Barely Legally

Confessions of a Moot Court Bailiff

Adventures in Money Laundering

Alastair Pal for Reuters UK: Fake online stores reveal gamblers’ shadow banking system.

The seven sites, operated out of Europe, purport to sell items including fabric, DVD cases, maps, gift wrap, mechanical tape, pin badges and flags. In fact, they are fake outlets, part of a multinational system to disguise payments for the $40 billion (31.6 billion pounds) global online gambling industry, which is illegal in many countries and some U.S. states.

The findings raise questions about how e-commerce is policed worldwide. They also underline a strategy which fraud specialists say regulators, card issuers and banks have yet to tackle head-on.

​Okay, so it’s no great surprise that despite the fact that gambling is illegal in the U.S., it’s still possible to find web sites that’ll take your money. That’s not news. What’s interesting about this story is how they take your money. Gambling sites set up stores that accept real money for fake goods, laundering the funds:

In December, a reporter placed an order for a yard of burlap cloth on one of the sites, myfabricfactory.com, a website run by a UK company called Sarphone Ltd. The fabric, advertised in U.S. dollars at $6.48 per yard, has “many uses including lightweight drapes,” the website says. Sarphone did not respond to requests for comment.

This order went unmet. After a few weeks an email from My Fabric Factory arrived saying the product was out of stock. The payment was refunded.

​The most surprising thing about this is that it sounds like regulators largely rely on credit card processors to self-report gambling transactions.