At the annual meeting of the Electronic Transaction Association last week, the Federal Trade Commission (“FTC”) announced the creation of a task force that will monitor third-party payment processors and their banks to quickly identify and stop processors, or their merchant customers, from defrauding consumers.
The operations of third-party processors and the banks with which they do business have recently come under increasing scrutiny for, among other things, failing to adequately screen merchant clients before processing debits to consumer bank accounts on behalf of the merchants. But, with the creation of this new task force, the Government has stepped up its game.
The new group will bring together officials from many other governmental agencies besides the FTC, including, the Justice Department, FBI, U.S. Treasury Department’s FinCen anti-money laundering unit, the Office of Comptroller of the Currency and the Federal Deposit Insurance Corporation (“FDIC”). Although each of these agencies, among others, have previously been able to investigate the practices of payment processors and the banks who sponsor them, this new multi-agency task force is intended to expedite the process of investigating and closing down processors or banks who contract with merchants defrauding consumers. The new task force will also be investigating independent sales groups or organizations (“ISOs”) who partner with payment processors or merchant-acquiring banks to ensure they are not working with fraudulent merchants. As Karen S. Hobbs, senior attorney in the FTC’s Division of Marketing Practices has stated, “this is drilling down into the third-party payment processing arena.”
The creation of this new task force again highlights how critical a strong compliance program is for third-party payment processors, ISOs and financial institutions alike. Companies who have any questions about this new task force or would like assistance with establishing or strengthening their compliance programs should contact Andrea Marconi.