On Aug. 7, the Federal Trade Commission announced it had charged 12 defendants with money laundering. The FTC alleges that these defendants laundered millions of dollars in credit card charges through fraudulent merchant accounts. According to the complaint filed by the FTC, the defendants arranged for a deceptive operation known as Money Now Funding (MNF) to obtain and maintain merchant accounts that allowed it to process almost $6 million through the credit card networks.
“Criminals continue to exploit weaknesses in the financial services industry to facilitate illegal activities and launder their proceeds,” said Jeff Kelly, vice president of governance, risk and compliance at OnCourse Learning. “There was a lack of adequate due diligence and ongoing monitoring for this type of activity to take place over a period of time.”
The case alleges that the defendants – an Independent Sales Organization (ISO), sales agents, and their principals – provided the MNF scheme access to the credit card networks by submitting and approving fraudulent applications in the names of more than 40 fictitious MNF companies. According to the FTC’s complaint, the defendants did so despite obvious signs that the companies were likely fictitious and being used to conceal the true identity of the underlying merchant. By processing the fraudulent MNF scheme’s transactions through merchant accounts opened in the names of fictitious companies, the ISO defendants allegedly also evaded the anti-fraud monitoring efforts of the credit card networks.
Financial institutions should continue to monitor the most up-to-date money laundering information and train their staff on the latest information available. This will decrease potential risks associated with money laundering.