A network of dummy online stores offering household goods has been used as a front for internet gambling payments, a Reuters examination has found. The seven sites, operated out of Europe, purport to sell items including fabric, DVD cases, maps, gift wrap and flags. In fact, they are fake outlets, part of a multinational system to disguise payments for the $40 billion global online gambling industry, which is illegal in many countries and some U.S. states. The findings raise questions about how e-commerce is policed worldwide. They also underline a strategy which fraud specialists say regulators, card issuers and banks have yet to tackle head-on.
That strategy is “transaction laundering” – when one online merchant processes payment card transactions on behalf of another, which can help disguise the true nature of payments. Credit card companies including Visa and Mastercard require all online purchases to be coded so they can see what type of purchase is being processed and block it if it is illegal in a particular country. The scheme found by Reuters involved websites which accepted payments for household items from a reporter but did not deliver any products. Instead, staff who answered helpdesk numbers on the sites said the outlets did not sell the product advertised, but that they were used to help process gambling payments, mostly for Americans. A financial security expert called transaction laundering “serious misconduct–often criminal.”