the Instabill Corp. Highlighting a number of case studies and industry trends, Chris dives into many telltale signs that transaction laundering is occurring. With criminal activity quickly evolving, understanding the scope of the problem has never been more paramount for acquiring banks, ISOs, PSPs and payment facilitators.


Chris discussed industry trends involving transaction laundering with Dan Frechtling, chief product officer at G2 Web Services, and Dione Hodges, senior director of Risk Management and Underwriting at Sterling Payment Technologies.


Illegal drug sales moving online

The illegal narcotics trade in the United States is increasingly finding refuge online. A drug report published by G2 earlier this year, Threats Grow with Rising Online Drug Sales, affirmed the trend. There are three key reasons for this dramatic increase:

  • Drug users’ experience with higher service levels, competitive choice and anonymity of buying drugs online instead of on the street
  • Drug users’ habit of using credit cards online to make purchases
  • Drug sellers’ inability to obtain direct merchant accounts, compared with the perceived easy alternative of transaction laundering


Industries under scrutiny

When asked in which industries Frechtling and Hodges see the most cases of transaction laundering, they cited online pharmacies, tobacco, incense and potpourri, nutraceuticals and websites peddling
counterfeit goods.


G2 reported that 56 percent of all transaction laundering cases studied in 2016 involved illegal drugs. Illegal pharmaceutical and psychoactive substances sales made up 20 and 18 percent, respectively, while illicit tobacco and nutraceutical products made up three percent each. With violations only growing, attention from regulators is also on the rise, giving concern to payment processors facing fines and assessments.


Signs of transaction laundering

Credit card issuers and private risk management firms have made important gains in the ongoing battle against transaction laundering. Acquiring banks and payment service providers can follow them by noting telltale signs, including:

  • Poor website design: A website that lacks aesthetics, appears to be incomplete or contains dead links is worth investigation. Other bad signs include an abundance of stock imagery, particularly photos with watermarks.
  • Irregularly high pricing: A website advertising mass market products well above their worth is a red flag. It is an indicator that there are other products behind the mass market products for sale.
  • Unusual merchant behavior: Merchants who launder transactions often seem impatient and overzealous, concerned about the transaction posting or account debit timing.
  • Fake reviews: Collect reviews of the merchant — positive and negative — and validate whether they are genuine.


To read the full article and learn more telltale signs of transaction laundering, visit The Green Sheet Online Edition. For more information on eradicating transaction laundering from your portfolio, click here.


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