Electronic payment via third-party channels or platforms – such as Venmo, Cash App, Alipay or WeChat Pay – is prevalent in our daily lives, especially as COVID-19 spreads and stay-at-home restrictions have fueled the strong growth of third-party payments. For the avoidance of doubt, I`m not talking about mobile banking apps or payment apps operated by banks. Let`s focus on apps that run independently while connecting consumers, merchants, and banks to create a payment loop. In general, we can notice these common difficulties when trying to manage the anti-money laundering risks related to external payment providers: the source of funds and the beneficiary are obscured. Since the payment cycle is separate and the relevant data is kept separately by different interested parties, authors can use this separation model to conceal the origin and destination of funds. A bank should implement appropriate policies, procedures and processes that address compliance and fraud risks. Policies and procedures should set bank performance thresholds and establish processes to mitigate risk to payment processors, as well as possible actions that can be taken against payment processors that exceed these standards. To understand these risks, let`s look at the flow of third-party payments and highlight the iterated anti-money laundering (AML) measures, as well as the main difficulties in implementing them. 1see Federally Regulated Financial Institutions Review Board (FCCEF) Review Manual, p. 239-242 (29 April 2010).
Although the FFIEC Examination Manual is published by the Bundesbank Supervisory Authorities and refers to the anti-money laundering requirements applicable to banks, it contains guidelines that may be of interest to all financial institutions that provide financial services to payment processors and MSBs. Non-bank payment processors or third parties (processors) are banking customers who provide payment processing services to merchants and other business entities. Traditionally, processors primarily contracted with retailers who had physical locations to process retailers` transactions. These merchant transactions mainly included credit card payments, but also automated clearing house (ACH) transactions 221NACHA – The Electronic Payments Association (NACHA) is the administrator of the Automated Clearing House (ACH) network. The ACH network is subject to the NACHA operating rules, which constitute the legal basis for the exchange of ACH and IAT payments. The NACHA website contains additional information about the ACH payment system., Remotely Created Checks (RCC), Remotely Created 222A Check (sometimes referred to as “On-Demand Draft”) is a check that is not created by the paying bank (often created by a payee or their service provider) that is drawn into a customer`s bank account. The check is often authorized by the customer remotely, by phone or online and therefore does not bear the customer`s handwritten signature. and debit and prepaid card transactions. With the expansion of the Internet, the boundaries of retail have been removed.
Processors now offer services for a variety of merchant accounts, including traditional retail and internet-based facilities, prepaid trips, telemarketers, and internet gaming companies. Enhanced registration by KYP third-party payment providers is the process of performing initial and ongoing due diligence of all business partners involving an e-commerce platform or payment platform, including all merchants. This would include, for example, an investigation into the activities of a trader, his constituents and officers; take into account the duration of a trader`s activity; and determine whether the merchant`s website appears credible and offers products and services that are consistent with the merchant`s description of the business, whether the price of goods and services meets market expectations, and whether reported revenues meet expectations and competitors. KYP is like KYC AML Compliance 101 – basic but important. Think of transactional linen as an updated version of trade-based money laundering.
