The FDIC issued guidance that describes potential risks associated with relationships with entities that process payments for telemarketers and other merchant clients. Highlights of the guidance include:
- Account relationships with entities that process payments for telemarketers and other merchant clients could expose financial institutions to increased strategic, credit, compliance, transaction, and reputation risks.
- Such account relationships require careful due diligence and monitoring, as well as prudent and effective underwriting.
- Payment processors pose greater money laundering and fraud risk if they do not have an effective means of verifying their merchant clients' identities and business practices.
- A financial institution should assess its risk tolerance for this type of activity as part of its risk management program and develop policies and procedures that address due diligence, underwriting, and ongoing monitoring of high-risk payment processor relationships for suspicious activity.
- Financial institutions should be alert to consumer complaints that suggest a payment processor's merchant clients are inappropriately obtaining personal account information.
- Financial institutions should act promptly when they believe fraudulent or improper activities have occurred related to a payment processor.