Money laundering is the attempt to conceal or disguise the nature, location, source, ownership or control of illegally obtained money. Money laundering is most commonly associated with tax avoidance. However, other individuals may attempt to launder money in order to conceal their identity or finance their operations.
‘Suspicious activity’ is a very difficult concept to define because it can vary from one transaction to another based upon all the circumstances surrounding the transaction or group of transactions. For example, transactions by one customer may be normal based on our knowledge of that customer and their pattern of activity, while similar transactions by another customer may be suspicious. Many factors are involved in determining whether transactions are suspicious including the amount, the ship to address and frequency of orders.
Merchant Service Providers (MSPs) are required by law to ensure that the merchants they service and the payments they process are both known and legitimate. However, the rapid expansion in both volume of e-commerce transactions combined with the wide variety of payment methods available, have created a situation where Merchant Service Providers often fail to identify Transaction Laundering, a sophisticated merchant-based fraud scheme whereby an unknown entity transacts through a legitimate merchant account.
Through Transaction Laundering criminals infiltrate legitimate payment ecosystems without being detected by the MSPs. This is a growing phenomenon and is likely an outcome of the combination of factors: the explosion in e-commerce payments, the growing ease of setting up an online storefront and the need to make merchant onboarding as frictionless as possible. In essence, Transaction Laundering is the money laundering in the digital realm.