An FT expose on the how money launderers have adapted and are exploiting merchant acquirers and the ineffective anti-money laundering (AML) and know-your-customer (KYC) regulations brought in post financial crisis.
The scam is simple. Rather than setting up bricks and mortar front businesses to launder profits from illicit activities, those who peddle illegal goods — from drugs to weapons and gambling services — set up fake web stores that appear to sell legitimate goods instead. (The more virtual those fake goods are, the better and easier for them.) These fake stores are then onboarded onto merchant processor systems and used as fronts to process entirely illegal transactions through. Technically, customers provide credit card authorisation details to the illegal stores, but these are transferred over to the fake sites for processing. Worryingly, Teicher says regulators are entirely behind the curve on this. Most don’t even know about it. Even worse, banks and processors don’t seem to care about the problem either.