Related Questions
.png)
Transaction laundering does not announce itself through chargeback spikes or fraud patterns. It starts with drift: small inconsistencies between what a merchant disclosed at onboarding and what their transaction behavior reveals.
By the time these inconsistencies become compliance violations, substantial volume has already processed, exposing your institution to network fines, regulatory scrutiny, and reputational damage under card network rules and federal oversight.
The challenge is timing:
Traditional monitoring programs rely on historical data patterns that typically require multiple months to establish. In our experience, transaction laundering indicators appear within the first 30 to 90 days, when most acquirers lack systematic surveillance protocols for new merchants.
Visa's Global Brand Protection Program and Mastercard's merchant monitoring requirements place compliance responsibility directly on acquirers and PayFacs. Networks may assess fines, require independent audits, and terminate acquiring relationships when transaction laundering is detected.
Your underwriting must detect not just initial merchant legitimacy, but ongoing behavioral consistency to protect your institution from network sanctions.
In our experience monitoring merchant portfolios, transaction laundering indicators appear within the first 30 to 90 days in the majority of confirmed cases. Merchants with sophisticated application fraud process high volumes immediately after approval, indicating pre-existing customer bases waiting for payment access.
Traditional velocity rules and anomaly detection fail during this window because there is no baseline to compare against, meaning standard monitoring approaches miss the critical detection period.
The Office of the Comptroller of the Currency (OCC) and Federal Deposit Insurance Corporation (FDIC) have issued guidance requiring financial institutions to implement merchant due diligence and ongoing monitoring (OCC Bulletin 2013-29). Transaction laundering facilitates money laundering, sanctions violations, and fraud at scale.
Regulators have issued consent orders when institutions fail to detect payment processing for prohibited merchants, requiring costly compliance overhauls and independent monitoring.
Systematic new MID monitoring breaks down into five core signal categories:
Website changes within 90 days after approval signal potential business model pivots: domain redirects, subdomain additions not disclosed during underwriting (partners.domain.com, sellers.domain.com), homepage restructuring that changes apparent business model, and removal of brand identity elements.
The guide explains how to establish website baselines at day 7, automate change detection, and distinguish legitimate business evolution from undisclosed marketplace operations. It includes ecosystem mapping methodology to identify related domains processing through a single MID.
Generic descriptors that customers do not recognize cause dispute spikes and obscure the actual seller identity. Transaction laundering merchants use parent company names, frequent descriptor changes, or multiple descriptors to avoid volume concentration thresholds.
The guide shows how to verify descriptors against customer-facing branding, monitor dispute reasons for "unrecognized charge" patterns, and identify descriptor rotation strategies designed to evade network monitoring programs.
Unusually diverse catalogs signal marketplace operations or dropshipping aggregators: thousands of Stock Keeping Units (SKUs) for small merchants, products spanning multiple MCCs without clear business rationale, high-risk items not disclosed during underwriting, and "Sold by" tags indicating third-party sellers.
The guide provides inventory plausibility tests, marketplace indicator detection (seller ratings, dashboard logins, "Add to Store" buttons), and methods to verify whether catalog expansion represents legitimate growth or undisclosed transaction laundering.
Transaction metadata revealing fulfillment from undisclosed locations indicates dropshipping or aggregator models: shipping origins vary widely across transactions, tracking numbers show manufacturers rather than merchant warehouses, fulfillment addresses belong to residential locations or storage facilities.
The guide details specific investigation protocols: request supplier agreements, verify warehouse locations, analyze shipping origin distribution, and distinguish legitimate third-party logistics from laundering operations processing for hidden sellers.
Websites referencing "partners", "sellers", "vendors", or "marketplace" when underwriting documents described a direct seller reveal post-approval model changes. Terms of service describing the merchant as a "platform" or "payment facilitator", seller onboarding forms, and commission structure disclosures indicate transaction laundering.
The guide explains how to audit business model language in website content, detect seller registration functionality, identify revenue sharing structures through FAQ analysis, and determine whether "partnership" references represent disclosed relationships or hidden transaction laundering.
Organizations that implement systematic new MID monitoring achieve:
Network compliance
Evidence that your program detects transaction laundering within 90 days, reducing exposure to Visa Global Brand Protection fines and Mastercard merchant monitoring violations.
Early intervention
Identification of laundering indicators before significant volume processes, limiting chargeback concentration, fraud losses, and regulatory exposure when violations are confirmed.
Investigation efficiency
Structured protocols and evidence collection frameworks that your risk team can execute consistently, eliminating ad hoc investigations and documentation gaps when network inquiries arrive.
Resource optimization
Automated drift detection rules that flag high-risk MIDs for manual review, allowing analysts to focus on genuine red flags rather than reviewing every new merchant manually.
Defensible decisions
Investigation documentation standards that demonstrate due diligence to card networks, regulators, and internal audit when merchant terminations or holds are challenged.
.svg)
.svg)
.svg)
.svg)
.svg)
.svg)
.svg)
.svg)
