FinCEN notes payment processing red flags

October 23, 2012

FinCEN notes payment processing red flags

The Financial Crimes Enforcement Network issued an advisory Monday on what red flags financial institutions should look out for when working with third-party payment processors.

The advisory, FIN-2012-A010, notes high numbers of consumer complaints about payment processors or merchant clients. "(P)articularly high numbers of returns or charge backs . . . suggest that the originating merchant may be engaged in unfair or deceptive practices or fraud" such as using consumers' account information for unauthorized debits.

Some of the signs to look for, the advisory notes, include a processor's movement from one institution to another within a short period; use of multiple institutions or redundant banking relationships; and check consolidation account use that limits an institution's ability to monitor and report suspicious activity.

The advisory, issued jointly by federal banking agencies and the Consumer Financial Protection Bureau,says payment processors can be used by criminals to carry out money laundering and pose risks to the institutions they work with.

FinCEN is holding a free, informational webinar tomorrow on third-party payment processors and seeks participation by financial institutions. Send requests to participate by email to BSA_Resource_Center@fincen.gov; include "Third Party Payment Processors Informational Webinar" in the subject line.

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