Washed In Plain Sight: The Legal And Policy Blind Spot In Payment Gateway Laundering
- IJLLR Journal
- Aug 12
- 1 min read
Vridhi Suri, Symbiosis Law School, Pune
ABSTRACT
The growth and expansion of India’s fintech ecosystem has brought with it a parallel rise in novel forms of financial crime. One such threat that is now seeing the light of the day is payment gateway laundering, which in layman terms is the misuse of legitimate digital payment intermediaries to disguise and process illicit funds. This paper explores how shell entities, fake merchants, and deceptive invoices are used to route illegal proceeds from activities such as online gambling, crypto scams, and fraud through regulated payment gateways, masking them to appear as ordinary commercial transactions.
Unlike traditional modes of money laundering, this form exploits the legal and technological trust infrastructure of licensed payment service providers. The process is often concealed behind layers of business activity that appear legitimate prime facie, making it difficult not only to detect, but also to prosecute. The paper maps the typology of such laundering, examines the roles of intermediaries like payment aggregators, banks, and front-end merchants, and evaluates the regulatory and legal framework governing these transactions in India.
By focusing on the ambiguities in current law, including the Information Technology Act, 2000 and the Prevention of Money Laundering Act, the study highlights the challenges law enforcement and regulators face in identifying and attributing liability for such crimes. The phenomenon of payment gateway laundering reflects a broader concern about the evolving nature of white collar crime in the digital economy.
