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September 22
FinCEN's Beneficial Owners Proposal: What It Can Mean for You;
Sonja Kriegsmann and John Burnett

September 23
Bankruptcy 101;
Sam Ott

September 30
Revised Escrow Rules - Review and Update;
Jack Holzknecht and Mary Beth Guard

October 7
CRA - Digging for Credit;
Patricia Cashman

October 8
Applicants and Applications: Knowing the Players and the Rules;
David Dickinson

October 15
MasterCard and Reg E: Basic Debit Card Investigations;
Brian Crow



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#1661737 - 02/07/12 04:05 PM Third Party Payment Processors
Local banker Offline
100 Club

Registered: 02/12/08
Posts: 114
I just read the FIL-3-2012 issued on Jan 31st regarding relationships with third-party payment processors. In reading the letter, I get the feeling this is just taking MSBs to the next level so to speak, but could someone give me an example of a third-party payment processor? I don't think we have any but I want to make sure before we have examiners here finding some.

Thanks,

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BSA/AML/CIP/OFAC
#1661746 - 02/07/12 04:19 PM Re: Third Party Payment Processors [Re: Local banker]
BSABecky Offline
100 Club

Registered: 03/18/11
Posts: 126
Loc: Seymour, IN USA
Paypal is one of the big ones, 2CheckOut, Inc. is another.

Here's an easier to understand description:

"Third party payment processors use a merchant account under their business name to process transactions for companies that either cannot get approved for a merchant account or can't afford the high fees. They typically have a higher rate (4-5%) compared with a merchant account (typically 2-3%) but offer no monthly fees. For businesses with less than $2500 per month in online credit card revenues, third party processors can actually save you money in total processing fees.

Third party prccessors often have incentives for businesses other than low monthly fees and no minimums. Many offer recurring billing, online control panels and even free shopping cart systems for your website. These features in addition to the low initial costs make third party processors very appealing to small businesses trying to start out."
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#1661815 - 02/07/12 06:25 PM Re: Third Party Payment Processors [Re: BSABecky]
Doug Hendrickson Offline
Power Poster

Registered: 10/01/09
Posts: 3386
Loc: NE New Mexico
Is there anything about the account activity that would alert you to it being a TPPP? I don't believe we have any (esp. since we are now doing CDD on businesses), but would appreciate any guidance on how to verify/monitor.
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#1661852 - 02/08/12 08:10 AM Re: Third Party Payment Processors [Re: Local banker]
devsfan Offline
Diamond Poster

Registered: 06/25/04
Posts: 1823
Loc: NYC
I believe you would see ACH entries, both debits and credits, in the account of the TPPP that have other companies names.

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#1661858 - 02/08/12 08:04 AM Re: Third Party Payment Processors [Re: Doug Hendrickson]
BSABecky Offline
100 Club

Registered: 03/18/11
Posts: 126
Loc: Seymour, IN USA
We had one at my previous bank but it was more like a payroll company that was sort of a clearing house. The account activity was just thousands of checks clearing every week with different business names on the checks; we thought it was suspicious activity until we realized what they actually were. The new account person input the NAICS incorrectly so we managed to skip right over it. That was the only one we had and they were with us prior to October 2003, so we had no CIP on them that we would've gotten currently. Eventually we added it to the CDD tree to catch them but had no one else that fit the bill when I left. Where I am now we have none. smile

eta: Devsfan hit the nail on the head. Seeing company names on checks/ACHs that didn't match our customer's name was what tipped us off.


Edited by BSABecky (02/08/12 08:05 AM)
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#1661868 - 02/08/12 08:34 AM Re: Third Party Payment Processors [Re: BSABecky]
Retread Offline
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Registered: 10/31/03
Posts: 2485
Loc: Southeast
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#1661985 - 02/08/12 11:01 AM Re: Third Party Payment Processors [Re: Local banker]
jade1234 Offline
Member

Registered: 07/09/10
Posts: 86
Loc: Medford, Oregon
Our bank has an account for a payroll services company, where they prepare payroll checks for their customers,offer direct deposit, management reports, and electronic tax and form service. Based on the previous posts, it may fall under this definition. Am I correct?

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#1662434 - 02/08/12 07:06 PM Re: Third Party Payment Processors [Re: jade1234]
BSAdiva Offline
Gold Star

Registered: 01/22/07
Posts: 314
Loc: CA
Originally Posted By: jade1234
Our bank has an account for a payroll services company, where they prepare payroll checks for their customers,offer direct deposit, management reports, and electronic tax and form service. Based on the previous posts, it may fall under this definition. Am I correct?



I was wondering the same thing, but the guidance specifically talks about the TPPP processing payments for their merchant clients, which means, I think, that they debit the account of their customer's customer. Payroll processors debit their customer's account and credit their customer's employee. It doesn't seem like payroll processors quite fit in this box.
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#1662647 - 02/09/12 11:23 AM Re: Third Party Payment Processors [Re: Local banker]
rlcarey Offline
10K Club

Registered: 07/16/01
Posts: 50035
Loc: Galveston, TX
I would suggest that everyone stop and read the examination manual starting at page 239. I have seen a lot of recent attempts at defining a TPPP that is not that accurate.
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#1662824 - 02/09/12 01:24 PM Re: Third Party Payment Processors [Re: Local banker]
jade1234 Offline
Member

Registered: 07/09/10
Posts: 86
Loc: Medford, Oregon
I would guess that a better part of us have read all the guidance as well as the FFIEC manual and are still left with questions, resuling in our posts here.

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#1662832 - 02/09/12 01:43 PM Re: Third Party Payment Processors [Re: Local banker]
rlcarey Offline
10K Club

Registered: 07/16/01
Posts: 50035
Loc: Galveston, TX
A payroll service company is not processing payments. They are sending out credits.
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#1662899 - 02/09/12 02:12 PM Re: Third Party Payment Processors [Re: rlcarey]
Al Miller Offline
Diamond Poster

Registered: 10/27/00
Posts: 2416
Loc: Pleasanton CA USA
Randy, I'm old and the memory seems to be going.

Page 239 of what? Thanks in advance.


Al
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Opinions expressed are my own and not necessarily shared by my employer.

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#1662921 - 02/09/12 02:36 PM Re: Third Party Payment Processors [Re: Local banker]
ACBbank Offline
Power Poster

Registered: 07/26/06
Posts: 2585
Loc: New York City
The BSA/AML Manual Al. That's the section on Payment Processors.


Edited by ACBbank (02/09/12 02:36 PM)
Edit Reason: spelling
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#1664336 - 02/13/12 02:50 PM Re: Third Party Payment Processors [Re: Local banker]
WonderWoman Offline
Diamond Poster

Registered: 03/07/07
Posts: 1989
Loc: gone fishin'
Originally Posted By: Local banker
could someone give me an example of a third-party payment processor?


Debt Collection services. We've all seen the checks that state "This has been authorized by your depositor" in the signature line.



Basically a TPPP is anyone who creates ACH or Check debits on behalf of your customer to pay a Third Party. A business that accepts & processes your medical payments is not a TPPP, they are not creating the check that debits your account. Converting a written check to ACH also does not qualify as a TPPP. We have a lot of gas stations that accept PG&E drop off payments. They are also not TPPPs.
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#1664410 - 02/13/12 03:58 PM Re: Third Party Payment Processors [Re: Local banker]
Doug Hendrickson Offline
Power Poster

Registered: 10/01/09
Posts: 3386
Loc: NE New Mexico
Am I correct in presuming that if a TPPP is creating ACH debits and/or RCCs, that the FI is usually aware of this activity when it occurs (or at least when the account was opened)? For example, the TPPP would have to have the capability to 'originate' an ACH transaction, a function that is usually somewhat controlled by the FI, who has to be the one to actually initiate the orgination. In our case, the businesses can submit a file to be processed or initiate an ACH request, but we have to actually process those files or review/honor those requests. And I'm presuming there is a similar process for originating RCC, through our check clearing process we would have to process the check.

Thanks for any input. I'm just trying to more fully understand the mechanics, so that due diligence and monitoring processes can be implemented.
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#1664460 - 02/13/12 04:55 PM Re: Third Party Payment Processors [Re: Local banker]
ACBbank Offline
Power Poster

Registered: 07/26/06
Posts: 2585
Loc: New York City
At my FI the customer cannot originate ACH or RCC's without the IT Department "turing on" the process. Sorry, I don't know the technical aspect of it. This would have to be approved by management and there would be limits.
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#1664524 - 02/13/12 07:05 PM Re: Third Party Payment Processors [Re: Local banker]
WonderWoman Offline
Diamond Poster

Registered: 03/07/07
Posts: 1989
Loc: gone fishin'
Exactly as ACB said ... I'm very much involved in the Cash Management process and I actually wrote their (IT) Risk Assessments.
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My opinions are my own, and not that of my employer.

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#1664768 - 02/14/12 10:32 AM Re: Third Party Payment Processors [Re: Local banker]
jade1234 Offline
Member

Registered: 07/09/10
Posts: 86
Loc: Medford, Oregon
rlcarey wrote: A payroll service company is not processing payments. They are sending out credits.

Our payroll company is an ACH originator that originates ACH debits for their customers to process their taxes and payroll.

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#1665296 - 02/14/12 07:09 PM Re: Third Party Payment Processors [Re: Local banker]
rlcarey Offline
10K Club

Registered: 07/16/01
Posts: 50035
Loc: Galveston, TX
For what third parties are they processing these debit transactions? They are processing debits to their own customers account so they can process the payroll and tax transactions for them. They are not a third party payment processor, unless I am really missing something.
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#1665334 - 02/14/12 09:23 PM Re: Third Party Payment Processors [Re: Local banker]
jennyfromthebloc Offline
Diamond Poster

Registered: 05/07/04
Posts: 1460
Loc: Big Brother knows and that's a...
I entered 0 for this item on OCC MLR and "estimated" because of this same exact confusing thread, here.
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#1763778 - 12/04/12 02:26 PM Re: Third Party Payment Processors [Re: Local banker]
The Real Mobo Offline
100 Club

Registered: 04/24/06
Posts: 237
Loc: MS
So if you have a business that is simply receiving a copy of a lockbox file for homeowner's association payments and doing the bookkeeping for the HAs, then they are not a TPPP? THe business never touches the checks - they simply get copies of the payments processed via lockbox and they enter the payments and track them for the associations.
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#1763845 - 12/04/12 04:52 PM Re: Third Party Payment Processors [Re: Local banker]
rlcarey Offline
10K Club

Registered: 07/16/01
Posts: 50035
Loc: Galveston, TX
Doesn't sound like it, they have nothing to do with the actual payments.
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