Detecting Money Laundering In E-Commerce

E-commerce businesses that rely on online transactions can be a target for criminal organisations using them to launder their money. This is especially true if the e-commerce platform allows for an element of anonymity.

We’ve previously shown you what some of these practices can look like. However, there are typically three elements of money laundering that are used:

  1. Placement - a large sum of money is broken down into different accounts

  2. Layering - the money is moved between different accounts in an attempt to obscure its source

  3. Integration - the funds are integrated back into the legitimate financial system

This can be complex to detect if your e-commerce platform allows for a degree of anonymity; however, through careful monitoring it is possible to detect criminal activity.

Common money laundering methods used in e-commerce

There are a few warning signs to look out for that can be a predictor for if money laundering is taking place on your e-commerce platform.

Consumer behaviour

There are three red flags you need to keep an eye out for regarding consumer behaviour:

  1. Inconsistent addresses - While it could be for legitimate reasons, there may be times that you have a customer with vastly different billing and shipping addresses. This strategy can be employed to conceal who actually ordered the item being delivered.

  2. Inexplicable returns and refunds - If a customer requests returns and refunds of large or expensive items with apparently no reason behind it, it could be a sign that they are attempting to conceal a large deposit in their account by making it appear legitimate.

  3. Using different accounts with different names - To spread the funds and make them appear genuine, it is possible that the criminal has created multiple accounts in a short space of time with different identities. To watch out for this, you need to keep an eye on accounts that were opened in a short space of time and have similar spending habits.

Product sales

There are two red flags you need to keep an eye out for when it comes to the spending habits of your e-commerce customers:

  1. Unusual purchase trends - Keep an eye out for new or occasional customers making several large purchases in a short space of time, or purchasing several gift cards at the same time. These are things which can be easily converted into cash with resale value.

  2. Purchases from high-risk countries - There could be legitimate reasons why individuals from high-risk countries are making purchases in your e-commerce business; however, you need to be vigilant about these.

How can you detect money laundering in e-commerce?

Detecting money laundering isn’t just about finding the laundering itself; you also need to be aware of the signs leading up to it.

For example, have you noticed a large number of phishing emails being sent from your domains? This could be a sign that criminals are attempting to gain access to legitimate customer accounts to carry out their money laundering activities.

Because of tactics such as these, you need to be aware of what’s normal for your business and what would be considered abnormal.

If you’re experiencing abnormal business activity in any area of your business, start looking for patterns and get on top of them as soon as possible.