New Guidance on Payments Processing

The Federal Deposit Insurance Corp. has issued revised guidance describing potential risks linked to relationships with third-party entities that process payments for merchants. The key message: The onus is on banks to perform due diligence and ongoing monitoring of these relationships. 

In its revised guidance for payment processor relationships, the FDIC says certain deposit accounts with payment processors pose unusual risks. 

"Payment processors that deal with telemarketing and online merchants may have a higher risk profile because such entities have tended to display a higher incidence of consumer fraud or potentially illegal activities than some other businesses," the guidance states. "Financial institutions should understand, verify, and monitor the activities and the entities related to the account relationship."

Institutions that fail to adequately manage these relationships may be viewed as facilitating a processor's or merchant's fraudulent activity and could be held liable, the FDIC states.  Read more.