8 ms·

This article is extremely alarming. The process the author is calling "cascade billing" is money laundering. This exact process of disguising the nature of tran

by akanet 8y ago

This article is extremely alarming. The process the author is calling "cascade billing" is money laundering. This exact process of disguising the nature of transactions to get banking institutions to transfer funds is literally what the feds took down Backpage for recently. I am very familiar with the details of that case and am surprised to see someone be so cavalier with the details publicly. Many adult services providers are burning through hundreds of merchant accounts, getting them closed/actioned, and repeating as long as they aren't prosecuted. The moment they have to deal with any criminal prosecution, however, there are going to be a lot of problems now that the feds have learned to prosecute this as money laundering. EDIT: Holy shit, the author cops to being an accomplice to wire fraud in the comments: https://i.imgur.com/S5UWBZZ.jpg https://i.imgur.com/S5UWBZZ.jpg. He needs to take this post down immediately. This is why programmers need to learn about the world before they do things to it.

caruana 8y ago
They are selling content through different payment services, this is not money laundering, stop being an alarmist. "the concealment of the origins of illegally obtained money, typically by means of transfers involving foreign banks or legitimate businesses" Illegally obtained money being they key term! > literally what the feds took down Backpage for recently. Also, incorrect. Backpage was taken down because they facilitated human trafficking https://www.google.com/amp/s/amp.usatoday.com/amp/501214002 https://www.google.com/amp/s/amp.usatoday.com/amp/501214002
- deleted 8y ago
  [deleted]
- SmellyGeekBoy 8y ago
  I wouldn't say that money needs to be "illegally obtained" to be classified as laundered. There are tax benefits to "laundering" legally obtained money, for example. Although at this point we're just arguing semantics.
  - koboll 8y ago
    i.e., what Paul Manafort is currently standing trial for
  - moneylaundering 8y ago
    Oversimplified version of most statutes: It has to be transferred AND (1)illegally obtained, or (2)intended for an illegal purpose, or (3)disguised and international but not in any way illegal.
- akanet 8y ago
  Your mistake is in thinking that the money laundering is achieved by, say, generating a credit card charge for FOO when the item sold was BAR. Not so - the money laundering is in opening many merchant accounts purporting to be for selling FOO, generating profit sanitized as "clean," moving those profits between banks, and essentially deceiving payment processors to generate a profit. This was, in fact, one of the actual mechanisms brought to bear against Backpage. Certainly the indictment was motivated by, you know, underage sex trafficking, but the enforcement mechanism used to achieve a verdict was mostly money laundering. You can read the indictment yourself: https://www.justice.gov/file/1050276/download https://www.justice.gov/file/1050276/download. How many counts of trafficking vs money laundering do you see? And finally, no, they are not "selling different content through other processors." These processors' entire business model is to create "legitimate," totally unrelated transactions to the credit card authorities, to take a cut, and pass back the funds to the merchant. I believe Backpage was instructing people trying to purchase ad inventory to go to a portal to purchase dog food for a while.
  - caruana 8y ago
    My point is the issue is not as black and white as you are making it out to be (hence, don't be an alarmist). All things are subject to interpretation and your position attempts to definitively categorize this activity as fraudulent behavior based on a 1000 word essay by a developer.
    - akanet 8y ago
      Cascade billing was literally named by the Backpage prosecution as money laundering.
      - nwsm 8y ago
        What if they just default to the last method? Is it then no longer 'cascade billing'? Or are you saying the psuedo-crypto currency is money laundering?
    - moneylaundering 8y ago
bumholio 8y ago
Money laundry means disguising illicit gains as lawful gains to hide the fact that you are breaking the law. In the Backpage case, the law that were broken pertained to child prostitution. Moving legal money around, no matter how complex, is not money laundry by itself. The intention here is to circumvent the high chargeback rate of porn by disguising the purchase from the customer's bank, thus making it harder for him to issue the chargeback for an amount you have legally charged. That does not sound like an illegal action, but a breach of contract with the payment processor.
- akanet 8y ago
  You are mistaken, and I've mostly responded upwards in the thread, but I wanted to add that the fraud's purpose is not to prevent chargebacks, it's to be able to receive money at all. Mainstream processors refuse to work with these guys because the fraud rate is so high, so they try to get their transactions approved (in any way possible) by disguising them. It is still very easy for any customer to chargeback a credit card charge.
lowercased 8y ago
> the author cops to being an accomplice to wire fraud Can you not determine who the author is? Based on clues like the author's name in the article heading, and the comment poster's name being different? And the author posting a reply to the circled comment you posted indicating that this approach does happen, but is sketchy... seems to point to a reading comprehension problem here.
- akanet 8y ago
  You're being rude, but to answer your question directly: the author responded to the circled comment with an underlined statement admitting to have knowingly engaged in these services for use by his employer.
  - lowercased 8y ago
    slightly, yes (rude). Offering 2 things (access to one service, then a second service as 'free') does not strike me as automatically 'wire fraud'; we'd need more information to make that determination.
stef25 8y ago
Buy a t-shirt and get access to my members only blog / porn site. I can see how it's against the rules of the payment provider but this wouldn't be fraud would it?
- moneylaundering 8y ago
  The elements for federal and state money laundering charges would be there. Lying to a bank, in a tri-partite merchant account agreement, email, or phone call, and then obtaining services from that bank, can come down on you as bank fraud, wire fraud, or mail fraud. Once you’re buttoned up on fraud, subsequent transfers of funds can be charged as money laundering. This is true for most states and under federal law. In a hypothetical scenario where I saw this occurring, I would look for emails, texts, etc where you admit that you actually intend to sell memberships, and the T-shirt sales are merely to obtain payment processing services to get the fraud charges up. Then I’d rack up the dollar amounts against you under money laundering statutes and stack them so you’d be looking at some pretty major prison time. All this over selling some T-shirts to get a payment processor for your adult site? You bet! I’m working on very similar cases now.
  - karrotwaltz 8y ago
    Bundling a physical good with a digital one has been done before, so if I understand correctly the only problem here is that the usage of a t-shirt is purely to circumvent the ban from the bank (due to high chargeback rate)... In that case, and theoretically, bundling the physical good with a digital access right from the start would be perfectly legal right? It would still be a dodgy way to reduce chargebacks, but assuming no bank ban occurs, it shouldn't be a breach of contract.
    - moneylaundering 8y ago
      Yes, good faith bundling is just fine, just a business decision as far as I’m concerned, and if it reduces your chargebacks, good! Circumvention and deception (which require clear intent, hence the emails) are the issue.
  - 8y ago

by akanet 8y ago

caruana 8y ago

They are selling content through different payment services, this is not money laundering, stop being an alarmist. "the concealment of the origins of illegally obtained money, typically by means of transfers involving foreign banks or legitimate businesses" Illegally obtained money being they key term! > literally what the feds took down Backpage for recently. Also, incorrect. Backpage was taken down because they facilitated human trafficking https://www.google.com/amp/s/amp.usatoday.com/amp/501214002 https://www.google.com/amp/s/amp.usatoday.com/amp/501214002

deleted 8y ago
[deleted]
SmellyGeekBoy 8y ago
I wouldn't say that money needs to be "illegally obtained" to be classified as laundered. There are tax benefits to "laundering" legally obtained money, for example. Although at this point we're just arguing semantics.
- koboll 8y ago
  i.e., what Paul Manafort is currently standing trial for
- moneylaundering 8y ago
  Oversimplified version of most statutes: It has to be transferred AND (1)illegally obtained, or (2)intended for an illegal purpose, or (3)disguised and international but not in any way illegal.
akanet 8y ago
Your mistake is in thinking that the money laundering is achieved by, say, generating a credit card charge for FOO when the item sold was BAR. Not so - the money laundering is in opening many merchant accounts purporting to be for selling FOO, generating profit sanitized as "clean," moving those profits between banks, and essentially deceiving payment processors to generate a profit. This was, in fact, one of the actual mechanisms brought to bear against Backpage. Certainly the indictment was motivated by, you know, underage sex trafficking, but the enforcement mechanism used to achieve a verdict was mostly money laundering. You can read the indictment yourself: https://www.justice.gov/file/1050276/download https://www.justice.gov/file/1050276/download. How many counts of trafficking vs money laundering do you see? And finally, no, they are not "selling different content through other processors." These processors' entire business model is to create "legitimate," totally unrelated transactions to the credit card authorities, to take a cut, and pass back the funds to the merchant. I believe Backpage was instructing people trying to purchase ad inventory to go to a portal to purchase dog food for a while.
- caruana 8y ago
  My point is the issue is not as black and white as you are making it out to be (hence, don't be an alarmist). All things are subject to interpretation and your position attempts to definitively categorize this activity as fraudulent behavior based on a 1000 word essay by a developer.
  - akanet 8y ago
    Cascade billing was literally named by the Backpage prosecution as money laundering.
    - nwsm 8y ago
      What if they just default to the last method? Is it then no longer 'cascade billing'? Or are you saying the psuedo-crypto currency is money laundering?
  - moneylaundering 8y ago

bumholio 8y ago

Money laundry means disguising illicit gains as lawful gains to hide the fact that you are breaking the law. In the Backpage case, the law that were broken pertained to child prostitution. Moving legal money around, no matter how complex, is not money laundry by itself. The intention here is to circumvent the high chargeback rate of porn by disguising the purchase from the customer's bank, thus making it harder for him to issue the chargeback for an amount you have legally charged. That does not sound like an illegal action, but a breach of contract with the payment processor.

akanet 8y ago
You are mistaken, and I've mostly responded upwards in the thread, but I wanted to add that the fraud's purpose is not to prevent chargebacks, it's to be able to receive money at all. Mainstream processors refuse to work with these guys because the fraud rate is so high, so they try to get their transactions approved (in any way possible) by disguising them. It is still very easy for any customer to chargeback a credit card charge.

lowercased 8y ago

> the author cops to being an accomplice to wire fraud Can you not determine who the author is? Based on clues like the author's name in the article heading, and the comment poster's name being different? And the author posting a reply to the circled comment you posted indicating that this approach does happen, but is sketchy... seems to point to a reading comprehension problem here.

akanet 8y ago
You're being rude, but to answer your question directly: the author responded to the circled comment with an underlined statement admitting to have knowingly engaged in these services for use by his employer.
- lowercased 8y ago
  slightly, yes (rude). Offering 2 things (access to one service, then a second service as 'free') does not strike me as automatically 'wire fraud'; we'd need more information to make that determination.

stef25 8y ago

Buy a t-shirt and get access to my members only blog / porn site. I can see how it's against the rules of the payment provider but this wouldn't be fraud would it?

moneylaundering 8y ago
The elements for federal and state money laundering charges would be there. Lying to a bank, in a tri-partite merchant account agreement, email, or phone call, and then obtaining services from that bank, can come down on you as bank fraud, wire fraud, or mail fraud. Once you’re buttoned up on fraud, subsequent transfers of funds can be charged as money laundering. This is true for most states and under federal law. In a hypothetical scenario where I saw this occurring, I would look for emails, texts, etc where you admit that you actually intend to sell memberships, and the T-shirt sales are merely to obtain payment processing services to get the fraud charges up. Then I’d rack up the dollar amounts against you under money laundering statutes and stack them so you’d be looking at some pretty major prison time. All this over selling some T-shirts to get a payment processor for your adult site? You bet! I’m working on very similar cases now.
- karrotwaltz 8y ago
  Bundling a physical good with a digital one has been done before, so if I understand correctly the only problem here is that the usage of a t-shirt is purely to circumvent the ban from the bank (due to high chargeback rate)... In that case, and theoretically, bundling the physical good with a digital access right from the start would be perfectly legal right? It would still be a dodgy way to reduce chargebacks, but assuming no bank ban occurs, it shouldn't be a breach of contract.
  - moneylaundering 8y ago
    Yes, good faith bundling is just fine, just a business decision as far as I’m concerned, and if it reduces your chargebacks, good! Circumvention and deception (which require clear intent, hence the emails) are the issue.
- 8y ago