Payments companies offer best practices to avoid bank closures


A set of compliance best practices standardizing how money-services businesses can protect themselves against financial crimes could have an additional ripple effect: preventing banks from abandoning them as customers.

The main objective of the new document from a group of industry associations, including the Electronic Transactions Association and the Money Services Business Association, is to help payment companies combat illicit activities such as money laundering. and the financing of terrorism. But its authors also hope the standards will help protect against so-called risk reduction by banking partners wary of the legal danger these business partners may pose, a problem that has long plagued the industry.

Banks can be held responsible for processing any improper payment that a partner sends or receives on behalf of a customer. In some cases, they will simply choose to terminate business with a money services company that may have a spotty or unknown track record of anti-money laundering compliance.

The authors of the best practices released Wednesday hope the document will allow money-services businesses that adhere to its standards to better demonstrate that they are not posing an outsized risk when it comes to their compliance protocols.

“To be able to hold this up and say, ‘I meet these standards,’ trade groups believe will make it easier for market participants to obtain banking relationships,” said Clay Roberts, deputy chief compliance officer. to financial crimes for Western. union Co.

“The perceived risks and cash-intensive nature of money-services businesses have made it difficult for many to open and maintain bank accounts in recent years,” a spokeswoman for the American said. Bankers Association, which advised the creation of best practices.

“These guidelines are an important step in helping money services businesses develop and adhere to strong compliance programs that have the potential to facilitate more banking relationships in the future,” the spokeswoman said.

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The document, which is over 40 pages, includes discussions of transaction monitoring, due diligence, and know-your-customer procedures.

Companies facilitating payments range from traditional money transfer companies such as Western Union to fintech startups looking to disrupt the traditional financial order. One of the challenges was designing standards that would be relevant to a wide range of such businesses, its authors said.

“You can see the document is designed to capture the common ground between all of these entities,” said Scott Talbot, senior vice president of government relations for ETA. The bottom line, he said, is “what should each money services business think about to put them in the best position to fight fraud?”

Write to Dylan Tokar at [email protected]

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