Cheque refund = money laundering?

jibbyboo

In my youth, I worked in a shop where we were told we must refund any card sales onto the card used for purchase. This is to prevent money laundering.

I have a couple of questions about this:

1) is this a legal requirement or just best practice?

2) can card sale refunds be provided by cheque? OR would this count as a potential money laundering tactic?

Thanks for your help!

pqrdef

It's also because they pay the card issuer a percentage on card purchases and they want the fee back.

maninthestreet

How could it be money laundering if the payment was by credit card?

bengal-stripe

The merchant will have been charged a transaction fee to take the payment by card. If he refunds the money to you, that fee will be refunded to him. If he refunds you by any other means, he will be lumbered with the fee; so he not only lost the sale, but he actually lost money on the transaction.

jibbyboo

@maninthestreet - if someone took out a credit card in a fake name and you refunded the amount to their debit card, that would be laundering no?

So it would actually not benefit the seller who issued the cheque-refund if the buyer had used credit card?

And is it legal to refund a buyer who has paid by credit card via cheque?

InsideInsurance

jibbyboo wrote: »

I have a couple of questions about this:

1) is this a legal requirement or just best practice?

2) can card sale refunds be provided by cheque? OR would this count as a potential money laundering tactic?

The legal requirement is to mitigate money laundering but not explicitly to refund to source and so it is just good practice.

Buying on a card and refunding to another card or cheque or cash etc is a classic money laundering technique.

Of cause there is the other consideration, if the purchase was made by card then the merchant will have paid card fees. If a refund is done then those card fees are refunded to them. If a refund is done by cheque then not only do those card fees not refunded but there is probably a banking charge for the cheque being drawn on too.

Thrugelmir

InsideInsurance wrote: »

Buying on a card and refunding to another card or cheque or cash etc is a classic money laundering technique.

Also to commit fraud,

The old trick was to buy an item from Marks & Spencer. Then return the goods for a cash refund.

InsideInsurance

Thrugelmir wrote: »

Also to commit fraud

It can be, though technically that is a separate matter

System

It's part of the card scheme rules too.
Can also cause successful chargebacks if the refund not via the card.

jibbyboo wrote: »

In my youth, I worked in a shop where we were told we must refund any card sales onto the card used for purchase. This is to prevent money laundering.

I have a couple of questions about this:

1) is this a legal requirement or just best practice?

2) can card sale refunds be provided by cheque? OR would this count as a potential money laundering tactic?

Thanks for your help!

jibbyboo

I have to admit I am asking for my own benefit - after paying with a credit card, TalkTalk are trying to refund me with a cheque that will take 28 days. So would like to be correctly informed if telling them that this is effectively money laundering.

WestonDave

I would be inclined to suggest to them that what they are suggesting is not considered good practice, may contravene their card handling terms and that if they insist you will put in a complaint to your card issuer with the expectation that it will be raised with their card processors. Technically there is nothing legal to stop them doing what they are doing, but their card handlers should take a dim view of it if they get caught doing it - in any event its pretty stupid as they will have been charged 2% or more for taking a card payment which they will lose if they don't refund to the card.