The risks of money laundering are no longer limited to banks. As online commerce expands globally, retailers find themselves exposed to threats that were once limited to the financial sector.
The online retail industry is a perfect whirlwind of cross-border transactions with payment methods including credit/debit cards, digital wallets and bank transfers. These channels provide low-friction entry points for criminals to place and layer dirty money. As a result, AI-powered e-commerce platforms can provide criminals with an efficient route to launder illicit funds.
Integrating AI with related technologies creates a dual challenge. It is a powerful tool for compliance, but also an accelerator of crime.
Traditional anti-money laundering (AML) strategies targeting financial institutions. This focus is now expanding as regulators such as the Financial Action Task Force (FATF) and the Financial Crimes Enforcement Network (FinCEN) push AML expectations beyond traditional financial institutions, forcing e-commerce platforms and payment providers to implement more robust controls.
Online retailers are beginning to use third-party regulatory technology (RegTech) solution providers. Their sophisticated technologies help retailers keep up with evolving AI money laundering risks.
According to Eleni Panagiotopoulou, head of AML at online gambling software company Softswiss, industry data shows that laundry fraud now accounts for a disproportionate share of economic crime. Organized crime gangs use retail platforms to move money in bulk without attracting the scrutiny that banks and other financial service providers face.
“Money laundering is becoming an increasing threat to online businesses, including typical e-commerce retailers, as criminal networks use digital payment flows to disguise illicit funds,” Panagiotopoulou told the E-Commerce Times.
The impacts of money laundering go beyond financial losses
For retailers, the direct financial losses from online platforms are compounded by the risks of regulatory exposure, damaged partnerships and the erosion of customer trust when their systems are used as conduits for illicit financing. As payment acceptance methods at global retailers diversify and cross-border sales grow, the e-commerce sector is shifting from a marginal target for money launderers to a prime target for illicit financial enablers.
“Criminals use the everyday mechanisms of online retail to cycle, layer and disburse funds,” explained Panagiotopoulou.
She noted that a common method involves purchasing goods with illicit proceeds and quickly requesting digital refunds. Such transactions often move the damaged funds to alternative bank accounts or new payment rails, effectively turning the damaged funds into clean money.
Market vendors are another weak spot, she noted. Fraudsters can create or breach seller accounts to receive tainted payments disguised as legitimate sales. They then move the payouts through a series of accounts before regulators discover the pattern.
Laundry people use real and synthetic networks of mule accounts to receive goods, store value in vouchers or digital items, and cash out through secondary markets. Because these schemes closely mimic normal consumer behavior, they often slip through systems designed to flag unusual transactions, such as credit card fraud, she added.
Regulatory pressure is rising
According to Panagiotopoulou, regulators around the world are expanding anti-money laundering requirements beyond banks to include virtual asset providers, digital platforms and other non-financial firms that process payments and otherwise facilitate the movement of value.
“Evolving FATF guidance, the EU anti-money laundering legislative package and proposed FinCEN rules in the United States signal a shift towards holding platforms and, by extension, large marketplaces responsible for vendor verification and transaction monitoring,” she said.
Despite this shift, many retailers still lack structured know-your-buyer (KYB) verification during seller sign-up, ongoing seller payout tracking, or clear escalation paths for suspicious behavior. Retailers also often rely heavily on external payment processors without ensuring contractually defined anti-money laundering obligations.
“As compliance requirements tighten, the absence of robust verification, monitoring and record-keeping exposes retailers to risks that were previously limited to financial institutions,” noted Panagiotopoulou.
Online business ripe for money launderers
Online trading is fast and hassle-free, exactly the qualities that attract money launderers. Large volumes of low-value transactions allow illicit flows to intermingle with normal customer activity.
“So setting thresholds for the size of monetary transactions, as banks do, would not work for e-commerce players,” she noted.
The digital retail landscape is also a contributing factor. Retailers favor fast customer sign-ups and easy one-click payments, making it easy for malicious actors to create accounts, switch identities, and test platform vulnerabilities at scale.
“As retailers integrate e-wallets, buy-now-pay-later options and alternative payment mechanisms, criminals have more opportunities to identify the weakest link and exploit it repeatedly before detection systems pick it up,” she added.
Why money laundering often goes unnoticed
Analysts often miss the warning signs that indicate money laundering on e-commerce platforms. Some of the most obvious red flags are the ones that look ordinary at first glance.
As an example, she cited quick cycles of small purchases across different product categories, followed by refunds or withdrawals. Such events are often indicative of test behavior rather than actual consumer activity.
“Geographic discrepancies such as payment data from one country, shipping to another, and device logins from a third country are also common signs of mullet activity.”
She suggested several other overlooked transaction patterns. These include unusually high refund rates tied to a single buyer or seller, sudden spikes in payout activity from newly created merchant accounts, and patterns of microtransactions that accumulate to significant value over short periods of time.
“These warning signs can often be missed by companies that don’t rely on integrated data analytics,” she noted. “All of these warning signs often blend into the noise of retail at first glance, but they can be detected if companies use a combined analysis of behavior, device and payment data.”
Prepare to defend
Small e-commerce businesses without significant IT budgets can defend against money laundering. Retailers can build a credible defense by focusing on a few highly effective controls, Panagiotopoulou suggested.
For example, they can tighten refund workflows and limit immediate refunds to trusted customers. Another strategy is to hold off on large payouts until basic verification is complete. It can stop several typical washing programs at a low cost.
Many vendors now offer modular AML tools and price-by-use fraud detection, allowing smaller firms to access device fingerprinting, risk assessment and basic KYB checks without having to build their own systems, she added.
“Even simple alerts that highlight unusual refund patterns, multiple shipping addresses for one payment method, or sudden fluctuations in seller activity can significantly reduce exposure when combined with the expertise of trained staff,” explained Panagiotopoulou.
She concluded by explaining that retailers who succeed in building effective AML systems typically start by creating a unified ID layer that connects orders, devices, payments and merchant accounts. Additional support from streaming events or regular data feeds allows models to evaluate risks in near real-time.
“Feature repositories and data management frameworks then help standardize inputs so that multiple teams and models can work on a solid and reliable foundation,” she said.