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Real Life Launderers: The Transaction Laundering Gift Card Diversion

Post Categories: Blog

By: Austin Denson, Marketing Coordinator


This series follows real cases of transaction laundering.


The payments industry is ever evolving and with the introduction of alternative payment methods (APMs), criminals are flying under the radar, selling illegal goods online while laundering the transactions to appear legitimate. According to a recent report, card-not-present fraud increased 40 percent from 2015. Overall, thieves stole $16 billion — an increase of $1 billion from the previous year. Criminals are not only using alternative payment methods to steal, but they are also using it to sell. Wire service payments are their most preferred method, because the transaction is difficult to reverse. However, with the increase in regulations and monitoring, criminals are migrating toward APMs that offer more anonymity.


Pre-paid gift cards are trending in terms of payment laundering methods. This article says that criminals are convincing their customers to buy gift cards and input the secret code so that the value on the card can be withdrawn or traded (See Figure 1). Gift cards can be turned around and sold on the black market allowing criminals to receive the funds and quickly cash them out. This payment method is “cash-like” meaning it’s nearly impossible to reverse the payment and the transaction is virtually untraceable. With help from the G2 Merchant Map™, our analyst team could detect this new trend of payment laundering and apply it to our list of fraud detection solutions.



Figure 1: Violating pharma website diverts customers at checkout


The Story:

The G2 analyst team recently discovered a website that was illegally selling prescription drugs online (See Figure 2). The illegal site claims to sell brand narcotics manufactured from a United States laboratory and occasionally importing the drugs from Europe when they do not have domestic stocks. The website offers a variety of pills ranging from Oxycodone, Vicodin, Percocet and more. Consumers are allowed one purchase per month and that includes a free prescription from their “licensed” doctors. Each order is shipped from one of three warehouses that are located in Seattle, Texas and Miami.



Figure 2: Illegal pharma website


At checkout, customers are given the option to pay over the phone using a debit or credit card or with APMs. They encourage their customers to purchase the pills using bitcoin or gift cards claiming that it is cheaper for them to process the payment (See Figure 3). They also inform their customers that the drugs will be shipped in unmarked packages, “very discreetly” using FedEx, UPS or DHL. They can also FedEx the illegal drugs overnight but only within the United States.



Figure 3: Offering “GREAT DISCOUNTS” for purchases made with gift card or bitcoin


This is one of many websites we have discovered using alternative payment methods to sell drugs online. Introducing new payment methods into the industry creates a gray area making it difficult for acquiring banks to notice these illegal transactions. And, as the payments industry evolves so does the black market.


If you are interested in reading more about cases like this, please download our latest case study:

Illegal Online Sales Drive Transaction Laundering


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