FDIC. FTC. CFPB. NP…
Understanding the alphabet soup of the payments industry can be exhausting. With so many guidelines, rules and regulations in place, it can be challenging to understand how the pieces come together – and even more difficult to determine how the puzzle should inform your decisions as a merchant, agent or other partner.
In this piece, NMA will guide you through understanding many of the government agencies and private entities that play a role in governing payments. This list should not be viewed as an exclusive or comprehensive list of all governing bodies, applicable laws, regulations or guidelines, and you should refer to legal or other counsel for complete guidance.
Understanding the roles each organization plays in the grand scheme of industry regulation will grant merchants and partners greater insight into the necessity for fraud mitigation, and will empower businesses to remain in compliance while simultaneously building a better payments industry.
Governing Bodies of Note
Visa | Mastercard | American Express | Additional Card Schemes | Federal Trade Commision (FTC) | Consumer Financial Protection Bureau (CFPB) | Federal Communication Commision (FCC) | Office of the Controller of the Currency (OCC) | Federal Deposit Insurance Corporation (FDIC) | Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) | Internal Revenue Service (IRS) | Food and Drug Administration (FDA) | Office of Foreign Assets Control (OFAC) | Financial Crimes Enforcement Network (FinCEN)
Visa is a global payments technology company that connects consumers, businesses, financial institutions, and governments in more than 200 countries and territories to fast, secure and reliable electronic payments. According to Visa, the company operates one of the world’s most advanced processing networks — VisaNet — that is capable of handling more than 65,000 transaction messages a second, with fraud protection for consumers and assured payment for merchants. Visa is not a bank and does not issue cards, extend credit or set rates and fees for consumers.
Visa has established rules that are designed to minimize risks and provide a common, convenient, secure, and reliable global payment experience while supporting geography-specific rules that allow for variations and unique marketplace needs. The Visa Core Rules contain fundamental rules that apply to all Visa system participants and specify the minimum requirements applicable to all Members to uphold the safety, security, soundness, integrity, and interoperability of the Visa system.
Mastercard is another leading global payments and technology company focused on connecting consumers, businesses, merchants, issuers and governments worldwide. According to Mastercard, the company has used technology and expertise to make payments safer, simpler and smarter for more than 50 years. Mastercard is not a bank and does not issue cards.
Mastercard processors and merchants are vital to the company’s success. As such, the company has designed not only a clear set of rules and standards, but also customer compliance programs aimed at minimizing risk. Mastercard rules and other standards change from time to time.
Discover strives to be the leading direct bank and payments services company. Their mission is to help people spend smarter, manage debt better, and save more to achieve a brighter financial future. Discover’s closed-loop network provides insights across payment network participants used to power better decisions and new products. According to Discover’s site, they have a massive, rock-solid payments infrastructure or “rails” that can enable networks, financial institutions, and fintech companies to develop card programs and in-store payments solutions.
Discover is the most widely accepted credit card thanks to a network partnership with UnionPay. To maintain a competitive advantage in the growing, cross-border commerce climate, merchants should consider accepting Discover cards.
American Express is a global services company, providing customers with exceptional access to products, insights and experiences that enrich lives and build business success.
According to their site, American Express makes it easier, safer and more rewarding for consumers and businesses to purchase the things they need and for merchants to sell their goods and services. American Express provides innovative payment, travel and expense management solutions for individuals and businesses of all sizes.
- UnionPay: UnionPay is the only interbank network in China that connects all of the ATMs of all banking companies throughout the world’s most populous nation. Merchants in more than 141 countries accept UnionPay cards, which makes it the third largest payment network by value of transactions processed, behind only Visa and MasterCard.
- JCB: Japan Credit Bureau operates primarily in Asia.
- Maestro: This international debit card service was founded in 1992, and MasterCard owns it. Approximately 15 million points of sale accept Maestro.
Interlink: Interlink is the electronic funds transfer division of Visa and it operates primarily within the U.S. But unlike a standard Visa check card purchase, and Interlink purchase uses a PIN and can provide cash back from the merchant.
- STAR: STAR was one of the first networks to focus on PIN debit, and First Data bought the company in 2003. The company prides itself on its innovation, such as the first processing of an envelope-less deposit at an ATM and the first real-time direct electronic check debit.
- SHAZAM: Shazam is a U.S. interbank network that operates primarily in the Midwest. The not-for-profit company provides electronic funds transfers to hundreds of financial institutions.
- NYCE: The New York Currency Exchange is an interbank network that now serves as the primary network for more than 300,000 ATMs and 89 million users in the U.S. and Canada.
- Accel: The Accel interbank network links more than 400,000 ATMs throughout all 50 states, along with a few U.S. Air Force bases around the globe.
- Plus: Plus covers all of Visa’s credit, debit, and prepaid cards, along with a plethora of other ATM cards from other issuing banks. The network claims more than one million ATMs in more than 170 countries.
- Interac: Interac is the primary Canadian debit card system and flourishes there because other traditional providers, such as Visa and MasterCard, hardly provide cards in the nation. As of 2010, Interac claimed 80 member organizations, 59,000 ATMs, and 450,000 merchants.
- Visa ReadyLink: This service allows Visa cardholders to quickly add cash to their prepaid accounts. Retailers such as Safeway and 7-Eleven make ReadyLink available to customers.
- Pulse: Discover owns Pulse, which operates an interbank network for more than 4,400 financial institutions and 380,000 ATMs in the U.S.
Federal Trade Commission (FTC)
The mission of the Federal Trade Commission (FTC), according to their website, is “Working to protect consumers by preventing anticompetitive, deceptive, and unfair business practices, enhancing informed consumer choice and public understanding of the competitive process, and accomplishing this without unduly burdening legitimate business activity.” The FTC is the only federal agency with both consumer protection and competition jurisdiction in broad sectors of the economy. The FTC pursues vigorous and effective law enforcement; advances consumers’ interests by sharing its expertise with federal and state legislatures and U.S. and international government agencies; develops policy and research tools through hearings, workshops, and conferences; and creates practical and plain-language educational programs for consumers and businesses in a global marketplace with constantly changing technologies.
A key piece of guidance offered by the FTC comes via the Federal Trade Commission Act. The Federal Trade Commission Act is the primary statute of the Commission. Under this Act, as amended, the Commission is empowered, among other things, to (a) prevent unfair methods of competition and unfair or deceptive acts or practices in or affecting commerce; (b) seek monetary redress and other relief for conduct injurious to consumers; (c) prescribe rules defining with specificity acts or practices that are unfair or deceptive, and establishing requirements designed to prevent such acts or practices; (d) gather and compile information and conduct investigations relating to the organization, business, practices, and management of entities engaged in commerce; and (e) make reports and legislative recommendations to Congress and the public. A number of other statutes listed here are enforced under the FTC Act.
The FTC received 2.68 million consumer complaints in 2017, according to the Federal Trade Commission’s 2017 Consumer Sentinel Network Data Book. Compliance with the FTC’s many FTC regulations and best practices can prevent class action lawsuits and consumer complaints.
The Consumer Financial Protection Bureau (CFPB) regulates the offering and provision of consumer financial products or services under the federal consumer financial laws and educates and empowers consumers to make better informed financial decisions.
When the Bureau enforces the law, it or a court may order the violator to take action to remedy the harm it caused consumers. This can include requiring the person or company to compensate its victims for this harm.
The Federal Communications Commission (FCC) regulates interstate and international communications by radio, television, wire, satellite, and cable in all 50 states, the District of Columbia and U.S. territories. An independent U.S. government agency overseen by Congress, the Commission is the federal agency responsible for implementing and enforcing America’s communications law and regulations. The FCC accomplishes the aforementioned mission and goals by focusing on several key initiatives.
The FCC’s key initiatives focus on providing better experiences for consumers. By staying up to date with their guidelines and initiatives, merchants can avoid fines, penalties and class action lawsuits.
The Office of the Controller of the Currency (OCC) charters, regulates, and supervises all national banks and federal savings associations as well as federal branches and agencies of foreign banks. The OCC is an independent bureau of the U.S. Department of the Treasury. The OCC’s mission is to ensure that national banks and federal savings associations operate in a safe and sound manner, provide fair access to financial services, treat customers fairly, and comply with applicable laws and regulations.
If money matters to you as a merchant, and you want to ensure that you’re working with ethical banks, you should keep up with the OCC.
The Federal Deposit Insurance Corporation (FDIC) is an independent agency created by the Congress to maintain stability and public confidence in the nation’s financial system by:
- Insuring deposits.
- Examining and supervising financial institutions for safety and soundness and consumer protection.
- Making large and complex financial institutions resolvable. And
- Managing receiverships.
The FDIC is a recognized leader in promoting sound public policies, addressing risks in the nation’s financial system, and carrying out its insurance, supervisory, consumer protection, resolution planning, and receivership management responsibilities.
In order to protect business assets, it is recommended that merchants bank with an FDIC-insured bank.
The Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) is a law enforcement agency within the United States’ Department of Justice that protects our communities from violent criminals, criminal organizations, the illegal use and trafficking of firearms, the illegal use and storage of explosives, acts of arson and bombings, acts of terrorism, and the illegal diversion of alcohol and tobacco products. They partner with communities, industries, law enforcement, and public safety agencies to safeguard the public we serve through information sharing, training, research, and use of technology.
Merchants operating in any of these higher-risk industries should ensure compliance with all existing and future regulations in order to keep their merchant accounts in good standing.
The Internal Revenue Services (IRS) is a bureau of the Department of the Treasury and one of the world’s most efficient tax administrators. In fiscal year 2015, the IRS collected almost $3.3 trillion in revenue and processed almost 240 million tax returns. The IRS is organized to carry out the responsibilities of the secretary of the Treasury under section 7801 of the Internal Revenue Code. The secretary has full authority to administer and enforce the internal revenue laws and has the power to create an agency to enforce these laws. The IRS was created based on this legislative grant.
In most cases, merchants will need to submit two years of audited tax returns in order to obtain a live merchant account. Ensuring that business and personal tax returns are up-to-date and accurate will expedite the merchant account acquisition process.
The Food and Drug Administration (FDA) is responsible for protecting the public health by ensuring the safety, efficacy, and security of human and veterinary drugs, biological products, and medical devices; and by ensuring the safety of our nation’s food supply, cosmetics, and products that emit radiation. FDA also has responsibility for regulating the manufacturing, marketing, and distribution of tobacco products to protect the public health and to reduce tobacco use by minors. FDA is responsible for advancing the public health by helping to speed innovations that make medical products more effective, safer, and more affordable and by helping the public get the accurate, science-based information they need to use medical products and foods to maintain and improve their health.
FDA also plays a significant role in the Nation’s counterterrorism capability. FDA fulfills this responsibility by ensuring the security of the food supply and by fostering development of medical products to respond to deliberate and naturally emerging public health threats.
In the food service industry, as well as higher risk industries like nutraceuticals, the list of ingredients used is highly regulated. Ensuring that products are compliant with FDA policies and regulations is a good practice to maintain merchant account longevity and health.
The Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury administers and enforces economic and trade sanctions based on U.S. foreign policy and national security goals against targeted foreign countries and regimes, terrorists, international narcotics traffickers, those engaged in activities related to the proliferation of weapons of mass destruction, and other threats to the national security, foreign policy or economy of the United States. OFAC acts under Presidential national emergency powers, as well as authority granted by specific legislation, to impose controls on transactions and freeze assets under US jurisdiction. Many of the sanctions are based on United Nations and other international mandates, are multilateral in scope, and involve close cooperation with allied governments.
Keeping abreast of OFAC sanctions and regulations will help you, as a merchant, ensure that you are not participating in any fraudulent, terrorism-related or other activities that threaten national security unknowingly.
The Financial Crimes Enforcement Network (FinCEN) is a bureau of the U.S. Department of the Treasury. The Director of FinCEN is appointed by the Secretary of the Treasury and reports to the Treasury Under Secretary for Terrorism and Financial Intelligence. FinCEN’s mission is to safeguard the financial system from illicit use and combat money laundering and promote national security through the collection, analysis, and dissemination of financial intelligence and strategic use of financial authorities.
FinCEN carries out its mission by receiving and maintaining financial transactions data; analyzing and disseminating that data for law enforcement purposes; and building global cooperation with counterpart organizations in other countries and with international bodies.
FinCEN exercises regulatory functions primarily under the Currency and Financial Transactions Reporting Act of 1970, as amended by Title III of the USA PATRIOT Act of 2001 and other legislation, which legislative framework is commonly referred to as the “Bank Secrecy Act” (BSA). The BSA is the nation’s first and most comprehensive Federal anti-money laundering and counter-terrorism financing (AML/CFT) statute. In brief, the BSA authorizes the Secretary of the Treasury to issue regulations requiring banks and other financial institutions to take a number of precautions against financial crime, including the establishment of AML programs and the filing of reports that have been determined to have a high degree of usefulness in criminal, tax, and regulatory investigations and proceedings, and certain intelligence and counter-terrorism matters. The Secretary of the Treasury has delegated to the Director of FinCEN the authority to implement, administer, and enforce compliance with the BSA and associated regulations.
Congress has given FinCEN certain duties and responsibilities for the central collection, analysis, and dissemination of data reported under FinCEN’s regulations and other related data in support of government and financial industry partners at the Federal, State, local, and international levels. To fulfill its responsibilities toward the detection and deterrence of financial crime, FinCEN:
- Issues and interprets regulations authorized by statute;
- Supports and enforces compliance with those regulations;
- Supports, coordinates, and analyzes data regarding compliance examination functions delegated to other Federal regulators;
- Manages the collection, processing, storage, dissemination, and protection of data filed under FinCEN’s reporting requirements;
- Maintains a government-wide access service to FinCEN’s data, and networks users with overlapping interests;
- Supports law enforcement investigations and prosecutions;
- Synthesizes data to recommend internal and external allocation of resources to areas of greatest financial crime risk;
- Shares information and coordinates with foreign financial intelligence unit (FIU) counterparts on AML/CFT efforts; and
- Conducts analysis to support policymakers; law enforcement, regulatory, and intelligence agencies; FIUs; and the financial industry.
FinCEN serves as the FIU for the United States and is one of more than 100 FIUs making up the Egmont Group – an international entity focused on information sharing and cooperation among FIUs.
FinCEN has the authority to penalize banks and organizations found in violation of the Bank Secrecy Act, as well as others.
Use this list to navigate the various governing bodies of the payments and banking industries. Understanding how each of these agencies/organizations works will have a lasting impact on your perception of the industry, as well as the ways you conduct business.
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