02/11/2019

Red Envelopes, Fortnite And The Rise Of Micro Money Laundering

PYMNTS.com

One of the main differences between a successful criminal and a wanna-be is that the smart one knows how to hide (often in plain sight), and use methods that often seem more mundane than dramatic — despite what Hollywood has trained us to believe over the last century or so.

A demonstration of that truth came around again recently with the observance of the Chinese New Year in early February. The country’s holiday tradition of people giving red envelopes stuffed with cash has — as befits a nation where consumers have embraced mobile payments and commerce more than just about anywhere else — turned digital. WeChat is credited with that shift, which began in 2015 with more than 1 billion envelopes (hong bao) being delivered. Annually, consumers send 40 billion or more red envelopes — and the tradition involves Chinese consumers located all over the world.

However, according to a recent PYMNTS discussion between Karen Webster and Zac Cohen, general manager of identity verification firm Trulioo, as that tradition transforms into a digital exercise, regulators and payment service providers are failing to keep up with criminals who are exploiting those transactions to conduct money laundering on a micro scale. Red envelopes, in fact, stand as only one example of that trend. Gaming — including the wildly popular Fortnite — is part of all this as well, one of the “unexpected ways in which people take advantage of the system.”

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