Detect & Prevent Collusion & Money Laundering

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The fundamental achievement of online P2P marketplaces has been to connect customers and providers who would otherwise have had barely a needle in a haystack’s chance of finding each other. And whether in e-commerce, housing, borrowing, or ride-sharing, the increased efficiency brought about by the P2P revolution has boosted supply and brought down prices.

One of the greatest business advantages that P2P companies like Uber and Airbnb have is that they only provide a platform for commerce – while avoiding the cost and risk of maintaining an inventory of their own. And while you may not think of retailers like Amazon as being in this category, many increasingly do also act as facilitators for third-party sellers. 

There are numerous advantages for retailers in bringing third-party sellers onboard:

  •  A bigger range: more products on offer mean you can attract new customer groups, who may also end up making purchases from your in-house inventory
  •  Competition between vendors makes for competitive pricing, attracting more customers
  •  Reduced risk – as responsibility for inventory safeguarding is spread among multiple parties

But despite these many positives, running a P2P online marketplace does present new challenges of its own – and these must be acknowledged and dealt with. And one of the most important of these is the threat posed by money laundering. 

It’s no secret that without adequate precautions in place, marketplaces can attract not only legitimate traders, but also individuals with dishonest or even criminal intentions. One method used by such individuals is to set up multiple accounts which are then used to trade with each other – creating the impression that business is being done, when in fact none has taken place.

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While it’s impossible to root out every single incident of malpractice, marketplace owners can and must be aware of those areas that represent heightened risk. Some of the most important ones include: 

  •   Items with a high value-to-size ratio, from consumer electronics such as smartphones to jewellery and even artworks, represent an attractive proposition to criminals with sizeable ill-gotten gains that they need to legitimise. Such goods have the added draw that its common for them to be traded between different parts of the world. 
  •   Gift cards are an even more efficient way of fabricating legitimate turnover – they represent a sort of cryptocurrency, bought and sold only on the basis that it can be exchanged for goods and services.
  •   Goods based on IP rather than physical value, such as video games, also represent an attractive opportunity for fabricating turnover.
  •   As a way to launder really large sums of money, exploitation of P2P lending platforms has significant potential. 
  •   Accommodation-sharing platforms may seem like and obscure candidate for money-laundering – but there are documented cases of them being used in this way.
  •   Likewise, ride sharing platforms have sometimes been used to facilitate collusion between fake accounts. 

If your business belongs to an at-risk category for money laundering, it’s important both to take precautions, and to be seen to be doing so. And because those who intend to misuse your platform are obviously not about to announce their intentions to you, it’s essential that you bring to bear the most powerful weapons in your arsenal against such abuse. Their names? Data and communication. 

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The first step towards a malicious user laundering the proceeds of illegitimate business via your site is for two or more accounts to collude with one another – to behave as the puppets of a single master, rather than as independent, competitive actors. Detecting when this is taking place demands a range of steps:

  •  First of all, taking a joined-up approach to data is essential if you are to ensure that you spot the tell-tale signs of collusion. This means combining data from your onboarding, fraud detection, and transaction monitoring tools, and analysing them as one to ensure that you spot troubling trends as they emerge.
  •  Incorporate anti-collusion thinking into all of your processes right from the outset. This applies particularly to onboarding, where there can be a temptation to minimise data collection so as to streamline the acquisition of new users. But onboarding has an essential role to play in providing the insights needed to ensure users’ legitimacy. Using a staged approach – asking for less data at the beginning, but then requiring more information from users after a few transactions – is an attractive compromise.
  •  Talk to your trusted partners from around the world. As an online P2P marketplace, one of your biggest strengths is your ability to carry out business across borders – and your vendors from around the world are what enable you to do this. But of course, this adds much more complication to the process of user verification, because what might look like suspicious activity in one country could be totally innocent in another, or vice versa. It’s likely that you’ll be much better at spotting suspicious activity in a territory that you are familiar with, so make use of your global network to understand what a legitimate user looks like in all the places your business reaches.
  •  Use innovative ways of interpreting your data, such as machine learning. As we’ve discussed previously, neural networks are an incredibly powerful way of gaining insights from data that simple wouldn’t have been possible using traditional methods. The analysis of multiple data streams to detect dishonest users on your platform is a great example of how they can be put into practice.   

As we think about how to identify and remove bad actors on your platform, it’s important also to spare a thought for the inverse challenge that we face during this process: that of avoiding false positives, and minimising the hassle to which we subject our legitimate users – who, after all, represent the vast, vast majority.

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Luckily, the core of the solution to both sides of the problem is the same: to maintain an honest, direct, and friendly dialogue with your users. By making it clear that you want to get to know them and learn from their experiences, you’ll not only be moving towards a situation where you have the technical means to spot when something isn’t quite right – you’ll also be building up essential good will with your users, and making of them strong allies in your quest to create a reliable, trustworthy business environment for all. 

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