12 Compliance questions to ask your payout provider

Meeting online payments compliance can be challenging. You have to be on the lookout for any updates. And you constantly adjust your operational processes. Online payment service providers can help ensure compliance. But how do you choose the right one?

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You can do so, by asking the 12 questions covered in this eBook. Download the ebook to uncover:

  • Critical payment compliance regulations and legislations to consider within the US and Europe
  • How to verify your preferred provider is compliant, licensed, and regulated

The 12 questions you must ask your payout provider to ensure compliance

Is the payout provider registered with the relevant licenses in the US?

Do they have a license under the relevant payment institution in Europe?

Is the provider regulated and licensed?

Does your payout provider have strong AML/CTF programs that are regularly audited, reviewed, and tested to guarantee compliant payouts?

Does the payout provider screen all transactions?

Does the provider regularly retrieve updated sanctions lists and re-screen transactions to flag bad actors?

Does your financial services provider have a robust KYC policy that is frequently audited to help you better understand your customers?

Does the provider monitor transactions to spot suspicious activity and report any red flags?

Are the provider’s employees trained to identify unusual activity?

Does the payout provider regularly audit their compliance program?

Can one inspect the audit reports?

Does your prospective provider apply a country risk evaluator to assess geographic risk?

Read on to find out why asking these questions is a must!

Important payments compliance considerations

Licenses

Governments require payout providers to be licensed to protect consumers and prevent fraud and other financial crimes. 

In the US, you want to know whether your prospective provider is licensed in your state as a money transmitter. Money transmitters operate under the guidelines of a group known as Money Services Businesses, which are regulated by the federal government’s Financial Crimes Enforcement Network (FinCEN).

In Europe, your provider should hold a payment institution or e-money license. EU law under the second E-Money Directive (2EMD) and revised Payment Services Directive (PSD2) provides directives for conducting business and supervising electronic money and payment institutions.

Understanding if your provider is compliant, regulated, and licensed in your region is imperative. 

AML/CTF

Money laundering and terrorist funding are two of the most significant financial crimes in the world. 

To prevent money laundering, regulatory authorities have strict rules for financial institutions (FIs) and payout providers to report financial transactions and keep records. 

On the other hand, the USA Patriot Act was brought into force to attempt to stop the financing of terrorism. To comply with this, FIs must monitor for potential terrorism financing and ensure foreign banks doing business within the US meet AML/CTF requirements. 

Europe has its fifth Money Laundering Directive (AML5), which required all EU states to pass it into law. 

The consequences of failing to meet these requirements could be government-applied sanctions and embargoes. 

Sanctions screening

When regulators and governments identify financial crimes, they create sanctions watch lists to weed out illegal transactions. These crimes range from money laundering, terrorist financing, narcotics trafficking, and proliferation of weapons of mass destruction, etc. 

Know Your Customer (KYC)

KYC policies help payout providers prevent identity theft, financial fraud, money laundering, and terrorist financing efforts. They also screen for sanctioned entities and determine customer risk factors.

Transaction monitoring and reporting

A payout provider should monitor transactions to flag suspicious or unusual activities. These activities can include financial crimes like eluding the Bank Secrecy Act (BSA) requirements, money laundering, or terrorist and criminal funding.

A good payout provider needs employees trained to spot suspicious activity, such as customers using fake IDs or behavior indicative of money laundering. They must also actively monitor transactions and report red flags to remain compliant. 

Auditing

Audits explain how compliant a financial provider is. Undergoing regular audits reassures customers and organizations using the service that the payments provider is compliant and operating legally. 

Generally, a compliant payout provider should provide public reports and systems of facts to be wholly transparent about the results. 

Geographical risks

Every geographical location experiences unique financial risks that affect regulations and legislations. Government and financial regulators respond to these with controls designed to provide stronger economic stability. But, controls can lead to other problems, such as the rise of black markets. 

Work with Payoneer to ensure payments compliance

Payoneer uses a robust risk-based compliance program that meets the regulatory requirements of 200 countries and territories. Our KYC processes are regularly audited, and our anti-money laundering policies meet FATF-GAFI, EU, and US regulations. 

Download our ebook to find out how to ask the right questions and ensure your payout provider is compliant, licensed, and adhering to global financial legislations.

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