04Apr

What Every ACAMS Member (and AML Professional) Should Know About Transaction Laundering

On: April 04, 2018

The Association of Certified Anti-Money Laundering Specialists (ACAMS) is the most prominent global anti-money laundering/counter-terrorist financing (AML/CTF) organization in the world. Members of the ACAMS include government regulators, compliance officers, attorneys, and accountants. The Certified Anti-Money Laundering Specialist (CAMS) title is granted by the organization to individuals who have demonstrated a thorough understanding of AML laws and regulations, and are internationally recognized as AML industry leaders.   

After a careful  review of the organization’s vast resource library, it is difficult to find a detailed analysis of “Transaction Laundering” – despite the fact that it is one of the most prevalent types of online fraud today.

Transaction Laundering has been recognized as online money laundering by legislators, and has already been specifically targeted by the FTC and other regulatory bodies in the US. So why isn’t the world’s largest professional AML network turning their  attention to this huge issue?

What Is Transaction Laundering?

Transaction Laundering is the digital evolution of money laundering. Transaction Laundering occurs when an undisclosed business uses an approved merchant’s payment credentials to process payments for unknown products and services, typically of illicit or illegal nature .  

For example, using common Transaction Laundering methodology, a child pornography dealer can set up a website and sell access to illicit movies – accepting payment via credit card from customers like any other merchant. How can this happen? The dealer simply reroutes payments through a legitimate and registered merchant account, perhaps an online electronics shop. The acquirer processing the payments doesn’t have any idea the payments are actually for child pornography and not for electronics.

And even if the products or services sold are not illegal – Transaction Laundering facilitates a huge amount of unreported income, as the the goods or services are falsely represented. This puts payment service providers and acquirers at risk of violating credit card brand association policies, breaching Know Your Customer (KYC) requirements, thereby violating strict AML and federal regulations.

A Widespread Issue

With the volume of online business increasing each day, Transaction Laundering has become the leading case of online fraud.

EverCompliant estimates that Transaction Laundering for online sales of products and services tops $200 billion a year in the US alone. Of this, $6 billion involves illicit goods, which are sold online by more than 330,000 unregistered merchants.

These are potentially millions of unregistered transactions from hundreds of thousands of merchants that have not been specifically approved.  

Not Just Digital

Like other online crime, Transaction Laundering starts in the digital realm – but does not stay there.

For example, even as the US government declared the opioid crisis a public health emergency, Transaction Laundering continues to facilitate online sales of opioids. This directly impacts the lives of those worst affected by addiction, destroying families and encouraging drug-related crime.

And just last year, the Wall Street Journal and other news outlets reported that an American-born, ISIS operative was arrested by the FBI after he received nearly $10,000 via PayPal for fake sales of computer printers through eBay. Transaction Laundering funds terrorism, too.

The Bottom Line

As e-commerce continues to grow, Transaction Laundering offers criminals an easy way to skirt AML regimes, right under the noses of regulators. Transaction Laundering has funded terror attacks, the international drug trade, and human trafficking. Transaction Laundering is the new, electronic form of money laundering – with the same serious consequences and it’s time that ACAMS members and AML professionals start seriously addressing the issue.

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