Transaction Laundering Detection
What is Transaction Laundering?
Transaction laundering occurs when an approved merchant secretly processes credit card payments on behalf of another entity not disclosed to the acquiring bank or payment provider. Fraudsters create front websites to obtain legitimate merchant accounts, then use those accounts to process payments for hidden, violative businesses that would never pass underwriting.
Why Transaction Laundering is Dangerous
Payment processors and acquiring banks face tremendous exposure from transaction laundering. Card network fines, regulatory action, brand damage, legal liabilities, and potential loss of operating licenses are all consequences of facilitating illicit transactions—even unknowingly. The penalties imposed on financial institutions often far exceed those on the rogue merchants themselves.
Business Impact
- Card network fines in millions of dollars
- Elevated chargeback rates and fraud losses
- Regulatory investigations and compliance violations
- Customer harm from prohibited or unsafe goods
- Reputational damage to the payment brand
Transaction Laundering Indicators
SafetyKit analyzes multiple data points to identify transaction laundering schemes:
Cross-Border Patterns
- Transaction volumes inconsistent with merchant's stated business model
- High volumes from unexpected geographic regions
- Unusual patterns suggesting payment aggregation
Business Mismatches
- Transaction descriptors don't align with merchant's actual business
- Incomplete or suspicious web presence
- Multiple unrelated businesses sharing infrastructure
Risk Category Misclassification
- Merchants operating in high-risk categories while coded as low-risk
- Business activities don't match declared merchant category
Volume Anomalies
- Unexplained transaction volume spikes
- Processing capacity inconsistent with business size
- Rapid growth without corresponding business development
SafetyKit's Detection Process
SafetyKit combines automated analysis with expert-level judgment to detect transaction laundering:
- Business Verification: Analyzes merchant websites and online presence to understand actual operations
- Transaction Pattern Analysis: Identifies suspicious volume and geographic patterns
- Payment Flow Analysis: Detects unauthorized payment routing and hidden processors
- Category Validation: Verifies merchant categorization matches actual business
- Network Detection: Identifies coordinated laundering operations
Customer Success Story
A top-4 US credit card network scaled high-risk merchant onboarding 50X:
A major credit card network needed to dramatically increase their review capacity for high-risk merchant onboarding without expanding headcount. SafetyKit's investigation agents and policy copilot enabled the team to support 50X the review volume.
Results:
- 1 week onboarding time → 5 minutes onboarding time
- 50X increase in review capacity
- Consistent expert-level detection across all reviews
Prevent Transaction Laundering at Scale
Manual transaction laundering reviews take hours per merchant. SafetyKit automates the entire investigation process, analyzing thousands of merchants daily with consistent, expert-level detection. Catch launderers before they process a single transaction, protecting your payment processor from regulatory fines and fraud losses.
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