Transaction laundering – too big to be ignored

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April 17 2018

Transaction laundering has quickly evolved into one of the payment industry’s most prominent and difficult problems. Also known as credit card laundering or factoring, this type of fraud occurs when legitimate merchant accounts are used to process unknown transactions for another line of business, both legal and illegal. In online sales, transaction laundering tops USD 200 billion a year in the US alone, of which at least USD 6 billion involves some type of illicit goods or services, sold by nearly 335,000 unregistered merchants.

Moreover, popular online marketplaces have become targets for transaction launderers looking to abuse the online payment system to facilitate illegal activities. In August 2017 the Wall Street Journal reported that the Islamic State allegedly used PayPal and fake eBay transactions to channel money to an agent in the US. Three months later, in November, scammers leveraged Airbnb to launder dirty cash from stolen credit cards. Fraudsters used stolen credits cards to launder the dirty money through Airbnb bookings that never actually happened, benefiting both parties through large value transactions.