According to the Financial Times, transaction laundering has grown to $200 billion in the United States. This sum is expected to experience explosive growth over the next few years. Transaction laundering is the “criminal” use of a lawful merchant payment infrastructure to process illegal transactions.
The verification of a user’s identity and authenticity of their business has proven to be a complex procedure, especially online.
Despite the enormous hurdles, merchants and payment providers must still act quickly to protect themselves from this ever-present threat. Not doing so could not only mean losses in the millions due to counterfeit transactions, but firm actions from government agencies for not making a concerted effort to keep these criminals off their platform.
How Wix Is Addressing Daily Money Laundering Threats
Co-head of Wix, Volodymyr Tsukur, has placed money laundering criminals into two categories. The first one is a merchant risk. This is where scammers attempt to break into the platform to use for money laundering or use credit cards that have been stolen. Their ultimate goal is to “swipe them virtually”, take the money, and run.
The second category is transaction laundering. Their primary objective is to target payment providers in order to use or test stolen credit cards.
Wix has come up with a solution that incorporates analytic technology to spot suspect transactions and a thorough knowledge of both their customers’ and partners’ transactions.
Amit Sagiv, a fellow co-head of Wix, believes that by having a “detailed and holistic view” of regular transactions, payment processors would have an easier time detecting any transactions out of the ordinary. On the flip side, it is equally important to become familiar with “habits” of would-be fraudsters.
Their analysis is powered by using Wix’s artificial intelligence (AI) and machine learning (ML) algorithms. This enables Wix to identify any unusual transactions and mark them for deeper analysis. These algorithms get “smarter” over a period of time, empowering Wix to keep up with money launderer’s ever-changing schemes.
The result is a simplified Know Your Customer (KYC) procedure that helps approve merchants in a matter of seconds.
However, KYC and Anti-Money Laundering (AML) processes come with their own set of challenges. These processes have to be both easy to use for real customers, but they must also keep in mind that many merchant partners are still in the dark about how actually AML works.
The Challenge Of Ensuring Both KYC And AML For All Customers
One issue is ensuring that their legitimate customers don’t have a less than seamless experience when conducting their payments. They have discovered, however, that the AML process should happen in advance, before any payments are processed.
Sagiv explains:
“We use our data analytics system to ensure that you have a very smooth process, so we would collect your information beforehand and whatever document is regulatory required, and then we will scan you”.
Another major obstacle for Wix is making sure that AML and KYC function for all of Wix’s customers. A great portion of their customer base is made up of smaller businesses that lack the compliance resources typical of a larger operation. The key to an effective KYC is that it must be easy to comprehend and to comply with. If Wix fails to deliver, they will see their merchants go somewhere else.
Wix Must Continue To Rise To The Challenge
Wix, merchants, and countless payment providers must continuously stay vigilant as fraudsters continue to evolve with their criminal tactics. The careful balance of compliance and seamless usability is a difficult one. However, failure to meet this need will not only mean a tremendous loss of business, but a gaping crack in the system, where fraudsters can easily creep in, resulting in severe penalties.