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#2032484 - 08/07/15 07:55 PM Third Party Payment Processors
Tabbetha, CRCM Offline
Junior Member
Joined: Feb 2009
Posts: 47
Biloxi, Mississippi
In a recent regulatory exam, I was told that one of our Cash Management ACH originators was a TPPP. This customer is a property management company that originates ACH debits for rent on its customers. I didn't look at this as a processor. Do you agree this is a TPPP and if so, what type of information should we add to our risk assessment for TPPP? We already have a pretty thick CM agreement and underwriting procedures, but there is no verbiage or questions concerning TPPP in it. I would appreciate it greatly if anyone would be willing to share questionaires and procedures that I can establish in our bank. Thanks!

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#2032493 - 08/07/15 08:04 PM Re: Third Party Payment Processors Tabbetha, CRCM
aBSAlife4me Offline
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Joined: Apr 2015
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#2032496 - 08/07/15 08:10 PM Re: Third Party Payment Processors Tabbetha, CRCM
Tabbetha, CRCM Offline
Junior Member
Joined: Feb 2009
Posts: 47
Biloxi, Mississippi
I'm sorry, I've read that at least ten times and I just don't get it. I've also googled every term I can think of.

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#2032498 - 08/07/15 08:13 PM Re: Third Party Payment Processors Tabbetha, CRCM
BrianC Offline
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BrianC
Joined: Nov 2004
Posts: 6,438
Illinois
Does the property management company own the properties for which it is receiving rent payments or is it processing the debits for the rent payment on behalf of any entity that owns the property?

If it is initiating debits on behalf of another entity, then it is a TPPP. When considering the risks associated with a TPPP you would want to know who the TPPP's customers are. (Higher risk areas include payday lenders, telemarketers, adult entertainment websites, online gambling, loan modification or credit repair services to name a few.) You should consider the return rates of the TPPP. (not NSF, but items returned unauthorized). Some TPPPs will blindly take the information their clients pass to them to initiate the debits without verifying that their clients have actually obtained valid authorizations to debit consumer accounts.

The FFIEC Exam Manual will provide some of the due diligence you may consider. Remember this is driven by risk. Property management may fall on the lower end of the risk spectrum so you should customize your due diligence accordingly.
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#2032522 - 08/07/15 09:12 PM Re: Third Party Payment Processors Tabbetha, CRCM
Tabbetha, CRCM Offline
Junior Member
Joined: Feb 2009
Posts: 47
Biloxi, Mississippi
Thank you for your help Brian!

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#2165375 - 02/21/18 09:14 PM Re: Third Party Payment Processors Tabbetha, CRCM
bcompliance Offline
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Joined: Sep 2014
Posts: 1,258
Resurrecting an old thread. We have several CPAs who process payroll for different companies. The CPAs originally only had their account at the bank and would receive an ACH credit from the business customer, and then debit the CPA account to send the payroll to the employees of the business. A few years ago, the bank decided that it would keep the CPA relationship, but would now require the CPAs customers' to have accounts here. The business has online banking portal and then they create an account for the CPA to login and process the payroll through the business customer's account. Does this meet the definition of a TPPP since they businesses are now our customer also (I do not think it does, but want another opinion)?

From the exam manual (pg 240 of pdf):

Nonbank or third-party payment processors (processors) are bank customers that provide payment-processing services to merchants and other business entities. Traditionally, processors contracted primarily with retailers that had physical locations in order to process the retailers’ transactions. These merchant transactions primarily included credit card payments but also covered automated clearing house (ACH) transactions,221 remotely created checks (RCC),222 and debit and prepaid cards transactions. With the expansion of the Internet, retail borders have been eliminated. Processors now provide services to a variety of merchant accounts, including conventional retail and Internet-based establishments, prepaid travel, telemarketers, and Internet gaming enterprises.

Third-party payment processors often use their commercial bank accounts to conduct payment processing for their merchant clients. For example, the processor may deposit into its account RCCs generated on behalf of a merchant client, or process ACH transactions on behalf of a merchant client. In either case, the bank does not have a direct relationship with the merchant. The increased use of RCCs by processor customers also raises the risk of fraudulent payments being processed through the processor’s bank account. The Federal Deposit Insurance Corporation (FDIC), Office of the Comptroller of the Currency (OCC), and Financial Crimes Enforcement Network (FinCEN) have issued guidance regarding the risks, including the BSA/AML risks, associated with banking third-party processors.223
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#2165533 - 02/22/18 10:12 PM Re: Third Party Payment Processors Tabbetha, CRCM
EB, CAMS Offline
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EB, CAMS
Joined: Mar 2009
Posts: 133
flyover country
In my opinion, it does not make your CPA a third party payment processor based on the definition. However, you may have an increased risk since the CPA is conducting business/payroll distribution on behalf of your (mutual) business customer.

There is still risk involved. It just may not be specifically "TPPP" risk.
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#2165564 - 02/23/18 12:38 PM Re: Third Party Payment Processors Tabbetha, CRCM
bcompliance Offline
Diamond Poster
Joined: Sep 2014
Posts: 1,258
thank you for your input!
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