What is transaction laundering?

This week we found an interesting article detailing a method of fraud that many merchants may not even know is fraud! Transaction laundering is when a merchant processes payments on behalf of another business through a legitimate, but different merchant account. The issue is whether or not those payments were for illegal services, as often the products are legal just difficult to find processing for. The article focuses on transaction laundering via mobile sites, but it can be done just as easily on desktop sites as well.

Here is the complete article.

An example of transaction laundering a legal product.

You may have an online merchant account for your dietary supplement business that has been up and running for years. Let’s say you have branched off into vape sales, electronic cigarettes, and e-juices. Maybe you just thought it would be easier to process it all through one merchant account, maybe you tried to apply for a vape account with your processor and were turned down. Either way, this is transaction laundering. It is bad. Do not do it.

What if you get caught?

The penalties for processing one type of business through another are SEVERE. You can have the money drained from your bank account via your merchant account agreement, plus you can be “blackballed” and put on a list terminated merchants that the processors all access, making processing cards again much harder if not impossible for many years.

What to do if you are, or were, planning on processing one high-risk product through another product’s merchant account.

What does this mean for you, the e-commerce retailer? Well, if you have a product that is hard to place DO NOT simply process the credit cards through a different, low-risk merchant account. Contact us anytime, tell us your situation, and let us do the work.  We have dozens of contacts, and years of experience, if you are selling a legal, legitimate product, we can probably help with a payment processing and gateway recommendation.