Transaction Laundering a Growing Trend in Internet Gambling

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Monday, July 10th, 2017 | Written by Charles Washington

Reuters has recently carried out an independent investigation of different transaction laundering websites, and has since released a comprehensive report about its findings. According to the report, transaction laundering has been growing exponentially in the world of online gambling in recent times, and is the process by which websites falsely claim to be online vendors selling different, everyday kind of products.

In its long investigation, Reuters has since found out that there is a network of Internet-based dummy sites that let United States online gamblers process payments that are not registered as gambling payments. They do this by using a third party site with a different “Merchant Category Code” where online gamblers then buy a bland, everyday product from a fake vendor; however, instead of actually buying the product, they are making a payment to an online gambling site. Commenting on the illegal procedure, Dan Frechtling, head of product at G2 Web Services, stated:

“Transaction laundering is serious misconduct – often criminal. It violates the merchant’s agreement with its acquirer, allows prohibited goods and services to enter the payment system, and may flout anti-money laundering laws.”

Bypassing Local Laws

Credit card companies along with other financial bodies use these merchant category codes to show whether a transaction is deemed illegal or legal in the region that it is being carried out. If a gambling transaction code is 7995, for instance, then MasterCard or VISA will check to see if gambling is legal or illegal in the state or country that the transaction came from, and if there is a bettor betting real money that makes a payment to a gambling website from the United States that has that code, the credit card companies will decline this payment.

Commenting on the issue, a spokesperson for Visa stated that, “we require all gaming sites to be processed under the relevant Merchant Category Code. Our rules are always subject to local law and we do not tolerate criminal activity.”

Meanwhile, a Mastercard spokesperson echoed the same sentiment by explaining that: “when we are alerted to activities that may be against our rules or against the law, we work with the merchant’s bank to confirm or investigate the allegation.”

Through transaction laundering, however, the payment makes it look like it is being sent to an online merchant that has nothing to do with the gambling industry. This is the latest way in which illegal payments are being processed and are tricking credit card companies into accepting their payments. Transaction laundering is hard for credit card companies like VISA and MasterCard to keep track of since it is considered new technology that regulators, banks and card companies cannot and do not track. Furthermore, new sites are popping up all of the time which makes it difficult to keep a list of those offending and breaking this law.

Commenting on the worrying trend that has sprung up in the gambling industry, Ron Teicher, CEO of Evercompliant, said: “It is the digital evolution of money laundering. The only thing is it is much easier to do, and much harder to get caught.”

Gamblers Beware

International and national online gamblers really need to understand that if they are engaging in transaction laundering knowingly, this can end poorly. Again, be sure that you are not making online purchases to fake merchants who are processing these credit card transactions on behalf of another company and disguising the true nature and identity of the payments being made. This sort of transaction laundering is illegal both in the United Kingdom, as well as in the United States. In the United States, online gamblers who are taking part in such a practice are in direct violation of their credit card terms and conditions agreement.

If you are using a website to process your payments, take a step back and realize that this might be strictly illegal. Even if you enjoy online gambling and feel secure at the site where you place your bets, it does not mean that it is legal or safe. Better to be safe than sorry, especially in this case where the “Sorry” indicates that you are part of a lawbreaking endeavor.