Recent FDIC Guidance on Providing Banking Services to Payment Processors or How to Avoid Engaging in Rent-A-Bin Relationships
By Chris Daniel and Todd Beauchamp
The Federal Deposit Insurance Corporation (FDIC) recently issued Financial Institution Letter 127-2008, which provides guidance to financial institutions regarding due diligence measures that they should undertake in screening payment processors as potential customers, as well as the steps that institutions should take as part of their ongoing monitoring of such customers activities. The focus of this guidance is on relationships with payment processors that create and deposit Remotely Created Checks (RCCs), as well as originate Automated Clearing House (ACH) debits on behalf of their merchant customers. These activities can present significant money laundering and fraud risks, which are heightened where the processor does not conduct appropriate due diligence on the merchants for whom it originates the payments.