By: Matt Lyman, Marketing Manager

 

Last week, Allison Guidette, CEO of G2 Web Services, spoke with PYMNTS.com about the significant threat that transaction laundering poses to the payments industry. Transaction laundering is not a new problem, but it has quickly become one of the most talked about issues in the industry; and for good reason.

Unlike the more well-known fraud of money laundering, transaction laundering relies on credit card payment systems, may involve softer crime such as prohibited pharmaceuticals and sexual content, and it gets “cleaned” once the money is deposited in the merchant account of the front business. All of these factors result in a security risk that is not only difficult to track down, but even more challenging to eradicate.

What’s worse is that as these fraudsters are being chased underground, they continue to pop back up by utilizing darker corners of the Internet to continue their crimes, G2 Web Services confirmed. But despite advancements in monitoring services, both merchants, card networks and federal regulators are having to do more in order to stay one step ahead of criminals in the transaction laundering world.

“The merchant acquiring industry has gotten pretty good at monitoring traditional merchant websites for brand damaging and illegal content. Now fraudsters — think of them as the mole in the carnival game whack-a-mole — are increasingly turning to transaction laundering as a way to gain access to payments and perpetuate crimes as we close off their avenues through traditional monitoring websites,” Guidette told MPD CEO Karen Webster in a recent interview in advance of the launch of G2’s new Transaction Laundering Detection Services.

As compliance programs have evolved and emerging risks have been more easily and more quickly identified and removed from portfolios, the bad actors have moved from overt sales methods to the covert methods of transaction laundering. With this transition, it has become more and more difficult to identify and eradicate these hidden merchants. More difficult, but not impossible.

“There is absolutely no one-size-fits-all solution to detect transaction laundering,” Guidette said. “Neutralizing the threat requires identifying which acquirer owns the front customer and which path the bad transactions followed.”

A path that Guidette firmly states requires the use of data, data science, expertise and the cooperation of the acquirer. But above all else, banks and compliance professionals will have to work together and with a multifaceted approach to truly curb the rise of transaction laundering.

“The solution to this problem isn’t just technology, it’s a combination of technology, internal monitoring by the acquirer and best practices. It’s never obvious and it is not easy,” Guidette explained.

Transaction Laundering: Payments’ Next Big Threat is available now via PYMNTS.com.

Fraudsters will always work to identify new ways to exploit the payment system, but having a comprehensive approach to merchant compliance will help you to locate and remove bad actors from your portfolio. To learn more about how a holistic approach to merchant compliance will help you minimize your risk exposure from rogue merchants, illegal content and transaction laundering, attend our webinar G2 Training Series: Compliance Cat and Mouse.