On 21st November Finextra published a useful guide to “merchant fraud”. It identifies 3 types used to acquire or launder funds –

  • “Bust out fraud” – a merchant applies for a merchant account without any intention of actually operating a legitimate business. These merchant accounts are then used to process fraudulent transactions or to acquire lines of credit before abandoning the account altogether;
  • “Identity swap” – merchants who use a fake or stolen identity or set up a bogus online storefront in order to secure a merchant account, because they are on sanctions or other watch lists; and
  • “Transaction Laundering (a.k.a. Factoring)” – occurs when an unknown business uses an approved merchant’s payment credentials to process payments for products and services that the acquirer is not aware of, and the article reports that $352 billion is estimated as being laundered this way every year in the US alone.


Author: raytodd2017

Chartered Legal Executive and former senior manager with Isle of Man Customs and Excise, where I was (amongst other things) Sanctions Officer (for UN/EU sanctions), Export Licensing Officer and Manager of the Legal-Library & Collectorate Support Section

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