Revised Guidance on Third Party Payment Processors

The FDIC issued a “clarification” on July 28 to the effect that banks had gone overboard in their reaction to the FDIC’s expressed concerns about third party payment processors. The pressure the banks have been subjected to is related to “Operation Choke Point” where the Justice Department, with the assistance of the federal bank regulators, have attempted to block of the flow of funding to certain businesses such as payday lenders by attacking the ability of third party payment processors who deal with the targeted businesses to maintain

Szell:  Is it safe? Babe:  I don’t know what you mean. I can’t tell you something’s safe or not, unless I know specifically what you’re talking about. Szell:  Is it safe? Babe: Yes, it’s safe, it’s very safe, it’s so safe you wouldn’t believe it. Szell:  Is it safe? Babe:  No. It’s not safe, it’s… very dangerous, be careful.

In the 1976 movie Marathon Man, Babe (Dustin Hoffman) is held down while Nazi war criminal Szell (Laurence Olivier) drills Babe’s teeth without anesthetic, trying to learn if it is safe to sell a cache of diamonds stolen from concentration camp

DC Partner John ReVeal, New York Partner Judith Rinearson and Santa Monica Partner Brette Simon will provide insight at the Money2020 Expo. The conference promises to bring together a global community of innovators in payments and financial services with 400-plus speakers spanning more than 100 sessions and workshops. More than 4,000 attendees are expected.

October 6, 2013 – October 10, 2013 Aria Resort and Casino 3730 Las Vegas Blvd. Las Vegas, NV 89158

On Oct. 6, ReVeal will moderate a panel on the risks and rewards of credit-based emerging payment products. In addition to discussing what people

The FDIC recently released a consent order with Meridian Bank (Paoli, Penn.) which dealt largely with the bank’s oversight and management of its electronic payment program and third-party payment processors (TPPPs), as well as BSA/AML issues. Although this order is tailored by the FDIC to address specific issues found at the bank and focuses on merchant transaction processing, a review of the requirements outlined in the order may be useful for banks and other financial services companies that deal with third-party providers or high-risk customers.

The order includes a lengthy and detailed list of the steps the bank must take

Hot on the heels of FinCEN’s advisory on risks associated with third-party payment processors (see Government Update, issue 18), FinCEN and the FDIC assessed concurrent $15 million civil money penalties against First Bank of Delaware for violations of BSA/AML laws and regulations. Among other things, FinCEN and the FDIC found that the bank “failed to adequately oversee third-party payment processor relationships and related products and services commensurate with associated risks.”

The bank also settled related civil claims with the DOJ, which alleged it “established direct relationships with several fraudulent merchants and third-party payment processors working in cahoots with

On October 22, 2012, FinCEN issued an advisory (FIN-2012-A010) on the risks associated with third-party payment processors and to provide additional guidance on identifying suspicious activities and filing SARs. The advisory highlights many of the same risks and concerns that were addressed by the FDIC in its January 2012 revised guidance on payment processor relationships (our post on the January 2012 revised guidance  can be found here.).

Less than one month later, FinCEN and the FDIC assessed concurrent $15 million civil money penalties against First Bank of Delaware arising from alleged deficiencies in that bank’s

On January 31, 2011, the FDIC released revised guidance on payment processor relationships, spelling out with a lot more specificity its expectations for banks’ relationships with payment processors.

We have summarized below some highlights of what was added to the guidance by the FDIC, and also provide a redline showing the changes from the FDIC’s prior guidance, released in 2008.  Of particular interest to many of our clients, the FDIC notes that some payment processors may target smaller community banks, based on a belief that they may be more willing to engage in higher-risk transactions in exchange for