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FinCEN Issues Advisory On Third-Party Payment Processor Risk

Posted on 10/23/2012

The Financial Crimes Enforcement Network issued an advisory providing guidance to financial institutions for filing Suspicious Activity Reports on activities involving third-party payment processors.

"Law enforcement has reported to FinCEN that recent increases in certain criminal activity have demonstrated that payment processors present a risk to the payment system by making it vulnerable to money laundering, identity theft, fraud schemes and illicit transactions," FinCEN said.

The agency noted that while many payment processors provide legitimate payment transactions for reputable merchant clients, the risk profile of such entities can vary significantly depending on the composition of their customer base.

"For example, payment processors providing consumer transactions on behalf of telemarketing and Internet merchants may present a higher risk profile to a financial institution than would other businesses," FinCEN said. "Telemarketing and Internet sales and [remotely created check-related] transactions tend to have relatively higher incidences of consumer fraud or potentially illegal activities."

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