(For more information on Transaction Laundering, please refer to: What is Transaction Laundering?。)


In recent years, the rapid development of e-commerce transactions has led to a surge in cybercrime, with some illicit e-commerce platforms continuously discovering new ways to generate illegal profits. The multitude of diverse payment systems in the market, coupled with the exponential growth of e-commerce activities, has made detecting illicit transactions increasingly challenging. While money laundering activities have primarily been conducted through physical stores for centuries, some money launderers are now abandoning the complex channels of physical stores and shifting to online money laundering.

As market transactions quickly transition from physical storefronts to online shops, money laundering activities are also moving from offline to online. One of the most commonly used online money laundering methods is known as transaction laundering (or “illegal aggregation payments”), posing significant threats to acquiring institutions, third-party payment companies, and brand owners. Transaction laundering involves criminals establishing illegal online stores behind seemingly legitimate websites and secretly channeling payments from the illegal stores through the legitimate ones to evade detection. With the ongoing development of internet services, it has become easy for ordinary individuals to utilize various internet technologies to set up online stores. However, this also means that in this digital age, criminals can leverage these widely accessible e-commerce and payment tools to sell illegal goods.

Due to the complexity of the e-commerce ecosystem, which criminals exploit to conceal their illicit gains, detecting “illegal transaction laundering” is extremely challenging. Setting up virtual stores is not only convenient but also low-cost. Compared to traditional money laundering methods that involve handling physical store operations and the associated high costs, the threshold for laundering money through transaction laundering is significantly lower. Money launderers only need to set up a website as a “shell company” to successfully infiltrate the e-commerce ecosystem.

The rapid increase in online transaction volumes and the continuous emergence of unidentified payment systems have made it more difficult for banks, third-party payment companies, and financial regulatory agencies to supervise transaction laundering. To evade detection, money launderers often split large transactions into many smaller ones and use various disguises, making illegal transactions harder to trace.

Since setting up an online store requires minimal personal information, it has led to the proliferation of anonymous online stores, enabling transaction laundering to process illegal transactions with minimal “know-your-customer” (KYC) requirements. Additionally, some money launderers even use fake identities to conduct transactions, leaving virtually no trace of personal identity. Through transaction laundering, money launderers can quickly and easily complete the entire money laundering process from behind a computer screen.

Many banks and third-party payment companies hire consulting firms to provide e-commerce monitoring services to ensure that their transactions comply with regulations. However, traditional e-commerce monitoring typically relies on web crawler technology or the installation of simple JavaScript, neither of which are effective tools for detecting transaction laundering. Web crawlers can only retrieve publicly available data, while JavaScript cannot record transaction-level data. These methods may reveal some potential clues of transaction laundering but are not the most reliable methods for monitoring it. Since over 90% of online illegal transactions are conducted through transaction laundering, finding the most effective tools to detect transaction laundering is crucial for banks and third-party payment companies.

Combating transaction laundering is a long-term battle that financial professionals, banks, and payment institutions should not underestimate. Many closely monitored illegal organizations, including those involved in pornography, drugs, counterfeit goods, and even terrorism, use transaction laundering to conceal their underground businesses. Allowing these criminals to bypass regulatory measures and enter their transactions into the banking payment system poses a significant risk of hefty fines for the payment institutions involved. Transaction laundering is not only difficult to detect but also poses a significant threat to payment security, making it imperative for the financial sector to remain vigilant to avoid penalties from regulatory agencies.


(Article first published in PressLogic – BusinessFocus)