By Melody Lashmar - On October 27, 2011 at the Electronic Transaction Authority’s (ETA) Compliance Day in Chicago, a Federal Trade Commission (FTC) official told attendees that the government has formed a task force to monitor third-party payment-services providers. The stated goal is to prevent fraudulent merchants from obtaining merchant accounts and to shut down such merchants as quickly as possible if they defraud consumers.
The group has some very heavy hitters and includes the FTC, the Justice Department, the Federal Bureau of Investigation (FBI), the U.S. Treasury Department’s FinCen anti-money-laundering unit, the Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corp (FDIC).
Looking more closely at the participants will demonstrate just how many different avenues are now available to this group to gather information.
The FTC is a government organization whose purpose it is to protect consumers. A consumer is able to enter a complaint against a business right on the FTC site. These complaints are entered into a secure database called the Consumer Sentinel. This database is accessible and used by thousands of civil and criminal law enforcement agencies worldwide.
The Justice Department is the primary federal criminal investigation and enforcement agency. Their stated mission is to enforce the laws of the USA and to seek just punishment for anyone who has been found guilty of unlawful behavior. To assist them they have an action center on their site for anyone to file a complaint.
The FBI does not require much explanation, as they are the nation’s law enforcement agency. The FBI, specifically, has one of their focuses to fight Cyber Crime. Once again, the FBI allows a consumer to file a complaint directly on their site.
FinCen, the OCC and the FDIC all oversee US banks and Money Service Businesses (MSB) and are probably relatively unknown to most people.
FinCen is the Financial Crimes Enforcement Network. They are interested in eliminating money laundering. They have guidance on their site for Money Service Businesses, such as Check Cashers, to be compliant in their licensing and activities as these businesses are natural locations for laundering money.
Further, Financial Institutions are required to submit Suspicious Activity Reports commonly known as SARs for any suspicious financial activity at their institution. You, as a consumer of that institution, would have no idea that a SAR was filed based on a transaction you completed. However, if the attributes of the transaction, being any cash transaction over $10000, were met then the Financial Institution is required to submit a SAR. Also, if there were any thoughts that the transaction being performed was out of character for the account holder or the circumstances seemed questionable, the bank is required to file a SAR as well. The concept here is that it is better to file then to not file and there is no penalty for filing but there could be repercussions for not filing. As you can imagine, this setup leads to an incredible number of SARs being filed in the USA everyday. To understand some of the trends, FinCen is kind enough to publish a report twice annually on the subject. You can find the most recent report here - http://www.fincen.gov/news_room/rp/files/sar_tti_20.pdf.
The OCC and the FDIC oversee banks directly. These organizations send examiners into the banks they oversee on a regular basis. They have an exam book that takes the examiners through all aspects of the bank. They will look at the controls in place for the activities of the bank and make a determination if they are adequate.
Currently the FDIC seems to be basing aspects of their examinations on the FTC Act (UDAP) and consumer protection. Not only are they looking at consumer protection regarding the banks’ consumers, but also the consumers of any of the banks’ merchants. They do this extended evaluation by looking at chargebacks and unauthorized transactions that are returned to the bank.
As you can see, there is a great deal of visibility and knowledge that can be attained with this new government task force. As a merchant of online commerce in the high-risk category, be aware of the following:
- your bank is facing scrutiny from their regulators based on any chargebacks and unauthorized transactions that your account is generating. Be responsive to your bank when they are asking questions as they are likely being asked for this information based on their exams. Do not give them any reason to terminate your account.
- your consumers have ‘anytime’ access to file a complaint about you so make sure you have anytime access to deal with them first.
- be clear with your consumers on your site regarding what they are buying. Any surprises or difficulty in handling their concerns can lead to detrimental complaints against you.
- the customer is always right
- this new task force demonstrates that authorities are working together looking for bad merchants, which also means they will be scrutinizing all merchants in order to find those bad ones. Be aware! Be Prepared!
