Alternative Payment Channels

Criminals exploit informal or minimally regulated payment channels to bypass stricter KYC and AML regimes. This enables them to access financial services that would otherwise be denied and allows illicit proceeds to flow with minimal oversight.

Alternative payment channels can also serve as an initial entry point for inserting illicit funds into the financial system. These funds are transformed into prepaid cards, cryptocurrencies, or mobile remittance balances under weak oversight.

By routing funds through lightly regulated payment methods, criminals add transactional complexity that obscures money trails and detaches illicit proceeds from their source, hindering standard investigative tracing.

Criminals exploit inherent vulnerabilities in certain alternative payment products (e.g., reloadable prepaid cards with little or no customer verification, pseudo-anonymous cryptocurrencies). These product features—such as easy reloading and minimal KYC—facilitate undetected layering and placement.

This technique primarily exploits lightly regulated or non-face-to-face payment channels (e.g., crypto platforms, prepaid card programs, and app-based remittance) to circumvent standard AML controls. By operating outside traditional banking and KYC processes, criminals obscure the origin and beneficiaries of funds, enabling rapid cross-border transfers and sanctions evasion with minimal oversight.

By routing funds through international or offshore providers, criminals exploit weak AML/CFT enforcement in certain regions. This cross-border dimension enables sanction evasion and undermines authorities' ability to track the true origin or destination of illicit proceeds.

• Consolidates risk ratings and AML/CFT enforcement levels for countries and regions.
• Supports the identification of transactions routed through or initiated in jurisdictions with weak AML oversight, a common trait of alternative payment channels.

• Collects transaction amounts, load frequencies, withdrawal endpoints, and card identifiers specific to prepaid cards.
• Enables identification of rapid loading or withdrawal patterns across multiple locations, revealing potential structuring or layering attempts.

• Captures detailed records of financial transactions and money movements across various channels, including timestamps, amounts, currencies, parties, and transaction identifiers.
• Supports the detection of unusual patterns involving prepaid cards, app-based remittances, or cryptocurrency transfers, flagging rapid or high-volume movements indicative of layering or structuring.

• Consolidates transaction details, user identifiers, and operational data from e-wallets or app-based remittance services.
• Highlights inconsistencies in user information across multiple platforms, detecting potential misuse or rapid account switching.

Contains official or government-run records listing licensed money service businesses (MSBs) and remittance providers, including their licensing status, ownership details, and operational scope. These records help identify and verify authorized MSBs used for alternative payment channels, enabling AML teams to detect illicit or unlicensed operations. Cross-referencing registration data with observed transactions helps pinpoint higher-risk or unauthorized service providers facilitating funds movement outside regulated banking systems.

• Contains verified identification documents, personal and business details, and beneficial ownership information.
• Allows cross-checking user profiles across multiple remittance apps or crypto platforms, uncovering inconsistent or fabricated credentials.

• Logs ATM withdrawal timestamps, transaction amounts, and physical terminal locations.
• Identifies anomalous withdrawal patterns or geographically dispersed usage of prepaid cards, which can signify illicit layering or shared credentials.

• Provides on-chain transaction records (e.g., wallet addresses, timestamps, amounts) and analytics tools for tracing cryptocurrency flows.
• Assists in detecting rapid transfers to external wallets, newly created accounts, and the usage of lightly regulated exchanges that may facilitate laundering.

• Contains user trading and transaction histories for cryptocurrency and other exchange platforms, including timestamps, volumes, and counterparties.
• Enables identification of frequent currency conversions on platforms with lax KYC, highlighting potential layering or sanctions evasion activities.

• Tracks transaction origin and destination points, including geolocation metadata.
• Facilitates detection of unusual cross-border flows, especially where established banking channels are bypassed for lesser-regulated alternatives.

Apply deeper identity scrutiny and source-of-funds verification for high-risk customers who rely on loosely regulated payment methods. Request documentation to validate transaction purposes, consult external intelligence sources, and maintain heightened monitoring for users who frequently top up prepaid cards or trade cryptocurrency with relaxed KYC.

Enforce robust identity verification (e.g., government-issued IDs, address cross-checks) for customers using prepaid cards or mobile-based remittance services. Immediately suspend or restrict usage if required CDD data is incomplete or inconsistent to prevent anonymous layering and placement via these channels.

Implement specialized detection rules for high-frequency loads of prepaid cards from multiple sources, repeated rapid transfers through multiple remittance apps, and crypto transactions funneled through newly created accounts. Flag or freeze any transfers diverging from expected usage to disrupt layering and illicit fund flows.

Screen mobile wallet accounts, prepaid card issuers, and crypto wallet addresses against sanction lists, adverse media, and known high-risk jurisdictions. Block or restrict accounts that show matches or close links to sanctioned entities, ensuring no regulatory breaches occur via alternative payment routes.

Continuously assess and audit the AML controls of partner platforms that issue prepaid cards or operate remittance apps to ensure they enforce rigorous identity checks and transaction scrutiny. Reevaluate vendor policies, contract clauses, and ongoing compliance records to minimize vulnerabilities in external networks.

Use analytics tools and tracing software to examine on-chain activity for cryptocurrency transactions. Identify address clusters, repeated mixing or chain-hopping, and links to sanctioned or high-risk wallets. Escalate detected anomalies for deeper investigation to prevent hidden cross-border transfers.

Deliver specialized instruction for frontline and compliance teams on red flags associated with prepaid card abuse and cross-border cryptocurrency flows. These red flags include repetitive transfers from unrelated parties, abrupt channel switching, and frequent multi-jurisdiction app usage. Emphasize the importance of immediate escalation for review.

Limit access to alternative payment channels under anonymous or incomplete KYC conditions by capping transaction volumes or frequency. Freeze or terminate services if patterns indicate unverified layering, such as continual high-value top-ups and scattered withdrawals lacking credible justification.

• Criminals exploit the pseudo-anonymous nature and global reach of cryptocurrencies to move funds rapidly across borders without relying on conventional financial institutions.
• They convert illicit fiat currency into crypto on lightly regulated exchanges, then transfer it to multiple wallets to further camouflage the money trail.
• Minimal transparency in transactions, especially on platforms with weak KYC, undermines standard AML efforts and enables the swift layering of tainted funds.

• Criminals can acquire prepaid cards or digital wallets that require minimal identity verification, allowing them to deposit illicit proceeds with little scrutiny.
• These balances can be reloaded or spread across multiple accounts to obscure the transaction trail, enabling quick layering across jurisdictions.
• Because many providers lack robust KYC/AML oversight, funds flow outside traditional banking channels, masking beneficial ownership and origin.

• Enable direct user-to-user trades with fewer compliance requirements, making it easier to avoid AML controls.
• Limited or non-standard KYC allows quick layering of illicit funds while dispersing transactions across multiple parties.

• Provide criminals a quick on/off ramp for illicit funds, enabling swift conversion between fiat and cryptocurrencies.
• Exploit pseudo-anonymous transactions to obscure both origin and eventual beneficiaries, bypassing traditional AML scrutiny.

• Criminals can use reloadable prepaid cards with minimal verification, concealing their identities and moving funds with limited traceability.
• The ability to conduct international transactions outside standard banking oversight supports undetected layering and placement.

• Allow swift transfers through smartphone apps, often with simpler onboarding and weak identity checks.
• Lack of face-to-face verification can shield the true user, facilitating unmonitored layering via mobile channels.

• Some remittance platforms, especially app-based, impose minimal KYC checks, allowing criminals to transfer funds covertly across borders.
• Rapid settlement and limited oversight hinder effective AML transaction monitoring, aiding layering and placement.

They issue reloadable cards that criminals can exploit for layering. Minimal or non-existent verification requirements allow illicit entities to move funds anonymously, complicating financial institutions' efforts to track and block suspicious transactions.

They knowingly exploit lightly regulated or alternative payment channels, including cryptocurrencies and prepaid cards, to layer illicit funds. By orchestrating rapid transfers outside mainstream banking oversight, they hinder financial institutions' ability to identify the true beneficiaries or sources of funds.

They use cryptocurrencies and other lightly regulated channels to evade restrictions imposed by mainstream financial institutions. These methods circumvent sanctions screening, allowing cross-border transactions to occur undetected by standard AML controls.

They enable direct user-to-user exchanges with minimal KYC, allowing criminals to swiftly layer or transfer illicit funds beyond the oversight of traditional financial institutions. These transactions bypass standard AML screening and reduce traceability.

They offer trust-based or unregulated payment networks outside formal banking channels, which criminals use to hide illicit funds. This arrangement bypasses conventional transaction monitoring, making it difficult for financial institutions to detect suspicious movements.

They provide app-based remittance or payment services, often with weak KYC controls. Criminals exploit these quick onboarding processes to funnel proceeds across borders without significant oversight by mainstream financial institutions.

They facilitate rapid, cross-border virtual asset transfers with limited transparency. Criminals exploit these platforms to obscure the origin and beneficiary of funds, circumventing traditional AML safeguards applied by financial institutions.