4 steps to tackle money laundering in online advertising

The UK’s digital advertising industry, valued at £30bn in 2023, isn’t just a prime target for ad fraud — it has become an unwitting accomplice in money laundering schemes.

Just as fraudsters manipulate ad metrics, money launderers create elaborate networks of fake campaigns and shell companies to legitimise dirty money.

They channel money through ad exchanges, run fake impressions on their own websites, even set up their own exchanges to keep the process in-house. Such networks only become more complex and sophisticated with time.

While we can calculate the financial cost of ad fraud — estimated at $100bn globally in 2023 — we must also consider the hidden toll of money laundering facilitated by these fraudulent activities.

Who are these fraudsters? Not just criminal gangs, but extremists, foreign adversaries, hostile regimes whose goals include hate speech, murder, corruption and the destabilisation of democratic regimes.

This isn’t a problem we can afford to sideline.

Four steps for fighting back

Even apart from the broader social impacts of crime, the ad industry’s reputational exposure is enormous. Money laundering erodes trust in our industry, skews market dynamics, and ultimately threatens the very foundation of digital advertising.

So we need to adopt proactive and strategic measures that not only prevent fraud but create a safer, more trustworthy advertising environment.

Here are four key steps that can make a real difference:

1. Enhanced due diligence

We need to rethink how we identify potential money laundering risks. It’s no longer enough to simply gather data on clients — we must dig deeper.

This means enhancing our due diligence processes by adopting more sophisticated techniques to thoroughly vet advertisers, partners and third-party vendors. Automated Know Your Customer tools, for example, can provide real-time risk assessments and track suspicious patterns in behaviour.

By implementing these evolved procedures, we can identify and stop fraudulent actors before they infiltrate the system.

2. Cross-industry collaboration

The fight against fraud and money laundering isn’t one that can be won in isolation — but requires a unified front across the ecosystem.

Imagine the power of ad networks, platforms, agencies and tech providers sharing intelligence on fraudulent activity in real time.

The faster we exchange information, the more rapidly we can react to emerging threats. Best practices can be shared across companies, ensuring lessons learned in one corner of the industry are adopted across the board.

This collaboration can also help us identify patterns of fraud that might not be immediately visible when companies work in silos.

3. Technological innovation

Technology is the engine of this kind of fraud, but it also offers us incredibly powerful tools to fight back. AI and machine learning can not only validate ad performance but also identify and flag suspicious financial transactions as they occur — for example, irregular spending patterns or unusually high return on adspend — both potential signs of money laundering.

Blockchain technology, transparent and immutable, allows us to track financial flows across the advertising supply chain, making it easier to follow the money and flag any dubious activity.

These technologies should be at the forefront of our strategy — not just in theory but in everyday operations.

4. Regulatory engagement

Regulation is often viewed as a burden, but when it comes to fraud and money laundering, it’s our best ally. Working closely with bodies like the Financial Conduct Authority can help us establish clear, targeted guidelines specifically designed for digital advertising.

These rules can provide clarity on what’s expected, reducing the grey areas in which bad actors thrive. Furthermore, regular engagement with regulators can lead to more flexible and adaptive frameworks that keep up with the fast pace of technological change.

We need to stop treating ad fraud and money laundering as distant problems and start building processes that work from the inside out.

The road ahead

We can continue with business as usual, inadvertently providing a haven for financial criminals and worse, or we can take decisive action from within.

This will require a fundamental shift in how we approach transparency and accountability in our industry. We must move beyond surface-level metrics and delve deeper into the financial intricacies of our operations.

Let’s make 2024 the year we not only tackle ad fraud head-on but also close the loopholes that allow money laundering to flourish in our industry. The integrity of digital advertising and the trust of consumers depend on our collective action.

The battle against money laundering in digital advertising is not separate from our fight against ad fraud — it’s an essential part of it. By addressing both, we can create a more transparent, trustworthy, and resilient digital advertising ecosystem.

The time for action is now. Will you join the fight?

Also published in: The Media Leader