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Is Your Online Affiliate Program Being Used to Launder Money?

By George Khoury, Esq. | Last updated on

Ecommerce can be amazing. With a few simple clicks, a small business can be online in minutes, selling products and services across the globe. However, when it comes to the relatively new area of online affiliate marketing, businesses need to beware of money laundering schemes that take advantage of these programs.

Affiliate marketing programs incentivize third parties to market the affiliated business for a fee. Some affiliate programs will actually pay third parties percentages as high as 50 to 80 percent when a referred customer makes a purchase. These high percentage programs are particularly susceptible to money laundering schemes, particularly if the purchase results in a resalable item. If you are paying others for affiliate marketing, close monitoring for signs of money laundering should be built into your costs of doing business.

How Does Affiliate Money Laundering Work?

When it comes to money laundering, criminals are essentially trying to turn ill-gotten dollars into legitimately sourced income. There are lots of different ways for criminals to do so. Affiliate marketing programs can allow money laundering to occur when an illegal transaction is conducted through the affiliate program. Essentially, affiliate marketing programs are cheap and easy money laundering fronts for criminals.

For example, a drug dealer can set up a legitimate website promoting a specific product. Rather than accept cash for the sale of the drugs, the dealer makes customers use their affiliate link to purchase the product they are promoting, thereby earning a legitimate percentage of the sale. By doing so, the drug dealer is getting legitimately sourced income from the affiliate program.

Can My Business Be Held Liable for Affiliate Money Laundering?

If your business is complicit in a money laundering operation, then, yes, your business, and potentially other owners, managers, and employees, can be held criminally liable. It may be difficult to prove that a business was aware of a money laundering operation exploiting their affiliate marketing program, but there are some glaring red flags that even small business owners should be able to detect. Some obvious signs include:

  • If multiple orders from one, or several, affiliate(s) are being processed to the same address.
  • If the same affiliate is associated with multiple regular orders using the same address and purchase method.
  • If purchases are completed for items that go unclaimed, such as digital assets, or other non-tangible items.

While any of the above may be linked to normal consumers, these are easy to spot signs that should alert a business owner to look into their affiliate's activity. As a practical matter, if your business offers a high percentage affiliate marketing program (over 50 percent), it may be advisable to earmark any profits associated with the program to hire professionals to set up monitoring systems and procedures to ensure your business doesn't get implicated in a money laundering scheme.

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