Payments Experts Talk Compliance at #ETATRANSACT

Josephine Rossi
April 8, 2014 – Ben Franklin had it right: An ounce of prevention is worth a pound of cure, according to today’s TRANSACT 14 Compliance Track speakers. While their focuses varied―federal oversight, avoiding prosecution, fraud trends, and risk management―their messages were unified. The payments industry cannot turn a blind eye to compliance and security.

Take Lois Greisman, associate director, division of marketing practices for the Federal Trade Commission. While her work focuses more generally on gatekeepers (choke points) that could be facilitating consumer fraud, the FTC has no qualms about probing further into the ISO and processor relationship. Chargeback rates, underwriting files, and other documentation that indicates the nature of the merchant relationship, as well as the merchant accounts and vetting processes, could all be investigated.

Her advice to ISOs? Use the ETA’s new merchant acquiring guidelines to evaluate their portfolios and establish transparency. “I don’t think it is that hard to figure out if a merchant is a bad apple.” And having a large portfolio won’t be an excuse if an acquirer is questioned. “Tell that to the consumers who lost their money.”

A panel discussion led by several industry attorneys offered up the chilling effects of regulation―chief among them is that ISOs and processors stand to loose their relationship with their sponsoring bank. Being compliant isn’t enough, they said. Proactive, “cradle to the grave due diligence” coupled with a litigation readiness program is a good starting point to prevent members from being low-hanging fruit for enforcement. The group also recommended all ISOs and acquirers review their merchant agreements and credit policies―ones that are not well written can now be used against them.

Processors also have skin in the risk-level monitoring game, and the big ones have a number of measures in place to mitigate fraudsters’ bad deeds on the refund side. “The reality of it is…for some people this is a very challenging issue, especially if you don’t have control over your platform. But…if you let one dollar, one penny through, you will get hit again,” said Georgia Stavrakis, ETA CPP, director of loss prevention for Heartland Payment Systems.

So if ISOs are paying attention to credit risk and portfolio management, what other elements are they overlooking? Call monitoring and document destruction policies, said Vincent Perrelli Jr., chief credit and operations officer, Global Payments Inc. “Everyone talks about credit and fraud, and yet there are other types of risk, and some have very strict laws. Reputational risk would be another, but I think the associations have done a very good job of bringing that to the forefront.”

But the speakers’ messages weren’t all anxiety provoking. Jeff Reich, chief security officer at Engine Yard, told attendees that while compliance measures are mandated, sharing risk and leveraging trusted partners gives ETA members a competitive advantage.

“Find someone that can do what are not your core services and transfer that risk to them.” This frees resources so the business can focus on growth and doing what it does best.

For more information about TRANSACT, visit www.transact14.com.

For media inquiries, contact Emma Sivakumaran: +1 202-277-6700 or Kimberley Waldron: [email protected].

About ETA
The Electronic Transactions Association (ETA) is the global trade association representing more than 500 payments and technology companies. ETA members make commerce possible by processing more than $4.5 trillion in purchases in the U.S. and deploying payments innovations to merchants and consumers.

Josephine Rossi is Editor of ETA’s Transaction Trends Magazine. She can be reached at [email protected].