Money Laundering Through Amazon and Other Online Marketplaces

00AMAZONPRICES_ALT_COMBO-jumbo - New York Times

Have you ever seen a seller on Amazon list a product at a price way higher than all of the others?  A book, for example, listed by one seller for $500 and for others for as little as $5.  You probably thought that it’s someone hoping to find a sucker willing to pay way too much.  However, you may be wrong.  There’s a good chance its criminals using Amazon’s marketplace to launder money.

As bank’s have improved their anti-money laundering programs, criminals have been forced to look for new ways to move money and make it look legitimate.  Increasingly, criminals have turned to Amazon and other online marketplaces to do this.

Here’s an example of how this might work.  Imagine a drug trafficking organization based in Mexico that sells its drug throughout the United States.  The drug traffickers have to figure out a way to get the money from different parts of the United States back to Mexico without making it look suspicious.

Step 1:  A drug trafficker in Mexico creates an Amazon seller account.  Amazon allows sellers to post products such as books, cell phones, electronics, computers and others without any formal approval.

Step 2:  The Mexican drug trafficker creates a fake product or finds a real product to pretend to sell.  However, the criminal’s goal is not to actually sell the product.  Their goal is to move the money from the sale of drugs in the United States back to Mexico while making it appear legitimate.  So, the criminal lists the product way above the market price so that no regular customer would ever think to purchase it.

Step 3:  The drug traffickers in the United States use the money from selling drugs to “buy” the product.  The U.S. drug traffickers pay Amazon and Amazon deposits the money into the Mexican drug trafficker’s bank account.  To the bank in Mexico that receives the money, it appears to be from legitimate business activity.  In reality, the drug traffickers have set up a system for moving money from the sale of drug from all over the United States to a central point in Mexico.

In July 2018, The New York Times (the “Times”) published an article called “Amazon’s Curious Case of the $2,630.52 Used Paperback.”  The article described unusual pricing of certain books listed on Amazon but without recognizing that it could be money laundering.  The article focused on Deborah Mcgillivray, a romance author who’s 2009 novel “One Snowy Knight” was selling for thousands of dollars while simultaneously being listed for $0.99.  “Are they just hoping to snooker some poor soul,” Ms. Mcgillivray wrote in an email to the Times.  She then noted that her blog had recently gotten a huge increase in traffic from Russia.  “Maybe Russian hackers do this in their spare time, making money on the side,” she said.

My guess is that Ms. Mcgillivray was half right.  It probably was Russians, but they were more likely engaged in fraud or money laundering.  While the Russians could have been involved in any of number of different illegal activities, if they were hackers, it’s possible they were using stolen identities and/or credit cards “purchase” the books and getting paid before their victims discovered the payments.

Amazon told the Times that they “activity monitor and remove” items that violate their policies.  Amazon also said that the examples in the article were “in error and have since been removed.”  When Amazon discovers activity it considers suspicious, they likely have an obligation to report that activity to law enforcement.

For banks, fintechs and other financial institutions with customers earning money through Amazon and other online marketplaces, it is important recognize the potential money laundering risk and consider it when evaluating a client’s transactions. These firms should consider whether the amount of money coming in from Amazon makes sense given what they know about the customer.  For higher risk customers or ones with a significant amount of money coming from Amazon, firms should consider reviewing their client’s Amazon sales to make sure their activity appears legitimate.

 

Photo from linked New York Times article.

 

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