Credit Card Laundering

By Sean Frank, La Verne Chamber Member

Credit card fraud can take many forms.  One example is when a business conducting illegal activities recruits another business to run its credit card transactions through their merchant account.  Also, it can be when a legitimate business that doesn’t have a merchant account needs to run a credit card transaction.  So, the merchant goes next door and uses its neighbor’s merchant account.  Either way this activity is considered credit card laundering.

Credit card factoring also known as credit card laundering is defined by the FDIC is “A form of merchant fraud that occurs when a merchant submits drafts for another merchant. The merchant account holder typically is compensated for submitting the unauthorized merchant’s business by receiving a percentage of their sales volume. Laundering is a federal offense. In addition, several states’ criminal statutes and Association operating regulations prohibit laundering.”

Businesses who agree to process other company’s credit card transactions assume full responsibility for those transactions.  Risks include chargeback’s and permanent termination of their merchant account.  Businesses today need to be more than ever vigilant and stay away from credit card laundering scams.  Otherwise they risk significant financial losses and assume criminal liability. 

Established in 1999 by Sean Franke, Electronic Merchant Services Inc., a registered ISO/MSP with US Bank – Minn. MN, provides credit card processing and merchant account services for hundreds of businesses in Southern California. Sean can be reached at 909.971.9583 or sean@emspayments.com