Money laundering is a significant legal issue for merchant processors that requires vigilant oversight and vigorous compliance procedures. As merchant processing litigators, the Sigal Law Group has witnessed the evolving landscape of financial crimes and the increasing sophistication of launderers.
What are the Legal Implications of Money Laundering?
Transaction laundering has emerged as a particularly insidious form of money laundering in the digital age. This method involves criminals processing payments through legitimate merchant accounts, effectively concealing the true nature of their transactions. For example, an illicit online pharmacy might process payments through a seemingly innocuous e-commerce site selling household goods.
The legal implications for merchant processors are severe. Regulatory bodies like the Financial Crimes Enforcement Network, FDIC, and the Office of the Comptroller of the Currency have issued guidance emphasizing the Bank Secrecy Act / Anti-Money Laundering program risks associated with third-party processors. Processors face potential criminal charges if found to have knowingly facilitated transaction laundering.
How to Protect Your Business From Money Laundering Accusations
To mitigate these risks, merchant processors must implement stringent due diligence procedures. This includes thorough Know Your Customer (KYC) checks and ongoing transaction monitoring. However, the challenge lies in the fact that 6-10% of online merchants' true identities remain hidden from their payment processors.
From a litigation standpoint, cases often hinge on whether the processor exercised reasonable care in vetting and monitoring their merchants. The “willful blindness” standard is frequently applied, where processors may be held liable if they deliberately avoided knowledge of suspicious activities.
Prosecutors increasingly focus on the effectiveness of AML programs. While third-party payment processors aren't legally required to implement such programs, most banks now mandate them as a condition of doing business. International transactions add another layer of complexity. With the trend toward lifting exchange controls and freeing capital movements, offshore money laundering has become more challenging to control.
As litigators, we stay ahead of these evolving trends, including understanding new technologies that facilitate laundering, like cryptocurrencies and peer-to-peer payment systems. We are also prepared to navigate the complex web of domestic and international regulations that govern this space.
As such, if you are a merchant payment processor accused of money laundering, a skilled merchant payment litigator will ensure you have the best possible defense against these accusations. Contact the Sigal Law Group today for a free consultation.
