Leveraging Analytics To Fight Money Laundering

Laveta Brigham

Share Tweet Share Share Share Print Email Money laundering is a never-ending threat to payments providers of all types, but especially to those that operate online. Verifying a user’s identity and the legitimacy of their business is exceptionally difficult in cyberspace, and fraudsters are taking full advantage of this challenge […]

Money laundering is a never-ending threat to payments providers of all types, but especially to those that operate online.

Verifying a user’s identity and the legitimacy of their business is exceptionally difficult in cyberspace, and fraudsters are taking full advantage of this challenge to process more than $200 billion in ill-gotten gains each year.

Payments providers are constantly exploring new ways to protect themselves and their merchant partners from fraudsters aiming to exploit them for the purpose of money laundering. Not only could both parties end up losing millions in false transactions, but they could also face a crackdown from government oversight agencies for not doing enough to keep launderers off their platform. It is ultimately up to the payments provider to be the first line of defense.

“Since we are acting in the financial space, there’s a lot of regulation that everybody needs to follow,” said Amit Sagiv, co-head of Wix Payments, the payments processing arm of web development company Wix. “We have shared responsibility with our partners. They are taking most of the burden, but because we provide the [payments] service, we want to make sure that we do not let fraudsters come in.”

In an interview with PYMNTS, Sagiv and his fellow co-head Volodymyr Tsukur offered an inside look at the money laundering threats that Wix faces in its daily business, and how the firm and other payments processors keep a close eye on their merchant partners to be on the lookout for any signs of suspicious activity.

The Money Laundering Threat

“Know thine enemy” is the first rule of any fraud or money laundering prevention system, with payments providers of all types requiring an intimate knowledge of the threat they face if they have any hope of countering it. Money launderers typically come in one of two categories, according to Tsukur.

“First of all, there is what we call the merchant risk,” he explained. “We know that fraudsters would like to hack the platform either for money laundering or to use stolen cards, looking for a way to swipe them virtually and get this money and then run away.”

The second main threat is transaction laundering, said Tsukur, consisting of buyers rather than merchants. Their end goal is largely the same, primarily targeting payments providers to test or use their stolen credit cards. In either case, Wix’s solution is the same: a combination of in-depth knowledge of their customers’ and partners’ transactions paired with analytics technology to identify suspicious transactions.

Preventing Money Laundering Analytically

The importance of understanding the habits of potential fraudsters is matched with the importance of recognizing legitimate customers. Having a detailed and holistic view of their typical transactions helps the payments processors identify and flag unusual ones that could be the result of money laundering, according to Sagiv.

“We know what they’re about to sell, what products they added and removed, we know where they’re doing their marketing,” he said. “So, it’s a 360-degree overview from both the buyer perspective and the merchant perspective, and with all the data points that we’re collecting, we could really pinpoint the [merchants] that should be expelled from the platform.”

This analysis is aided by Wix’s artificial intelligence (AI) and machine learning (ML) algorithms, which can pinpoint the unusual transactions and flag them for further analysis. These algorithms grow smarter over time, allowing Wix to catch up with money launderers’ evolving techniques.

“It creates a smart model that we will teach based on our user data,” Tsukur explained. “With this engine, we have a streamlined KYC process that can approve merchants within seconds.”

Know your customer (KYC) and anti-money laundering (AML) measures come with their fair share of obstacles, however. Not only do these procedures have to be seamless for the convenience of legitimate customers, but they also have to account for the fact that many of their merchant partners are unfamiliar with the intricacies of AML.

Challenges in AML

The most crucial consideration when developing AML procedures, according to Tsukur, is ensuring that the process is frictionless for legitimate customers who may have little patience for needless checks when conducting payments. The secret is to start the AML process long before payments are processed, however.

“We don’t start at the moment of payment, we start way ahead of the time,” Sagiv said. “We use our data

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.”

The other primary challenge is ensuring that the AML and KYC procedures work for all of Wix’s customers, as many of them are smaller merchants without the compliance resources of a large company. This means that all KYC checks have to be easy to understand and comply with, or else merchants might take their business elsewhere.

“We serve so many kinds of merchants, selling anything from glasses to virtual games to bookings for restaurants and events,” Tsukur noted. “We needed the KYC process to be first and foremost simple, digestible and understood by mom-and-pops building their own businesses in their garage, and this is a huge challenge.”

Failure to meet this challenge could mean lost business, or even worse, a potential money launderer slipping through the cracks. Businesses like Wix will need their AML and KYC procedures to strike the right balance between usability and security or not only will launderers flock to their business, they could face severe penalties for letting them do so.



Banks, corporates and even regulators now recognize the imperative to modernize — not just digitize —the infrastructures and workflows that move money and data between businesses domestically and cross-border. Together with Visa, PYMNTS invites you to a month-long series of livestreamed programs on these issues as they reshape B2B payments. Masters of modernization share insights and answer questions during a mix of intimate fireside chats and vibrant virtual roundtables.

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