By Melody Lashmar The phrase “Operation Choke Point” conjures up many images and is representative of the spirit in which the authorities are using their power to target the providers within the payment industry.
Operation Choke Point is, in fact, the name that the authorities have given their combined efforts in stopping bad merchants by removing the payment processors that these merchants are using. I think that we can all agree that stopping bad merchants is a worthy endeavor, but the way in which it is being executed is causing unnecessary and unfair collateral damage to other merchants, consumers and payment processors.
Their “choke point” focus is akin to stopping illegal marijuana grow houses by turning off the power to the neighborhood. Or to stopping deceptive telemarketers by eliminating the telecommunications company that service them. Or by catching would be criminals before they commit the crime by mass surveillance … oh wait, they do that too.
Banks in the USA are responsible for adhering to the regulations of the Bank Secrecy Act, the Anti Money Laundering regulations and many other laws in the USA. To adhere to these regulations, a bank is charged with knowing their customers and if they see or believe that there is anything suspicious regarding their client’s transactional activity then they are to file a Suspicious Activity Report (SAR). Filing of this SAR protects the bank from being guilty of being a participant in the consumer or merchant activities and gives the authorities a heads-up on possible financial crimes that are potentially being committed.
Although, every transaction that gets initiated into the payment networks in the USA is the direct responsibility of a Bank, many banks rely on third party payment processors to handle merchant related accounts. Through this relationship, the bank sees transaction processing revenue, which can be a significant contributor to the banks bottom-line.
The latent consequence of this initiative is that the banks are enjoying the resultant revenues while ignoring or rationalizing the risks associated with this processing. This greed has led to the targeting of Third Party Payment Processors as the root of all evil by the authorities.
Why is this Operation Choke Point important to you? In this environment, you need to ensure that your business will not be collateral damage and that you have redundancies in place to protect your business in the event that your payment processing chain gets altered.
Here are six suggestions to consider for your business and its’ payment processing health.