By: Jane Hennessy, Head of External Alliances
I recently attended the Third-Party Payment Processors Association (TPPPA) Executive Leadership Summit in Arizona where there were many interesting and informative presentations from attorneys, the Attorney General from the State of Arizona and others. The following are some of the key points that may be useful to those in the financial services space:
With respect to the Consumer Financial Protection Bureau (CFPB), there is more scrutiny against payday lenders than any other group it supervises and more rules with respect to payday lenders are expected within a year.
Of note for financial institution is FDIC’s FIL-3-2012 (revised 2014). If you fail to adequately monitor your third-party relationships, you may be facilitating payment processor or merchant fraudulent activities. The FDIC revised guidelines advise that banks need to be aware of any nested processors — the processors must disclose them, but we find many banks are unaware of nested relationships in their portfolios and that should be of concern.
Some best practices for meeting KYC requirements are monitoring red flags such as increases in consumer complaints, performing diligent background checks, reviewing fraud databases, reviewing the web pages of your customers and using data from third-party databases.
My favorite quote from the summit was, “you can’t be an ostrich if you are a payment processor”. While you may not strictly be responsible for some of the rules and regulations that banks are, as a processor you still have obligations to know your customers, be aware of unfair marketing practices etc.
Whether you are a bank or a payment processor, G2 Web Services can help you with your KYC needs. See our recent white paper on managing third party payment processors/third-party senders in the current regulatory environment. For more information on third-party payment processor risk and regulations, sign up for free webinars hosted by the TPPPA and KirkpatrickPrice.