The Financial Crimes Enforcement Network (FinCEN) recently issued an advisory bulletin warning financial institutions on the risks associated with maintaining deposit accounts for third-party payment processors (“Payment Processors”). Payment Processors are companies that initiate payment transactions on behalf of their own customers, typically merchants and other businesses, where these customers lack a direct relationship with the financial institution. Payment processors may service domestic or foreign businesses that are conventional bricks-and-mortar establishments or internet-based.
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The FDIC recently issued Revised Guidance regarding account relationships with payment processors that process RCC and ACH payments on behalf of third-party merchants (the “Revised Guidance”). Such account relationships are relatively common for financial institutions, but come with the risk of association with unscrupulous third-party merchants serviced by the payment processor. The Revised Guidance focuses on the need for caution with respect to payment processors and merchants that have a higher risk profile for unauthorized payments and fraudulent/unlawful activity, such as those involved in telemarketing and certain internet-based industries.