Dealing with Transaction Laundering: Investigating Detected Merchants

Safeguarding against transaction laundering is more crucial than ever, as e-commerce continues to evolve every day. Austreme shares a robust approach to investigating identified merchants flagged through our Transaction Laundering Detection (TLD) service. Here’s a step-by-step guide on how you can ensure compliance and protect our ecosystem:

1. Conducting Thorough Investigations: Upon identification of potential laundering activities, Acquirers and PSPs should initiate a comprehensive investigation into the merchant’s background, compiling findings and documenting any necessary remediation actions.
2. Validating Merchant Applications: A careful review of merchant applications and associated business documentation is essential. This includes verifying ownership, physical addresses, phone numbers, and financial records.
3. Verifying Business Legitimacy: Ensuring that the merchant’s address is a legitimate physical location is key; we look for genuine office spaces rather than mailboxes or virtual offices.
4. Assessing Online Presence: Our team conducts a deep dive into the merchant’s website functionality and the legitimacy of the goods or services offered. We also monitor their reputation on social media and consumer complaint forums.
5. Performing KYC Checks: Proper Know Your Customer (KYC) and sanction screenings are critical. It is important to confirm that all involved principals are not listed on the VMSS or MATCH lists, reducing your risk exposure.
6. Analysing Domain Information: If WHOIS and DNS records are concealed, you should seek explanations and detailed information about domain ownership from the merchant.
7. Secret Shopping: To verify legitimacy, we recommend conducting secret shopping to test the functionality of the merchant’s website and transaction processes.
8. Gathering Evidence: Collecting invoices that detail goods or services sold, along with recipient and shipping information, is essential for further validation.
9. Reviewing Transaction Patterns: Analysing transaction activity helps us identify any unusual changes since onboarding, such as spikes in volume or an influx of foreign-issued card sales.
10. Maintaining Control: We recommend prioritising robust controls to prevent unauthorised changes to merchant descriptors or the use of dynamic descriptors without an acquirer or PF’s knowledge.

Handling Suspected Identifications

Acquirers should remediate, terminate, or refute the identification after investigating their merchants. If refuting the identification, acquirers should provide satisfactory evidence of their investigation leading to this conclusion. Additionally, acquirers should supply Visa/Mastercard with all merchant documentation obtained during underwriting, a copy of the TLD report, and any additional documents collected during the investigation.

Response

When responding to findings, acquirers should ensure their communications are accurate and backed by evidence of a thorough investigation or appropriate due diligence to establish whether the merchant is involved in transaction laundering or other illicit activities.

By diligently following these steps, acquirers and PFs can demonstrate their commitment to maintaining a secure payment environment.

Contact Austreme and learn more about our Transaction Laundering solution for effective merchant content screening.

Additionally, you can read our How Merchant Content can Predict Chargebacks blogpost to learn more about evaluating a merchant website.

Want to learn more about merchant risk services? Visit our Youtube Channel.

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